Banking Regulations Update

ODI-FDI Share Swap is now permitted ! In an important amendment, Ministry of Finance notified the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 on 16 August 2024 to streamline Foreign Direct Investment (FDI) and Overseas Investment (OI) regulations. 1. Cross-Border share swaps: Earlier, in a non-cash transaction involving share swap, issuance of shares by an Indian company to a non-resident/ foreign entity against acquisition of shares of an overseas company owned by such foreign seller was not permitted. Now, by Insertion of new rule 9A, Indian companies are allowed to issue or transfer equity instruments in exchange for foreign company equity instruments. This is one of the most significant amendment facilitating FDI and ODI exchanges and enhancing cross-border mergers and acquisitions. 2. Downstream Investments: The amendments clarify the treatment of downstream investments by Overseas Citizen of India (OCI)-owned entities, aligning them with Non-Resident Indian (NRI)-owned entities. 3. The definition of "Control" has been harmonized with the Companies Act, 2013. 4. The definition of a "startup company" has been updated to refer to a private company identified as a startup under specific government notifications. 5. Foreign Portfolio Investments Liberalised: Now the requirement of the government approval is pegged to the sectoral or statutory cap and is not limited to 49%, provided that such investment does not result in transfer of ownership and/ or control of the resident Indian company from resident Indian citizens to non-residents. 6. Sectoral caps and entry routes are introduced for specific activities, such as White Label ATM Operations (WLAO), which can have 100% foreign direct investment under the automatic route subject to Reserve Bank of India guidelines. #FEMA #FDI #ODI #RBI #NonDebtInstruments #Crossborder #Indiainc

🚀🌿 Exploring the FSB's new Nature-Related Financial Risk Stocktake The Financial Stability Board (FSB) just released a comprehensive stocktake on nature-related financial risks, providing valuable insights for the sustainable finance community. Here are some key points: 1. Diverse Stages of Evaluation: Financial authorities are at various stages of evaluating the relevance of biodiversity loss and other nature-related risks as financial risks. While some have recognized these as material financial risks, others are still monitoring international developments due to data gaps and the need to prioritize climate risks. 2. Data and Modelling Challenges: A major challenge identified is the difficulty in connecting underlying nature risks with financial exposures. There is a significant need for improved data and modelling to translate estimates of financial exposures into tangible measures of financial risk. 3. Regulatory and Supervisory Work: The regulatory and supervisory initiatives related to nature-related financial risks are in the early stages globally. There are diverse approaches across jurisdictions, with some authorities already implementing initiatives to promote firm-level disclosures and capacity-building efforts. 4. Analytical Frameworks: The report categorizes nature-related risks into physical and transition risks, similar to climate-related financial risks. Financial institutions are exposed to these risks through their investments and financing activities, but more work is needed to develop holistic approaches that consider the interdependencies between climate and nature-related financial risks. 5. Capacity Building and International Coordination: The report emphasizes the importance of international cooperation and capacity building to manage nature-related financial risks effectively. Examples include initiatives by the Network for Greening the Financial System (NGFS) and the Taskforce on Nature-related Financial Disclosures (TNFD). #SustainableFinance #NatureRisk #FinancialStability #FSB #Biodiversity #ESG #NatureDisclosure

"Russian importers are grappling with a new significant issue in their transactions with China. Payments in yuan bought in Russia are increasingly being rejected, causing alarm among market participants, reports The Moscow Times. Both Chinese banks and payment agents handling transfers to the East via third countries are wary of dealing with such funds. Market insiders revealed that new terminologies— "clean" and "dirty" yuan—have emerged in the cross-border payments sector since June. A "clean" yuan refers to the currency purchased abroad, whereas a "dirty" yuan is bought within Russia, whether on the stock exchange or the interbank market. Handling this "dirty" yuan has become burdensome. The number of Chinese banks willing to accept money from Russia significantly dwindled after the US imposed sanctions on the Moscow Exchange and Asian subsidiaries of major banks on 12 June. VTB Shanghai, which is also under sanctions, began facing severe issues in transferring yuan to client accounts in China. Even before, acquiring yuan within Russia was arduous due to the threat of secondary US sanctions. The bank used complex methods to replenish its yuan reserves, either through the Moscow Exchange and subsequent transfer to China via local intermediary banks or the Russian division of the Bank of China, receiving yuan from the same intermediaries. But now, this channel has shut down as both intermediaries and the Bank of China have withdrawn from the scheme. Simultaneously, operations involving "counterflows"—using incoming yuan on exporter accounts to pay for goods or swapping debt obligations to settle similar transactions—are becoming increasingly complex. The source noted that exports passing through VTB Shanghai are less than the payments for imports, aggravating the situation. Consequently, direct transfers of yuan from Russia to China, which were challenging before, have now nearly ceased entirely. "If before 12 June, around 15% of such payments were quickly and seamlessly received by Chinese counterparts, now it's approximately 5%," a source told The Moscow Times. The situation is further complicated by new issues with the only effective scheme for settling foreign trade transactions through payment agents in other jurisdictions. "In the past month, three out of five of our payment agents informed us they would only work with 'clean' yuan," disclosed an equipment supplier from China. Regarding attempts to pay directly to China in rubles, not all banks are willing to accept payments in the Russian currency. Those that do often impose exorbitant conversion rates to "clean" yuan. Even if rubles reach China, utilizing them is challenging due to low demand. "It is even harder to find suppliers willing to accept rubles, and they tend to raise prices for such payments. Therefore, it turns out to be neither quick nor cheap," added the source." From https://lnkd.in/d7WqzNMi

Russia added to the EU’s AML high-risk list: What this means in practice You’ve probably already seen the news: ↳ The European Commission added Russia to the list of high-risk third countries due to strategic deficiencies in its AML/CFT framework. I’ve decided to write a short breakdown of what this looks like in practice, especially if you work in AML. The first thing to understand is that: This is a binding decision and directly applicable to all EU regulated entities. And here’s what makes this decision interesting: 👉 Russia is not on the FATF grey or black list 👉 The UK has not taken a similar position 𝗦𝗼 𝘄𝗵𝘆 𝗱𝗶𝗱 𝘁𝗵𝗲 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻 𝘁𝗮𝗸𝗲 𝘁𝗵𝗶𝘀 𝗱𝗲𝗰𝗶𝘀𝗶𝗼𝗻? Because the EU has concluded that, despite the lack of FATF or UK designation, Russia still presents a threat to the integrity of the EU financial system. If you're an AML officer at an EU-regulated institution, here’s what this update requires you to consider: 𝟭. 𝗖𝗼𝘂𝗻𝘁𝗿𝘆 𝗿𝗶𝘀𝗸 𝗮𝘀𝘀𝗲𝘀𝘀𝗺𝗲𝗻𝘁𝘀 ↳ Russia must now be treated as a high-risk third country under EU law ↳ Update internal risk scoring, matrices, and policy documents 𝟮. 𝗘𝗻𝗵𝗮𝗻𝗰𝗲𝗱 𝗱𝘂𝗲 𝗱𝗶𝗹𝗶𝗴𝗲𝗻𝗰𝗲 (𝗘𝗗𝗗) ↳ Apply EDD to Russian clients, counterparties, and beneficial owners ↳ Consider indirect links - such as offshore structures or intermediaries ↳ Retain clear documentation of your rationale and decisions 𝟯. 𝗢𝗻𝗯𝗼𝗮𝗿𝗱𝗶𝗻𝗴 𝗮𝗻𝗱 𝗞𝗬𝗖 𝗽𝗿𝗼𝗰𝗲𝘀𝘀 ↳ Russian connections should now trigger additional review steps ↳ Check whether your onboarding process can flag links to Russia properly 𝟰. 𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻 𝗺𝗼𝗻𝗶𝘁𝗼𝗿𝗶𝗻𝗴 ↳ Revisit typologies that may involve Russia-linked flows ↳ Consider additional monitoring thresholds or alert triggers 𝟱. 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗰𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻 ↳ Inform relevant teams (e.g. onboarding, legal, risk, senior management) ↳ Include this regulatory change in your compliance reporting 𝟲. 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 ↳ Senior management should be informed - and may need to approve changes to customer acceptance criteria or risk appetite. Tip for leadership: Ensure there’s someone at board or senior level who can work closely with your AML team to implement such regulatory changes effectively. This is necessary to support decision-making, understand the impact, and help align risk strategy across the business. Wishing you a great week ahead!

There are a 𝑙𝑜𝑡 of conversations happening around stablecoins right now — and the tone has changed. This isn’t just crypto people debating tech anymore. It’s turning up in 𝐛𝐚𝐧𝐤 𝐞𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐜𝐚𝐥𝐥𝐬, 𝐩𝐨𝐥𝐢𝐜𝐲 𝐝𝐫𝐚𝐟𝐭𝐬, 𝐚𝐧𝐝 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐟𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤𝐬. Take Bank of America’s CEO Brian Moynihan — his point was blunt: if stablecoins are allowed to pay yield, they could pull deposits out of banks and “take lending capacity out of the system.” And JPMorgan leadership (Jamie Dimon included) have raised the bigger structural concern: if stablecoins start behaving like deposits, we may be creating a parallel banking system — but without the same safeguards that sit behind traditional banking. Which is why this feels like a real shift: 𝐒𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧𝐬 𝐚𝐫𝐞 𝐧𝐨 𝐥𝐨𝐧𝐠𝐞𝐫 𝐚 “𝐜𝐫𝐲𝐩𝐭𝐨 𝐭𝐨𝐩𝐢𝐜”. 𝐓𝐡𝐞𝐲’𝐯𝐞 𝐛𝐞𝐜𝐨𝐦𝐞 𝐚 𝐛𝐚𝐧𝐤𝐢𝐧𝐠 + 𝐩𝐨𝐥𝐢𝐜𝐲 𝐭𝐨𝐩𝐢𝐜. Here are the 6 stablecoin discussions shaping 2026 1) Yield / rewards (the real battleground) If stablecoins pay yield — directly or indirectly — they stop being “just payments”. They become a competing store of value. 2) Deposit outflows → lending capacity Banks fund lending through deposits. If a meaningful share migrates to stablecoins, credit tightens or becomes more expensive — SMEs get hit first. 3) Shadow banking risk Regulators worry stablecoins could recreate deposit-like intermediation outside the prudential perimeter — without the same capital, liquidity, or backstops. 4) Tokenised deposits vs stablecoins Two versions of digital money are competing quietly in the background: - bank-issued tokenised deposits (inside the system), vs - stablecoins issued by non-banks (reserve-backed, outside the system) 5) Reserve rules & redemption stress What counts as safe reserves? How fast can redemptions be met in a shock? This is where “payments innovation” meets “financial stability”. 6) Consumer protection & integrity Clear disclosures, governance, audits, AML/sanctions controls — all become non-negotiable if this scales. The interesting part is this: The industry isn’t debating whether stablecoins work. They clearly do. The debate is whether they remain a regulated payments layer… or evolve into a deposit alternative, forcing a redesign of credit intermediation and monetary plumbing. Where do you think this lands over the next 12 months? #Stablecoins #FinTech #DigitalPayments #Banking #Regulation #CryptoRegulation #Payments

🔴 Just In - the Senate Banking Committee has just released its 309-page draft of the "Clarity Act". After the "Genius Act" on stablecoins in 2025, this is the most anticipated crypto legislation of the year in the US. 👉 Amendments due tomorrow. Markup Thursday. Here's what actually matters : 🔵 BTC, ETH and any spot ETP approved before year-end are permanently treated as "non-securities". No ambiguity. No reversal. The regulatory overhang on institutional allocation disappears. 🔵 Staking is fully carved out - self-staking, liquid staking, custodial staking. Governance rights don't disqualify a token. A massive unlock for on-chain yield products. 🔵 Banks can now offer custody, staking, lending, market making and underwriting for digital assets. No prior approval required. TradFi infrastructure enters the game at scale. 🔵 Stablecoin yield on exchanges is banned. Activity-based rewards (staking, governance, loyalty) stay permitted. Existing programs will need to restructure. A direct hit on exchange business models. Circle and Coinbase will play this very differently. This is the most consequential piece of crypto legislation the US has ever drafted. And Europe is watching closely. MiCA 2 is coming. Two of its biggest open questions are the legal nature of tokens and the regulation of DeFi. The Clarity Act's answers - permanent non-security status for major tokens, staking carved out, banks fully authorised - will be hard for European regulators to ignore. We're tracking every detail at The Big Whale - including in our institutional briefings. 📌 Join us tomorrow morning with Grégory Raymond & Aleksandar Bukovski for our insights.

Navigating India's Digital #Banking Future: Reserve Bank of India (RBI) 's New Authorization Directions. The Reserve Bank of India (RBI) has just unveiled its comprehensive "Reserve Bank of India (Digital Banking Channels Authorisation) Directions, 2025". This significant draft, effective from its final issuance date, aims to streamline and strengthen the regulatory framework for digital banking services across India. This isn't just an update; it's a foundational shift for all commercial and cooperative banks operating in India! Let's dive into what these directions mean for the banking landscape: 1. Defining the Digital Frontier: The RBI clearly distinguishes between various digital banking channels: • Digital Banking Channels themselves encompass services offered via websites (internet banking), mobile phones (mobile banking), or other digital channels, involving significant process automation and cross-institutional capabilities. • Internet Banking allows customers to manage accounts and access services online. • Mobile Banking facilitates banking through mobile applications, USSD, and SMS. Crucially, the directions differentiate between two levels of digital service based on functionality: • View Only Banking Facility: This is for non-transactional services that do not alter a customer's assets or liabilities. Think balance inquiries, statement downloads, or viewing. While loans and fund transfers cannot be directly provided, banks can offer downloadable forms for such facilities. • Transactional Banking Facility: This is the full suite, allowing all fund-based or non-fund-based banking services. This distinction is key to understanding the varying compliance requirements. 2. Dual Pathways for Authorization – A Tailored Approach: The RBI has established two distinct eligibility criteria, reflecting the risk profiles of the services offered: • For "View Only" Banking Facility:     ◦ Banks must have fully implemented Core Banking Solution (CBS).     ◦ Their public-facing IT infrastructure must be enabled to handle Internet Protocol Version 6 (IPv6) traffic.     ◦ Upon launching, banks must inform the concerned RBI regional office within thirty days and submit a ‘Gap Assessment and Internal Controls Adequacy’ (GAICA) report. This demonstrates a lighter, but still structured, oversight for lower-risk services. • For "Transactional" Banking Facility:     ◦ This requires prior approval from the Reserve Bank.     ◦ Applications must be submitted via the PRAVAAH portal with a board resolution and supporting documents.     ◦ The criteria are significantly more stringent, emphasizing robust financial health and technological readiness:         ▪ Full CBS and IPv6 enablement of IT infrastructure.         ▪ Compliance with minimum regulatory Capital to Risk-Weighted Assets Ratio (CRAR).         ▪ Net worth of at least the minimum regulatory requirement or ₹50 crore, whichever is higher, as of March 31st of the preceding financial year.

The Financial Stability Board (FSB) just released a comprehensive report on Multifunction Crypto-Asset Intermediaries (MCIs), marking a significant stride in international guidance. This report, arguably the most detailed to date, sheds light on the intricacies of Virtual Asset Service Providers (VASPs) that offer both custody and trading services. The report recognizes the critical role played by Multifunction Crypto-Asset Intermediaries (MCIs) in the crypto-asset ecosystem. It highlights their expanding services, from market making to blockchain infrastructure development, often evolving in non-compliance with existing regulations. Alignment with CoinDCX's Approach: CoinDCX aligns with the FSB's perspective, particularly in its recommendations to IOSCO and other relevant Standard Setting Bodies (SSBs). The report underscores risks analogous to the traditional financial system, especially in proprietary trading on the same platform and the issuance of virtual assets used as collateral for borrowing. Financial Stability Implications: While the threat to global financial stability from MCI failures is currently deemed limited, recent closures of "crypto-asset-friendly" banks underscore the need for continued monitoring. The report stresses that financial stability implications depend on the sector's development, the role of MCIs, their linkages with the traditional financial system, and effective global crypto-asset regulation. Key Policy Implications and Recommendations: The report concludes with key policy implications, including assessing amplification risks from combinations of MCI functions, enhancing cross-border cooperation, addressing information gaps, and recommending a global regulatory framework for crypto-asset activities. As the crypto-asset sector continues to evolve, reports like these pave the way for informed decisions, responsible practices, and a secure future for all investors. Stay tuned as CoinDCX is working on initiatives that reflect our commitment to continue to enhance our user's trading experience and create a safe environment for the growing web 3 community. ✊ 🚀

How Banks Ensure Regulatory Compliance: Conducting Treasury Activities Regulatory compliance is a cornerstone of modern banking, ensuring financial institutions operate within legal frameworks. For banks, particularly in treasury activities, maintaining compliance is crucial to uphold trust, manage risk, and avoid significant penalties. Here is how banks ensure regulatory compliance in their treasury operations: Understanding Regulatory Requirements: Banks must have a comprehensive understanding of relevant regulations, including international directives and national rules. These cover capital adequacy, liquidity management, and risk assessment. Robust Internal Controls: Implementing robust internal controls is essential. Compliance departments monitor and enforce adherence to regulatory standards through regular audits and reviews of treasury activities. Effective Risk Management: Banks use risk management frameworks to identify, assess, and mitigate risks in their treasury operations. This includes market risk, credit risk, and operational risk, maintaining a conservative approach. Training and Education: Continuous training ensures staff are aware of regulatory changes and understand their roles in compliance. Specialised training for treasury staff focuses on specific compliance requirements. Technology and Automation: Advanced software solutions monitor transactions, manage data, and generate compliance reports. These tools detect potential compliance issues in real-time for prompt corrective actions. Regular Reporting and Documentation: Accurate and timely reporting to regulatory bodies is essential. Comprehensive documentation of all treasury activities ensures transparency and provides a clear audit trail. Engagement with Regulators: Proactive engagement with regulators keeps banks informed about upcoming regulatory changes and provides guidance on compliance matters, addressing issues before they escalate. Scenario Analysis and Stress Testing: Conducting scenario analysis and stress testing helps ensure compliance under various market conditions. Banks assess the impact on their treasury activities to ensure they can withstand adverse conditions. Ensuring regulatory compliance in treasury activities is a multi-faceted process requiring understanding regulations, implementing robust controls, managing risks, continuous education, leveraging technology, accurate reporting, engaging with regulators, and conducting scenario analysis. By prioritising compliance, banks navigate the complexities of the regulatory landscape, contributing to the stability and integrity of the financial system.

The AIF industry was under the impression that issuance of partly paid-up units by AIFs to persons resident outside India was well within the realms of law because the definition of 'unit' under FEM (NDI) Rules, 2019 referred to 'beneficial interest of an investor in an AIF' and SEBI permitted issuance of partly paid-up units by AIFs. In March, 2024, this definition of 'unit' under the NDI Rules was amended to 'include' a unit that has been partly paid up. It seemed like a clarification, rather than a new position of law. However, from the circular issued by RBI last week, it seems that it was indeed a new position of law and not merely a clarification. RBI has asked AIFs to to regularise the issuances of partly paid units to persons resident outside India prior to March 14, 2024 through compounding under FEMA. #legalupdate #fundmanagement #fundmanagers #alternativeinvestments #sebi #rbi #regulatory #securitieslaw #foreignexchange