Regulatory Digest: The Financial Services Bulletin

The Financial Services Bulletin

This is the October edition of Nishith Desai Associates’ monthly financial services newsletter in collaboration with U.S.-India Business Council.

INTRODUCTION

In this edition, we spotlight key regulatory developments across the finance and banking sectors, with a particular focus on foreign investment. Despite global uncertainty stemming from renewed U.S. trade tariffs and fiscal concerns in advanced economies, India’s economy demonstrated strong resilience, recording a five-quarter-high growth in Q1 FY 2025–26 (April-June 2025), driven by robust domestic demand¹. Adding to this positive momentum, India’s foreign exchange reserves crossed USD 700 billion in September 2025, with foreign currency assets rising to approximately USD 590 billion². Supported by the government’s emphasis on ease of doing business and regulatory harmonization, the last month saw a notable surge in foreign investments and continued strength in banking operations along with India’s benchmark indices, Sensex and Nifty, approaching record highs, driven by optimism around an earnings revival and a resurgence in foreign investor inflows³. Further reflecting this spirit of global collaboration, Nishith Desai Associates (“NDA”), in partnership with Choose New Jersey, hosted an exclusive luncheon dialogue with New Jersey Governor Phil Murphy and First Lady Tammy Murphy on September 24, 2025, to deepen India – U.S. economic and cultural ties. It also saw participation from U.S.-India Business Council (“USIBC”). The dialogue provided a unique platform for Indian industry leaders to engage directly with U.S. policymakers.

NDA, in collaboration with USIBC, is pleased to launch the October edition of our monthly financial services roundup entitled “The Financial Services Bulletin”. Through this publication, we aim to cull out key developments in the financial services industry which happened over the last month that, in our view, “summarizes this period”. Our roundup has been meticulously curated into two parts: Part I provides updates from the broader business world, while Part II covers legal and regulatory developments in the financial services industry, ensuring that key developments relevant to our stakeholders are concisely discussed.

PART I – BUSINESS AND NEWS UPDATES

TRADES, TRENDS, LEGISLATIONS AND LITIGATION

1. United States of America (“U.S.”) – India ongoing trade negotiations: an updated saga

   As mentioned in our previous newsletter, on August 27, 2025, U.S. President Donald Trump announced a 25% (twenty-five percent) punitive tariff on Indian imports, effectively doubling overall import duties to 50% (fifty percent). The additional 25% (twenty-five percent) levy reportedly serves as a penalty for India’s continued purchase of Russian oil.

   Even though the trade negotiations between the two nations have remained inconclusive as on date, in late September, India described the recent round of trade talks with the U.S. in a public statement as “constructive,” signaling mutual interest in continuing negotiations toward a bilateral trade agreement. Further, it has been reported that: (i) a delegation led by Piyush Goyal (Ministry of Industry & Commerce) visited Washington from September 22, 2025 to September 24, 2025, meeting U.S. trade officials and the ambassador-designate Sergio Gor, exchanging views on the possible contours of a deal; and (ii) Piyush Goyal and Sergio Gor joined a meeting between India’s Foreign Minister S. Jaishankar and U.S. Secretary of State Marco Rubio, where the focus of the discussion was on trade and tariffs.⁴

   Thereafter, it has been reported on October 9, 2025 that the Indian Prime Minister Narendra Modi spoke with U.S. President Donald Trump and that they have “reviewed good progress achieved in trade negotiations” and discussed the possibility of remaining connected on these discussions.⁵ It appears that this was succeeded (based on news reports dated October 11, 2025) by a visit by Sergio Gor to India (from October 9, 2025 to October 14, 2025), where he discussed bilateral issues which included trade, defense and technology with Narendra Modi.⁶

   That said, India has continued to uphold its strategic autonomy and protect key domestic sectors such as agriculture and dairy, even as it engages constructively with the U.S. on trade discussions⁷.

2. Ministry of Finance launches Goods and Services Tax (“GST”) Appellate Tribunal (“GSTAT”)⁸.  

   In line with the vision of ‘minimum government, maximum governance’, the Ministry of Finance has announced the launch of the GSTAT, which will become operational from December 2025. The tribunal aims to provide a unified forum for resolving GST disputes, streamline tax adjudication, and reduce litigation delays while marking a significant milestone in the evolution of India’s indirect tax regime.

   Justice Sanjay Kumar Mishra has been appointed as the President of the Tribunal, which will serve as the appellate authority for both the Central GST and State GST commissions. From April 2026, the Principal Bench of GSTAT will function as the National Appellate Authority for Advance Rulings. Each Bench of the GSTAT will comprise two Judicial Members, one Technical Member (Centre), and one Technical Member (State).

   In addition to the GSTAT, the GSTAT e-Courts Portal was also announced, which has been developed jointly by the Goods and Services Tax Network (GSTN) and the National Informatics Centre (NIC). The platform is designed to facilitate end-to-end digital management of GST appeals, enabling taxpayers and practitioners to file appeals online, monitor case progress, and participate in hearings virtually.

   India’s Finance Minister Nirmala Sitaraman has quoted this step as ‘a true reflection of cooperative federalism in action’. The establishment of the GSTAT aligns with India’s idea of tribunalisation of justice, in order to ensure that specalised forums are able to deliver justice faster and create much needed jurisprudence relating to GST litigations.

3. Reserve Bank of India (“RBI”) consolidates regulatory guidelines / directions into 238 master circulars by proposing a repeal of 9,000 existing circulars

   In a major simplification push, in a press release on Friday,⁹ the RBI has proposed to consolidate nearly 9,000 circulars into 238 master circulars. In effect, these 9,000 circulars are proposed to be repealed. This follows from the existing work of the Regulations Review Authority (“RRA”), established to review the regulations, circulars, reporting systems, based on the feedback from public and stakeholders.¹⁰

   The RBI’s consolidation of circulars into Master Directions has been structured separately for 11 types of regulated entities and covers 30 functional areas of regulatory instructions. The exercise incorporates all instructions issued by the Department of Regulation and its predecessor departments, with obsolete instructions excluded. Further, the proposed consolidation has been done on an “as-is” basis, with only minor editorial updates. Certain operational circulars (such as AML / TF updates / bank name changes) remain standalone for ease of reference.

   Given that the current regime is split across multiple circulars across different domains, this proposed exercise will go a long way in streamlining the regulatory framework and improving clarity for regulated entities. For the industry, this consolidation is particularly significant as it simplifies the regulatory landscape, reduces compliance complexity, and lowers the risk of misinterpretation.

4. RBI appoints Sonali Sen Gupta as a new Executive Director

   RBI has appointed Sonali Sen Gupta as Executive Director, effective October 9, 2025. Previously serving as Regional Director for Karnataka at the Bangalore Regional Office, she will now oversee the Consumer Education and Protection Department, Financial Inclusion and Development Department, and Inspection Department at RBI.¹¹

5. Securities and Exchange Board of India (“SEBI”) might allow foreign portfolio investors (“FPIs”) to trade in non-cash, non-agricultural commodity derivatives

   SEBI is considering allowing FPIs to trade in select commodity derivatives for hedging, as part of efforts to deepen institutional participation and enhance liquidity in the commodities market¹². The regulator is also exploring the participation of banks, insurers, and pension funds to make the market more robust and attractive for hedging. The proposal aims to broaden hedging options beyond crude oil and natural gas to include metals like gold and silver.

   Additionally, SEBI has set up a committee to suggest measures for expanding agricultural commodities trading and is considering the establishment of a working group to develop non-agricultural and non-cash commodities such as metals. This comes as an attempt to enhance institutional participation to ensure higher liquidity in the market, making it more attractive for hedging.

6. Insurance and Regulatory Development Authority of India (“IRDAI”) appoints Ajay Seth as Chairman 

   Ajay Seth assumed charge as Chairman of the IRDAI after a five-month vacancy. A 1987-batch IAS officer of the Karnataka cadre and former Secretary of the Department of Economic Affairs, he has over three decades of experience in economic policy and regulatory reform. He is expected to retain this role for a three-year term / until turning 65.¹³ 

7. IRDAI limits venture capital backed fintechs from obtaining insurance manufacturing licenses 

   News articles have reported that IRDAI will not allow start-ups backed by venture capital (that are not promoter-backed¹⁴) to secure insurance manufacturing licenses¹⁵. IRDAI also appears to have further emphasised that venture capital-backed fintech firms may continue to operate in distribution or brokerage but will not be permitted to underwrite or design insurance products, thereby limiting their entry into the insurance manufacturing space.

   The regulator’s concerns stem from opaque ownership structures and heavy reliance on external capital, noting that promoter-driven entities with clear and stable control may potentially be better suited for underwriting responsibilities.¹⁶

8. Meesho’s big move signals fresh momentum in India’s IPO market¹⁷

   Meesho, a rapidly growing Indian e-commerce unicorn, is preparing to raise roughly INR 42.5 billion (approximately USD 484 million) through a fresh issuance of shares in its upcoming initial public offering (“IPO”). In FY25, Meesho became India’s largest e-commerce platform by annual transacting users and annual placed orders. This is significant because it comes at a moment when India’s IPO market is gaining strong momentum, and Meesho’s strong position, growing faster than the overall Indian e-commerce market and narrowing its losses over the last year, adds weight to investor confidence.

PART II – LEGAL AND REGULATORY UPDATES

BANKING, FINANCIAL SERVICES & FINTECH 

Vaibhav Parikh (New York)

Viral Mehta (Mumbai-BKC)

Nishchal Joshipura (Mumbai-BKC)

1. RBI releases Master Direction on regulation of Payment Aggregators (“PAs”)

   On September 15, 2025, the RBI released the Master Directions on Payment Aggregators (“PA Directions”)¹⁸, introducing a consolidated framework governing the activities of PAs. The new framework repeals three existing regulatory frameworks¹⁹ and is aimed at bringing uniformity across the payment aggregation ecosystem. The PA Directions bring in physical payment aggregation services within the regulatory purview of the RBI for the first time. The new guidelines also introduce stricter due diligence obligations, including customer due diligence of its merchants and KYC²⁰.

   The PA Directions are applicable to banks, non-bank payment aggregators, and authorized dealer banks (“AD Banks”), and classify payment aggregators into three distinct categories -

   (i) Payment Aggregator Online(“PA-O”) for online payments where acceptance devices and payment instruments are not in proximity;

   (ii) Payment Aggregator Physical(“PA-P”) for proximity-based, point-of-sale transactions. Until now, PA-Ps remained outside the regulatory ambit of the RBI. By including them within the fold of the PA Directions, the RBI has extended direct licensing and compliance obligations to entities facilitating physical payments such as point-of-sale transactions; and

   (iii)  Payment Aggregator–Cross Border(“PA-CB”) for aggregation of cross-border payments pertaining to permissible current account transactions under the Foreign Exchange Management Act, 2000 (“FEMA”).

   In respect of PA-CBs, the Directions have introduced a more liberal and clearly defined regime. PA-CBs are now permitted to process all permissible current account transactions under FEMA, expanding the scope beyond merely trade-related payments allowed under India’s foreign trade policy. The Directions no longer categorize PA-CBs as “export-only” or “import-only” but instead distinguish between inward transactions and outward transactions. The PA Directions retain the existing capital requirements, a minimum net worth of INR 15 crore (approximately USD 1.8 million) in application, to be scaled up to INR 25 crore (approximately USD 3 million) by the end of the third financial year. PA-CBs must not engage in marketplace business, co-mingle funds, or net off inward and outward transactions. The framework also prescribes a transaction cap of INR 25 lakh (approximately USD 28,000) for both inward and outward payments, restricts dealings in foreign currency to AD Banks, and limits pre-funding and inter-escrow transfers to domestic PAs.

   Payment aggregators would need to closely evaluate and ensure compliance with the various operational requirements under the PA Directions. This would also include revisiting various existing policies as well as contractual documentation with merchants to align with the regulatory stipulations under PA Directions. 

2. RBI revises digital payment transactions framework for authentication mechanisms²¹ 

   In an interesting development, RBI has released the “Authentication Mechanisms for Digital Payment Transactions” Directions, 2025 (“Directions”), aiming to strengthen the security of digital payments in India. The new framework mandates two-factor authentication (2FA) for all domestic digital payment transactions while expanding the scope of permissible authentication mechanisms beyond traditional SMS-based One-Time Passwords (OTPs). Effective April 1, 2026, the Directions permit the use of advanced authentication technologies such as biometric verification, behavioural analytics, or device-based tokens, thereby enhancing user convenience without compromising security. Adopting a risk-based approach, issuers may introduce additional verification layers for high-risk transactions, factoring in parameters like user behaviour, transaction patterns, geolocation, or device attributes.

   The Directions provide a forward-looking framework that aligns with international security standards. While the domestic authentication norms do not directly apply to such transactions, card issuers are required to implement mechanisms to validate non-recurring cross-border card-not-present transactions by October 1, 2026. Issuers must also register their Bank Identification Numbers (BINs) with card networks and adopt risk-based controls to effectively monitor and mitigate potential fraud in cross-border transactions. Overall, the RBI’s Directions seek to enhance the security, reliability, and interoperability of India’s digital payments ecosystem, while harmonizing domestic and cross-border payment authentication standards with global best practices.

   The Directions also repeal eight existing circulars, thereby consolidating India’s regulatory framework for digital payment authentication into a single, cohesive structure. 

3. PhonePe IPO and Online Payment Aggregator License

   Walmart-backed PhonePe has reportedly filed confidential papers for an IPO in India, marking a significant step toward its debut in public markets²². In parallel, PhonePe has also received the RBI’s final approval to operate as an online payment aggregator, allowing it to onboard merchants and process digital payments independently under the new regulatory framework²³. 

4. RBI orders buy now pay later (“BNPL”) player M/s One Sigma Technologies Pvt Ltd (“Simpl”) to suspend payment operations²⁴, proceedings initiated by the Enforcement Directorate for violation of foreign exchange laws 

   RBI has the power to revoke or suspended the operations of entities when they operate in violation of the Payment and Settlement Systems Act, 2007 (“PSS Act”).

   In a recent, important instance, the RBI utilized this power and ordered BNPL player Simpl to immediately halt its payment, clearing, and settlement operations, citing that it was functioning as a payment system operator without obtaining the mandatory Certificate of Authorisation under the PSS Act.

   Parallelly, the Enforcement Directorate has initiated proceedings that Simpl engaged in foreign exchange and foreign direct investment irregularities, alleging that the company routed overseas capital intended for technology services into unlicensed financial services operations in breach of foreign exchange regulations, amounting to approximately INR 913 crores (approximately USD 110 million).²⁵

5. Developments in the Non-Banking Financial Company (“NBFC”) sector in September 2025. 

   The NBFC sector in India is evolving rapidly, driven by regulatory reforms, strategic investments, and growing participation from both domestic and global players. Among recent developments, the Finance Industry Development Council (FIDC) has reportedly received in-principal approval from the RBI to operate as a self-regulatory organisation (“SRO”), making it the first full-suite NBFC body to achieve such status if the final approval is granted. While no official RBI press release has been issued, multiple news outlets have covered the development. This step follows the RBI’s June 19, 2024 invitation for SRO applications which was covered in our first edition of this Financial Service newsletter. Other SROs include Sa-Dhan and Microfinance Industry Network (MFIN) for MFIs and the FACE for Fintechs.²⁶

   Additionally, in yet another interesting development, Amazon has now entered the NBFC space and completed the acquisition of NBFC firm Axio, which has been facilitating its buy-now-pay-later services in India for over six years²⁷.

   These developments signal an exciting and transformative phase in India’s NBFC landscape. The move toward SRO recognition reflects the sector’s increasing maturity and focus on self-governance, while the entry of global institutional investors and strategic acquisitions highlights growing confidence in the sector’s scalability and profitability.

FOREIGN PORTFOLIO INVESTMENT AND PUBLIC MARKETS 

Kishore Joshi (Mumbai)

Viral Mehta (Mumbai-BKC)

Nishchal Joshipura (Mumbai-BKC)

1. SEBI amends several key regulations to enhance “Ease of Doing Business”²⁸

   On September 12, 2025, SEBI had its 211^th board meeting, which approved certain major changes in the current regulations. This was with the objective of promoting “Ease of doing Business” for investors²⁹. Few critical developments are as follows:

   (i) Amendments to Securities Contracts (Regulation) Rules, 1957 (“SCRR”) relating to Minimum Public Offer and timelines to comply with Minimum Public Shareholding for issuers with the objective to enhance ease of doing business. 

   • SEBI has decided to revise the minimum public offer (“MPO”) by making the following changes in the SCRR – (i) For companies with market capital of INR 50,000 crore (approximately  USD 6 billion) to INR 100,000 crore (approximately  USD 12 billion), MPO of INR 1,000 crore (approximately  USD 120 million) and at least 8% of the post issue market capital has been proposed; and (ii) Minimum public shareholding (“MPS”) of 25% must be achieved within 5 years from date of listing.
   • For companies with market capital of INR 100,000 crore to INR 5,00,000 crore (approximately USD 60 billion), MPO of INR 6,250 crore (approximately USD 750 million) and at least 2.75% of the post issue market capital has been proposed. In case MPS is less than 15% as on the date of listing, MPS of 15% should be achieved within 5 years and MPS of 25% should be achieved within 10 years from date of listing. In case MPS is 15% or above as on the date of listing, MPS of 25% should be achieved within 5 years of the date of listing.
   • For companies with market capital more than INR 5,00,000 crore, MPO of INR 15,000 crore (approximately USD 1.8 billion) and at least 1% of the post issue market capital should be achieved, subject to a minimum dilution of 2.5%.
   • SEBI recommends extending the proposed MPS compliance timelines to listed entities, ensuring consistency with new issuers and providing additional time for those currently non-compliant.

   (ii)  Amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR”) with the objective of facilitating Ease of Doing Business and enhancing inclusive participation of institutional investors in the IPO process. 

   • SEBI has proposed amendments to the SEBI ICDR Regulations, 2018 relating to anchor investor allocations to facilitate participation of long-term investors. The current cap for Category I classification for allocation up to INR 10 crore (approximately USD 1.2 million) has lost relevance due to large IPO sizes. Discretionary allotment under anchor portion Category I and Category II have been merged into a single category for allocations up to INR 250 (approximately USD 30 million) crore with minimum number of anchor allottees as 5 and maximum as 15 (minimum allotment INR 5 crore (approximately USD 0.6 million) per investor).
   • Reservations for anchor portion have increased from 33.33% to 40%. Out of this, 1/3 will continue to be reserved for domestic mutual funds, remaining for registered life insurance companies and registered pension funds. The unsubscribed part to be available for domestic mutual fund allocation.
   • SEBI proposes extending MPS compliance timelines to listed entities to ensure consistency and allow additional time for non-compliant entities.

   (iii) Amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) and the circulars thereunder with the objective of facilitating Ease of Doing Business relating to Related Party Transactions (“RPT”) 

   • SEBI has now introduced scale-based thresholds based on annual consolidated turnover of the listed entity, for determining material RPTs.
   • The revised threshold for the Annual Consolidated Turnover of Listed Entity is as follows:
     • Up to INR 20,000 crore (approximately USD 2.4 billion) – 10% of the annual consolidated turnover of the listed entity;
     • INR 20,001 crore to up to INR 40,000 crore (approximately USD 4.8 billion) – INR 2,000 crore (approximately USD 241 million) + 5% of the annual consolidated turnover of the listed entity above INR 20,000 crore;
     • More than INR 40,000 crore – INR 3,000 crore (approximately USD 361 million) + 2.5% of the annual consolidated turnover of the listed entity above INR 40,000 crore or INR 5000 crore (approximately USD 602 million), whichever is lower. 
   • The revised threshold for prior audit committee approval of RPTs is set at 10% of the subsidiary’s last audited standalone turnover (or the listed entity’s material RPT threshold, whichever is lower); for newer subsidiaries without a year of audited financials, it is 10% of their paid-up capital and securities premium or the listed entity’s threshold, whichever is lower. 

   (iv) Amendments to SEBI (Foreign Portfolio Investors) Regulations, 2019 (“FPI Regulations, 2019”) to facilitate ease of doing business for FPI based in International Financial Services Centres (“IFSCs”) 

   • In order to operationalize this framework, SEBI approved amendments to the FPI Regulations 2019, so that overseas mutual funds / unit trusts registering as FPIs shall now be permitted to include Indian mutual funds as constituents.
   • SEBI has now approved a proposal to also allow retail schemes in IFSCs with a resident Indian sponsor or manager, to register as FPIs and has amended SEBI FPI Regulations 2019, so that such sponsor contributions shall now be subject to a maximum of 10% of corpus of the fund.

   (v)  Proposals to give regulatory fillip to Accredited Investors to Alternate Investment Funds (“AIF”) to facilitate ease of doing business. 

   • Introduction of a separate category of AIF schemes, limited exclusively to Accredited Investors only (AI-only schemes), extension of additional relaxations and operational flexibilities to Large Value Funds (“LVFs”) for accredited investors and provision for existing eligible AIF schemes to opt into AI-only or LVF classification has been approved by SEBI.
   • SEBI also approved the reduction of the minimum investment threshold for LVFs from INR 70 crore (approximately USD 8.4 million) to INR 25 crore (approximately USD 3 million). 
2. Block deals get bigger, bolder and more transparent³⁰ 

   Currently, SEBI’s framework allows block deals with a minimum order size of INR 10 crore, executed within two special trading windows (morning and afternoon) at prices restricted to a tight ±1% band around the reference price. Additionally, till now the block deal mechanism for T+0 settlement cycle was available only during morning sessions. These trades are meant for large, institutional transactions and are conducted transparently through exchanges to prevent manipulation and ensure fair price discovery.

   On October 8, 2025, by the way of a circular, SEBI increased the minimum order size to INR 25 crore and widened the price band to ±3% for all stocks. It added provisions to allows application of block deal framework on T+0 settlement cycle for both morning session and afternoon session This change is expected to restrict speculative small trades, provide greater flexibility for large institutional investors, and improve liquidity and transparency.

   A detailed analysis of the same is available here. 

3. SEBI revises the framework on Social Stock Exchange (“SSE”) 

   On September 19, 2025, SEBI revised the SSE framework in line with recent amendments to the ICDR and LODR.³¹The updated framework tightens eligibility norms for Not-for-Profit Organizations (“NPOs”), requiring them to be registered in India as a trust, society, or Section 8 company with at least 12 months of valid registration before applying to the SSE.

   The changes also expand disclosure and report obligations for NPOs and Social Enterprises. They must now file detailed annual disclosures on governance, financials, and operations by October 31, 2025, or their income tax filing due date, whichever is later. Additionally, entities that have raised funds through SSE must submit an annual impact report covering at least 67% of program expenditure, reviewed by social impact assessors. These measures aim to enhance transparency, accountability, and investor trust in the social sector while encouraging the boost in this sector. We have further analyzed these revisions here.

4. SEBI’s assertive regulatory and quasi-judicial role in Indian markets. 

   SEBI, in the recent times, has played an active and assertive role in regulating India’s capital markets and dealing firmly with defaulting participants. The latest instance of SEBI playing a quasi-judicial role, was highlighted in Jane Street’s case. As mentioned in previous editions of this newsletter, SEBI in July issued an interim order accusing Jane Street, a U.S. trading firm of manipulating index options by influencing futures and cash markets around expiry days. Jane Street has contested the order before the Securities Appellate Tribunal (“SAT”), alleging procedural unfairness, denial of access to key documents, and selective reliance on internal notes while disregarding prior surveillance findings that found no wrongdoing. SEBI, in turn, has maintained that it has already provided substantial data and must withhold internal deliberations under settled legal precedents³². Following this, the tribunal is now set to hear the case on November 18^th, 2025, and has directed SEBI to defend itself through a written reply³³.

INSURANCE 

Nishchal Joshipura (Mumbai-BKC)

Parul Jain (Delhi)

1. IRDAI issues directive on fraud risk management to insurers, reinsurers and distribution partners

   New reports have reported that the IRDAI has directed insurers, reinsurers, and distribution partners to implement a comprehensive framework to detect and mitigate fraud risks. The guidelines, which emphasize a zero-tolerance stance, are set to become effective from 1 April 2026.³⁴ 

   Key features of the new fraud risk and cybersecurity framework include: 

   (i) Establishment of Fraud Monitoring Committee (“FMC”): Insurers must establish an FMC responsible for implementing and overseeing fraud risk management across the organisation. Further, an independent Fraud Monitoring Unit (separate from internal audit) will assist the FMC in executing and reviewing anti-fraud measures.

   (ii) Embedded risk management: Fraud risk management must be integrated across all business operations, including underwriting, claims, and distribution.

   (iii)  Cybersecurity and data protection: Insurers are required to adopt robust cybersecurity frameworks, continuously monitor and upgrade systems, and strengthen access controls, customer verification, and incident reporting mechanisms to address evolving threats.

   (iv)  Participation in Insurance Information Bureau’s (“IIB”) Fraud Monitoring Technology Framework: Insurers must actively share details of distribution channels, hospitals, third-party vendors, and blacklisted fraud perpetrators with the IIB, which will maintain a caution repository to safeguard the integrity of the insurance sector.

   The above measures will likely increase accountability and reporting relating to fraud within the insurance industry.

MISCELLANEOUS

Vaibhav Parikh (New York)

Viral Mehta (Mumbai-BKC)

Nishchal Joshipura (Mumbai-BKC)

1. Competition Commission of India (“CCI”) and Ministry of Electronics and Information Technology (“MeitY”) to adopt coordinated approach to streamline oversight; launch of market study 

   CCI and MeitY have agreed to adopt a consultative and coordinated approach to address issues that fall under both the Digital Personal Data Protection (“DPDP”) Act, 2023 and the Competition Act, 2002, following a high-level meeting held on August 28, 2025.³⁵ The press release that followed, noted that the collaboration will focus on sharing information, avoiding jurisdictional conflicts, and mapping regulatory touchpoints, while building joint protocols involving the Data Protection Authority to ensure smooth enforcement. This coordinated approach is expected to streamline oversight on platform conduct, mergers, and consumer protection in India’s data-driven digital markets, underscoring the importance of enhanced regulatory coherence in safeguarding both competition and data privacy.

   Separately, the CCI has launched a market study on artificial intelligence (“AI”),³⁶ to understand the AI ecosystem (including legal framework), potential competition law issues emanating from use of AI and understanding the potential manner of delineation of AI in markets in India.

2. Ban on India’s online gaming industry enacted by the Parliament of India³⁷ 

   In August 2025, the Indian Parliament passed the Promotion and Regulation of Online Gaming Bill, 2025 (“Online Gaming Bill”). The legislation introduces a comprehensive framework for regulating online gaming while imposing a blanket ban on real-money games, covering both skill-based and chance-based formats.

   The Online Gaming Bill applies to e-sports, online money games, and online social games offered by Indian operators to users in India, as well as to foreign operators providing such games to Indian users. It classifies online games into three categories: (i) e-sports, (ii) online social games, and (iii) online money games, the first two being regulated and the third expressly prohibited. To oversee implementation, the Online Gaming Bill has empowered the Central Government to establish a GamingAuthority tasked with determining whether a game qualifies as an online money game, recognizing and registering online games, addressing user complaints, and exercising additional functions as may be prescribed.

   While the Online Gaming Bill has currently been challenged and is pending hearing before the Supreme Court, as an immediate aftermath of its enactment, a large number of businesses in this sector appear to have shut down.³⁸ We have discussed this development and its impact in detail in our article here.

MONETARY POLICY COMMITTEE DECISIONS ON OCTOBER 1, 2025 

1. RBI Announces 22 Measures to Strengthen the Banking Sector and Boost Economic Growth³⁹

   In a move to enhance financial stability, credit flow, and India’s global economic integration, RBI Governor announced a comprehensive package of twenty-two additional measures in his statement on October 1, 2025. These reforms aim to strengthen the resilience and competitiveness of the banking sector and can be divided into five major buckets, a few of which are as set out below:

   (i) Strengthening the Resilience and Competitiveness of the Banking Sector

   • The Expected Credit Loss (“ECL”) framework of provisioning with prudential floors will be made applicable to select Scheduled Commercial Banks (with the exception of small finance banks, payment banks, regional rural banks and all-India financial institutions) from April 1, 2027. Further, they will be provided a glide path till March 31, 2031 to smoothen the one-time impact of higher provisioning on their existing books.
   • The revised Basel III capital adequacy norms for commercial banks (barring the entities set out above being exempted from the ECL framework) will come into effect from April 1, 2027.
   • A risk-based deposit insurance premium system will replace the current flat-rate premium, incentivising sound risk management and benefiting better-rated banks.

   (ii) Improving the Flow of Credit

   • An enabling framework will allow Indian banks to finance acquisitions by Indian corporates, expanding the scope of capital market lending. This is a landmark announcement by the RBI which was much awaited by the industry.
   • The regulatory ceiling on lending against listed debt securities will be removed, and lending limits against shares will rise from INR 20 lakh (approximately USD 24,000) to INR 1 crore (approximately USD 120,000), while initial public offering financing limits will increase from INR 10 lakh (approximately USD 12,000) to INR 25 lakh (approximately USD 28,000) per person.
   • The 2016 framework disincentivising lending to large borrowers (credit limit above INR 10,000 crore (approximately USD 1.2 billion)) will be withdrawn, as credit concentration risks are now managed under the Large Exposure Framework and other macroprudential tools.
   • To reduce infrastructure financing costs, the risk weights on NBFC lending to operational, high-quality infrastructure projects will be lowered.

   (iii)  Simplifying Foreign Exchange Management

   • ECB regulations under FEMA will be rationalized to simplify provisions relating to eligible borrowers, recognized lenders, borrowing limits, cost, end-use, and reporting requirements.
   • FEMA rules for non-residents establishing business presence in India will also be streamlined to promote ease of market entry.

   (iv)  Internationalizing the Indian Rupee

   • The RBI will establish transparent reference rates for currencies of India’s major trading partners, facilitating INR-based cross-border transactions and boosting the Rupee’s global acceptance.

These measures collectively mark a significant policy shift towards strengthening India’s financial architecture, deepening credit markets, and elevating the rupee’s international standing. As India advances toward its goal of Viksit Bharat by the centenary year of independence, these initiatives underscore the critical alignment of fiscal, monetary, and regulatory policies needed to achieve sustainable growth.

CONCLUSION

The last month has been marked by a series of progressive legal, regulatory, and market developments across India’s financial services landscape, underscoring the country’s resilience and steady march toward innovation and uniform application of law. From the RBI’s sweeping reforms in payment aggregation and digital authentication, to SEBI’s proactive adjustments enhancing ease of doing business for public markets, insurance and AIFs, the regulatory environment has evolved to support growth, transparency, and investor confidence. The surge in foreign investments, launch of new business-friendly initiatives such as the GSTAT, and the consolidation / constant amendment of existing laws in the sector collectively highlight India’s growing appeal as a dynamic financial and entrepreneurial hub.

Authors

Sonakshi Babel, Parina Muchhala and Nishchal Joshipura

You can direct your queries or comments to the relevant member.

¹Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61277.

²Available at: https://ddnews.gov.in/en/indias-forex-reserves-cross-usd-700-billion-rbi-reports-third-straight-weekly-rise/.

³Available at: https://economictimes.indiatimes.com/markets/stocks/news/diwali-aint-over-yet-sensex-hits-52-week-high-nifty-tops-26k-5-factors-pushing-d-st-near-all-time-peak/articleshow/124753512.cms?from=mdr.

⁴Available at: https://www.reuters.com/sustainability/boards-policy-regulation/india-says-trade-talks-with-us-constructive-eyes-early-deal-2025-09-26/.

⁵Available at: https://www.reuters.com/world/india/modi-says-he-trump-call-reviewed-good-progress-trade-negotiations-2025-10-09/.

⁶Available at: https://www.reuters.com/world/india/us-ambassador-india-gor-says-he-discussed-bilateral-issues-with-pm-modi-2025-10-11/.

⁷Available at: https://www.financialexpress.com/policy/economy/centre-gives-update-on-india-us-trade-deal-no-breakthrough-negotiations-to-continue/3990342/

⁸Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2170932

⁹Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61407.

¹⁰Available at: https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4755.

¹¹Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61411.

¹²Available at: https://www.sebi.gov.in/media-and-notifications/speeches/sep-2025/address-of-chairman-at-mcx-event-metals-from-mines-to-markets_96657.html.

¹³Available at: https://economictimes.indiatimes.com/industry/banking/finance/insure/ajay-seth-appointed-irdai-chairman-after-5-month-gap/articleshow/123642339.cms?from=mdr.

¹⁴A promoter, in ordinary parlance often referred to as ‘founder’ in other jurisdictions, is the person responsible for day to day management and affairs of a company. In India, companies that are promoter backed refer to entities that have individuals / families that run its affairs. Accordingly, a “non promoter backed” company in general parlance refers to all such companies that are not backed by a “promoter”, and instead backed by institutional or financial investors (such as venture capital or private equity funds) who are not controlling the daily affairs.

¹⁵An insurance manufacturer is allowed to create insurance products and collect premiums while bearing the liability to pay back the customer in case of a claim. An insurance manufacturing license refers to the license granted by IRDAI to an applicant company permitting it to carry the given business in India.

¹⁶Available at: https://economictimes.indiatimes.com/tech/startups/irdai-hardens-stance-no-insurance-licence-to-vc-backed-fintechs/articleshow/123663104.cms?from=mdr.

¹⁷Available at: https://www.reuters.com/world/india/e-commerce-platform-meesho-raise-484-million-indian-ipo-via-fresh-issue-2025-10-20/

¹⁸Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12896&Mode=0#11.

¹⁹(i) Guidelines on Regulation of Payment Aggregators and Payment Gateways dated 17 March 2020; (ii) Clarifications on Guidelines on Regulation of Payment Aggregators and Payment Gateways dated 31 March 2021; and (iii) Regulation of Payment Aggregator Cross Border dated 31 October 2023.

²⁰CDD stands for Costumer Due Diligence and KYC stands for Know your Costumer Obligations.

²¹Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12898&Mode=0.

²²Available at: https://www.thehindu.com/business/markets/walmart-backed-phonepe-files-confidential-ipo/article70087861.ece.

²³Available at: https://www.cnbctv18.com/business/phonepe-gets-final-rbi-nod-to-operate-as-online-payment-aggregator-19681609.htm.

²⁴Available at: https://www.cnbctv18.com/business/finance/rbi-orders-bnpl-player-simpl-to-suspend-payment-operations-19690879.htm.

²⁵Available at: https://enforcementdirectorate.gov.in/sites/default/files/latestnews/Press%20Release-%20SIMPL-23.7.2025%202.pdf.

²⁶Available at: https://www.moneycontrol.com/news/business/nbfc-body-fidc-gets-in-principle-approval-from-rbi-to-be-an-sro-final-nod-expected-soon-13496088.html.

²⁷Available at: https://www.thehindu.com/business/amazon-completes-acquisition-of-nbfc-firm-axio/article70013577.ece.

²⁸Available at: https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2025/sebi-board-meeting_96601.html.

²⁹Available at: https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2025/sebi-board-meeting_96601.html.

³⁰Available at: https://www.sebi.gov.in/reports-and-statistics/reports/aug-2025/consultation-paper-on-review-of-block-deal-framework_96252.html.

³¹Available at: https://www.sebi.gov.in/legal/circulars/sep-2025/framework-on-social-stock-exchange_96702.html.

³²Available at: https://www.thehindu.com/business/sat-asks-sebi-to-respond-to-jane-street-in-three-weeks/article70030545.ece.

³³https://economictimes.indiatimes.com/markets/stocks/news/ex-trader-investigating-jane-street-ends-term-at-sebi/articleshow/124403480.cms?from=mdr.

³⁴Available at: https://www.businessworld.in/article/irdai-sets-new-fraud-risk-rules-for-insurers-from-2026-575210.

³⁵Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2161633.

³⁶Available at: https://www.cci.gov.in/images/marketstudie/en/market-study-on-artificial-intelligence-and-competition1759752172.pdf.

³⁷Available at: https://www.meity.gov.in/static/uploads/2025/10/18bae7782749f36ebb062fdb0b2607ea.pdf.

³⁸Available at: https://www.thehindu.com/news/national/businesses-shut-down-because-of-law-online-gaming-companies-tell-supreme-court/article70097376.ece.

³⁹Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61333.

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