Fintech Companies - MUST READ

Happy Weekend everyone!

Today I am back with another weekly update for the Fintech Companies.

Covering updates in the regulatory or economic side of the Fintech market for Indian companies.

If you run a Fintech Company in India.

Or you plan on expanding your Fintech Company in India.

Then this becomes important for you.

Here are the main things that happened in the last week.

A) Emerging Trends

1) PayNearby Eyes FY26 IPO Amid Revenue Growth

IPO Plans:

• PayNearby, a fintech leveraging retail stores for financial services, plans an IPO in FY26, with talks underway with three merchant bankers, per PTI and Economic Times reports.

• Founder-CEO Anand Kumar Bajaj confirmed initiation of the process, expecting to file DRHP with SEBI soon after selecting a banker.  

Financial Snapshot:

• Reported ₹300 Cr gross revenue and ₹12 Cr profit in FY25, with 10% growth projected for FY26.

• Operates on a Distribution-as-a-Service model, facilitating ₹10,000 Cr in annual transactions via 1.2M retail partners.  

Why It’s Significant:

• Funds expansion, including adding 5 lakh partners and hiring 550-600 employees by FY26 end.

• Builds on Digital Naari program, onboarding 1.5 lakh women across 10,000+ PIN codes for rural empowerment.  

2) RUGR Fintech Secures $5M Pre-Series A for Rural Expansion

Funding Milestone:

• Rural fintech RUGR raised $5M in pre-Series A via CCPS from Vikasa India EIF I Fund, valuing it at $25M post-money, per Entrackr and Elets BFSI.

• Bengaluru-based startup will use proceeds for tech infrastructure, strategic investments, and working capital.  

Platform Focus:

• Offers one-stop rural banking solutions like merchant acquisition, real-time payments, and escrow services to banks and cooperatives.

• Targets underbanked communities, enabling digital access in Tier-3 cities and villages.  

Why It’s Significant:

• Accelerates financial inclusion by modernizing rural payments for underserved markets.

• Reflects investor confidence in RUGR’s mission to empower banks and businesses at scale.  

B) Economic Highlights

1) MUFG in Talks for 20% Stake in Shriram Finance Valued at $2.6B

Deal Talks:

• Japan’s MUFG is negotiating a 20% stake in Shriram Finance for ₹23,200 Cr ($2.6B) via primary issuance, potentially India’s largest NBFC FDI, per Economic Times and Bloomberg.

• Exclusivity agreement signed; MUFG open to higher stake over time, without secondary sales.  

Company Profile:

• Shriram, India’s second-largest NBFC with ₹2.72 lakh Cr AUM (17% YoY growth), focuses on vehicle finance (67% of book) and serves 10M customers via 3,225 branches.

• Q1 FY26 net profit rose 6.3% to ₹2,159 Cr, with NII up 10.3%; shares at ₹616.40 (5.85% YTD gain).  

Why It’s Notable:

• Highlights Japanese interest in Indian NBFCs amid sluggish home growth; Shriram refuted majority stake rumors but shares rose 3.5%.

• Bolsters Shriram’s retail lending in semi-urban/rural areas, with neutral FY26 outlook from India Ratings.  

2) India Inc’s Credit Profile Strengthens in H1 FY26

Credit Trends:

• Corporate credit quality improved in H1 FY26, with upgrades outpacing downgrades: CareEdge ratio at 2.6x (up from 2.4x), ICRA at 2.9x, Crisil at 2.2x, per Times of India and BusinessLine.

• Upgrades hit 15% (CareEdge), downgrades steady at 6%, driven by resilient demand and infra spending.  

Sector Insights:

• Infrastructure led upgrades (8.54x ratio), with BFSI at 2.1x; exporters (e.g., diamonds, textiles) faced downgrades from US tariffs.

• Strong balance sheets and cautious capex offset global risks, with reaffirmations at ~80%.  

Why It’s Significant:

• Reflects a two-speed economy: domestic sectors thrive amid export pressures; ICRA raised FY26 GDP forecast by 50 bps to 6.5%.

• Signals robust credit health, supporting steady growth despite uncertainties.  

C) Business Developments

1) Axis Bank Debuts Gold-Backed UPI Credit Line with Freecharge

Product Launch:

• Axis Bank, partnering with Freecharge, introduced Credit on UPI with Gold Loans on September 29, 2025—India’s first gold-backed credit accessible via UPI for MSMEs, entrepreneurs, and merchants.

• Available to existing Axis customers at gold loan branches, it offers instant overdraft against gold holdings with a fully digital journey post-onboarding.  

Key Features:

• Interest charged only on utilized amounts for working capital or liquidity; repayments via UPI QR or Freecharge app in real-time, no branch visits needed.

• Aligns with NPCI’s Credit Lines on UPI guidelines, as noted by NPCI’s Sohini Rajola, enhancing seamless credit access.  

Why It’s Notable:

• Unlocks gold’s economic value digitally, promoting inclusion in urban/rural areas, per Axis ED Munish Sharda.

• Combines Axis’s credit expertise with Freecharge’s digital flow, setting a benchmark for UPI-linked secured lending.  

2) Ignosis Secures $4M for AA and Data Intelligence Expansion

Funding Round:

• Ahmedabad-based Ignosis raised $4M in pre-Series A led by Peak XV’s Surge on September 30, 2025, with Force Ventures, Razorpay Ventures, and Cred’s Kunal Shah participating.

• Founded in 2022 by Nirav Prajapati and Chintan Sheth, it serves 125+ BFSI clients with RBI-regulated Account Aggregator infrastructure.  

Platform Impact:

• Addresses underserved credit for 160M consumers and 80% MSMEs via income detection, risk underwriting, and AI-driven insights on AA rails.

• Funds will scale teams and develop finance-specific LLMs/agentic AI for hyper-personalization in underwriting and advisory.  

Why It’s Significant:

• Positions AA as UPI-like rails for consent-driven data sharing, per CEO Prajapati, tackling income proof gaps.

• Marks Surge’s 11th cohort focus on AI/fintech, accelerating Ignosis’s growth in India’s digital finance ecosystem.  

D) Regulatory Insights

1) RBI Seeks Feedback on Draft Lending to Related Parties Framework

Draft Overview:

• RBI released eight draft Directions on October 3, 2025, for lending to related parties by banks, NBFCs, and AIFIs, harmonizing rules under the Banking Regulation Act, 1949.

• Introduces scale-based thresholds: e.g., >₹10 lakh Cr assets need Board approval beyond ₹50 Cr loans; <₹1 lakh Cr at ₹5 Cr.  

Key Provisions:

• Excludes independent directors of other banks from ‘related persons’; offers principle-based exemptions from Section 20(1)(b) for certain loans.

• Mandates supervisory reporting/disclosures; comments invited by October 31, 2025, via Connect2Regulate portal.  

Why It’s Important:

• Ensures prudence with operational flexibility, addressing risks from connected lending, per RBI’s review of extant guidelines.

• Promotes transparency and governance across REs, balancing innovation and stakeholder protection.  

2) RBI Expands INR Trade Settlement Options

Policy Update:

• RBI’s October 3, 2025, circular allows surplus in Special Rupee Vostro Accounts (SRVAs) to invest in non-convertible debentures/bonds and commercial papers by Indian firms, effective immediately.

• Builds on July 2022 framework, per A.P. (DIR Series) Circular No.10, promoting INR for global trade invoicing/settlement.  

Implementation:

• AD Category-I banks can facilitate without prior approval, subject to FEMA and statutory limits, aiding exports and partner country liquidity.

• Supports growth in INR-denominated trade, reducing forex reliance amid global sanctions.  

Why It’s Important:

• Enhances SRVA utility for investments, boosting INR internationalization and trade efficiency.

• Aligns with RBI’s vision for rupee as a settlement currency, per ongoing FEMA provisions.  

3) RBI Fines American Express ₹31.8 Lakh for Card Compliance Issues

Penalty Details:

• RBI imposed ₹31.8 lakh on American Express Banking Corp on October 1, 2025, for violating 2022 Credit/Debit Card Directions, based on ISE 2024 findings.

• Non-compliance: Failed to reverse credit balances from refunds/failed transactions to cardholders’ accounts.  

Enforcement Process:

• Followed show-cause notice, bank replies, and hearing; penalty under Banking Regulation Act, 1949, targets regulatory gaps, not transaction validity.

• Additional RBI actions possible, emphasizing compliance in payment systems.  

Why It’s Important:

• Reinforces RBI’s oversight of card issuers to protect consumers from unresolved refunds.

• Highlights scrutiny on data/payment handling amid digital growth.  

4) RBI Penalizes Ranuj Nagrik Sahakari Bank ₹3 Lakh

Penalty Details:

• RBI fined The Ranuj Nagrik Sahakari Bank ₹3 lakh on September 30, 2025, for breaching ‘Management of Advances - UCBs’ and customer liability limits on unauthorized transactions.

• Violations: No end-use checks on certain loans; failed to enable instant SMS reply objections for unauthorized e-banking.  

Enforcement Process:

• Stemmed from March 31, 2024, inspection, show-cause notice, and hearing under Banking Regulation Act, 1949 (Section 56).

• Focuses on compliance deficiencies, not customer agreements; further actions possible.  

Why It’s Important:

• Strengthens UCB accountability for loan monitoring and fraud protection.

• Protects rural/semi-urban customers from unauthorized transaction risks.  

I hope this was useful to you guys working in the Fintech Space.

The fintech space is everchanging, so staying up to date with information will help you make smart decisions for your business.

Again, If I see any notable changes or updates on the Fintech Side during the week, that can help Fintech Companies, I will compile them.

And then share them on the weekends!

Btw - I run a legal firm that's a one-stop solution for Fintech Companies in India.

Whether you are starting out in India, or expanding to the Indian market, DM 💬 me if you need legal help with:

1) Business Registration

2) Contract Drafting or Review

3) Compliance

4) Answering any legal questions

See you tomorrow with another Newsletter now.