India Banking Research

The Reserve Bank of India (RBI) has proposed that commercial banks need to institute a Board-approved Cyber Security Policy no later than September 30, in a bid to address the growing number of cyber threats and reported incidents of cyber crime in the banking industry. The RBI set the rules in a letter to bank chief executives this month, with Regional Rural Banks exempt from the change. The use of technology in banks, already an "integral part" of operational strategy, has gained further momentum, hence the need for such guidelines, the RBI said.

India’s insurance sector is worth $60 billion and has established some solid regulatory models that helped spawn an entire web and mobile driven industry. The main insurance regulator, the Insurance Regulatory and Development Authority (IRDA), played a proactive role by setting boundaries early on in the sector, such as clearly distinguishing between insurance brokers and web aggregators.

The Islamic banking system, where neither the borrowers nor depositors are paid or pay any interest, is set to launch in India. It will completely function under the tenets of sharia law, where the bank doesn’t charge interest but the customers share a part of profit or loss of the bank. The idea is to encourage the economic and social development of the region the bank is based in.

As the 'India stack' becomes mainstream, what will banking look like in the future?

Even with over 40 Acts directly or indirectly pertaining to pertaining to insolvency and bankruptcy, banks in India are still under tremendous pressure due to rising non-performing assets (NPAs). Multiple agencies are involved in handling these situations, with overlapping jurisdictions that creates complexities and delays.

For nearly 30 years, India’s double taxation avoidance agreement (DTAA) with Mauritius came in handy for investors to route money through ‘shell’ companies based out of the island nation. These investors saved on capital gains tax liabilities in Mauritius which does not impose these taxes on off-shore entities. A similar treaty exists with Singapore. As a consequence, India receives half of its FDI from just two countries: Mauritius (34%) and Singapore (16%).

Blockchain is a distributed, immutable ledger that records transactions using digital tokens. Its distributed architecture is much like P2P services such as Skype and bittorrent and it uses public key cryptography to ensure complete security for users. The immutability of entries on the blockchain is a key design feature that makes it particularly attractive to industries that lean heavily on trustworthy records, such as banks. But is India ready?

India’s banking regulator, the Reserve Bank of India (RBI), recently released a consultation paper on P2P lending in India. This paper aims at regulating India’s fledgling P2P ecosystem, demonstrating that the RBI is positively besieged with the concerns and realities of this nascent industry.

For several years the Indian Government has been pushing larger Public Sector Banks (PSBs) to consolidate the market by acquiring smaller and weaker banks. After failing several times in the past, it seems at least the merger of India's largest bank with its five associate banks will be finalised during this fiscal year.

Capital Small Finance Bank (SFB) was launched this Sunday (April 24, 2016) with much fanfare. This is the first of the ten small finance banks to become operational. The SFBs had received in principle approval from RBI last fiscal to start operations.

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