Banking, India updates

Changes to merchant discount rate framework: impact on stakeholders
  • India
  • 02 March 2018

The Reserve Bank of India and the Ministry of Electronics and Information Technology recently established a new regulatory framework for setting limits on and payments of merchant discount rates and encouraging digital payments. Rates will now be determined based not only on the basis of transaction value, but also on turnover. However, in its effort to curb transaction costs for merchants, the government risks imposing significant charges on other system participants.

Supreme Court rules on post-dated cheque given as security for repayment of loan instalment
  • India
  • 23 December 2016

The Supreme Court recently held that a dishonoured post-dated cheque for repayment of a loan instalment that was described as 'security' in the loan agreement was covered by the criminal liability set out in Section 138 of the Negotiable Instruments Act. While deciding whether dishonoured cheques issued to discharge existing liability fall under Section 138, the court explained that the question of whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction.

Licences for pre-paid payment instruments temporarily suspended
  • India
  • 23 December 2016

The Reserve Bank of India (RBI) recently issued a press release stating that given the rapid changes to the payments solutions space, it was in the process of reviewing the regulatory framework governing pre-paid payment instruments. The RBI also stated that it will grant no new licences for the issue of pre-paid payment instruments until the end of February 2017. This temporary suspension will not apply to applications made by new small finance banks and payment banks.

RBI guidelines for at-will licensing of private banks – key features
  • India
  • 30 September 2016

The Reserve Bank of India recently issued guidelines for the at-will licensing of universal banks in the private sector which, for the first time, will allow applicants to apply for a banking licence at will. The at-will regime will lead to increased transparency, better innovation and more realistic valuations, and is a significant step towards a healthier licensing regime for new private banks.

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