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) PhonePe Clears SEBI Hurdle for Major Public Listing

Approval Milestone:

• PhonePe received final SEBI approval for its IPO on January 20, 2026, positioning it for one of India’s largest new-economy public offerings.

• Expected valuation around $15 billion, with a planned raise of nearly ₹12,000 crore ($1.35 billion) through a pure offer for sale (OFS).  

Listing Significance:

• Would rank as the second-largest new-economy IPO after Paytm (2021: ~$20B valuation, ₹18,000 crore raise) and comparable to Swiggy’s ₹11,300 crore IPO in November 2024.

• Updated Draft Red Herring Prospectus (DRHP) expected to be filed shortly.  

Market Leadership:

• Holds ~45% UPI market share (vs. Google Pay ~35%), processing ~10 billion monthly transactions worth over ₹12 lakh crore.

• Payments still contribute >90% of revenue despite diversification into share.market, lending, and insurance.  

2) Airwallex Acquires Paynuri to Enter South Korea Directly

Strategic Buy:

• Airwallex acquired South Korea-based Paynuri Co Ltd, gaining Payment Gateway, Prepaid Electronic Payment Instrument licences, and Foreign Exchange Business registration.

• Enables direct operations without third-party intermediaries; financial terms not disclosed.  

Growth Roadmap:

• Plans to roll out global business accounts, payments acquiring, and spend-management tools in South Korea in 2026.

• Targets building a ~20-person team by end-2026 across sales, compliance, client management, and product support.  

Company Momentum:

• Follows December funding round at $8 billion valuation (30% increase); achieved $1.2B annualised revenue and $266B transaction volume.

• Targets South Korea’s booming ecommerce, creative, and entertainment sectors for cross-border growth.  

3) Razorpay POS Wins RBI Nod for Offline Payments

Licence Achievement:

• Razorpay POS received RBI approval to function as an offline Payment Aggregator (PA-P), enabling compliant in-store digital payment processing.

• Completes Razorpay’s full RBI licence suite: online PA, cross-border PA, and now offline PA-P.  

Merchant Advantages:

• Allows direct onboarding of physical merchants (retail, restaurants, services) with reliable processing, faster settlements, and regulatory trust.

• Supports smart POS machines, mPOS devices, soundboxes, and pin-on-mobile for UPI, cards, and contactless payments.  

Strategic Value:

• Strengthens omnichannel capabilities, unifying online and offline payments for seamless merchant and customer experience.

• Accelerates adoption in urban and semi-urban markets amid rising demand for compliant in-store digital solutions.  

B) Economic Highlights

1) Private Banks Trim Low-Yield Loan Exposure

Margin Defence:

• Lenders like Federal Bank, South Indian Bank, and Yes Bank are deliberately slowing low-yielding loans to protect net interest margins amid a softer rate environment.

• Full impact of December policy rate cut expected to hit Q4 profitability.  

Lending Adjustments:

• Federal Bank reduced retail (especially housing) and large corporate lending; grew medium-yielding assets (gold loans +12%) to 47.7%.

• Yes Bank limited prime housing and large corporate exposure; South Indian Bank increased lending to A-/AA-rated corporates for better spreads.  

Performance Highlights:

• Federal Bank’s NIM improved to 3.18% in Q3 from 3.06%; overall advances rose 11% YoY to ₹2.56 lakh crore.

• Yes Bank’s advances grew only 5% YoY (vs. industry 14.5%), prioritising profitable growth.  

2) RBI Strengthens PSL Compliance Requirements

Auditor Certification:

• RBI now requires external auditors’ certificates from NBFCs, NBFC-MFIs, and HFCs confirming no loan is claimed as priority sector by multiple banks.

• Reiterated end-use monitoring and internal controls for PSL classification.  

On-Lending Caps:

• Bank loans to intermediaries for agriculture/MSMEs capped at 5%; to NBFC-MFIs at 10% of previous year’s PSL.

• Added credit to National Cooperative Development Corporation for specific on-lending as eligible PSL.  

Purpose & Enforcement:

• Aims to prevent over-classification (e.g., recent ICICI/HDFC cases) and ensure genuine priority sector credit flow.

• Compliance monitored quarterly to maintain discipline in PSL reporting.  

3) Public Sector Banks Disburse ₹52,300 Crore via Digital MSME Lending

Digital Credit Scale:

• PSBs sanctioned 3.96 lakh+ MSME loan applications worth over ₹52,300 crore (April–December 2025) using advanced digital underwriting (Credit Assessment Model).

• Model leverages digital footprints, account aggregators, GST data, ITR verification, credit bureau checks, and fraud screening.  

Borrower Benefits:

• Fully online applications, no paperwork/branch visits, instant sanctions, shorter turnaround, and data-driven decisions.

• Integrates CGTMSE credit guarantees for enhanced access.  

Ecosystem Support:

• Complements government’s extension of export incentives (Duty Drawback, RoDTEP, RoSCTL) to postal shipments (effective January 15).

• Aims to boost MSME competitiveness, especially in smaller towns and remote areas.  

4) RBI Floats Idea of BRICS Digital Currency Integration

Cross-Border Proposal:

• RBI suggested linking BRICS nations’ central bank digital currencies (CBDCs) to streamline trade and tourism payments.

• India plans to place the proposal on the 2026 BRICS summit agenda (to be hosted by India).  

Potential Impact:

• Could reduce US dollar reliance amid geopolitical tensions; BRICS includes Brazil, Russia, India, China, South Africa, UAE, Iran, Indonesia.

• Builds on 2025 Rio summit declaration encouraging payment system interoperability.  

Current Status:

• All core BRICS members running CBDC pilots (India’s e-rupee at ~7 million retail users); requires shared tech, governance, and settlement framework.

• Proposal may attract US scrutiny given past BRICS-related statements.  

C) Business Developments

1) India Secures Third Spot in Global Fintech Funding for 2025

Funding Performance:

• India’s fintech sector raised $2.4 billion in 2025, ranking third globally behind the US and UK, per Tracxn’s Geo Annual India FinTech Report 2025.

• Marked a modest 2% increase from $2.3 billion in 2024.  

Key Activity:

• Four funding rounds of $100M+ led by Groww, Weaver, and Raise; early-stage funding surged 78% to $1.2 billion.

• Seed-stage funding fell 40% to $177 million; late-stage funding dropped 26% to $1.0 billion.  

Ecosystem Highlights:

• 22 acquisitions (down 21% from 2024), with Groww’s $150M Fisdom deal as the largest; four IPOs (down 50% from 2024).

• Three new unicorns created; Bengaluru led with 42% of funding, followed by Mumbai (29%).  

2) Industry Urges Stronger Fintech Support in Budget 2026

Policy Expectations:

• Fintech leaders call for Budget 2026 to treat fintech as core financial infrastructure, emphasizing resilience, security, and interoperability.

• Focus areas include AI-led compliance, verification, fraud prevention, and simplified regulatory pathways.  

MSME & Inclusion Focus:

• Rajat Deshpande (FinBox) and Chirag Shah (Pulse) stress smoother digital credit journeys, responsible data governance, and expanded credit guarantees for MSMEs.

• Harsha Vardhana (Atom Financial Services) seeks clear capital gains and holding period rules to encourage long-term investing.  

Why It’s Critical:

• Fintech powers credit, savings, and transactions at scale; targeted incentives and compliance simplification can unlock broader adoption and inclusive growth.  

D) Regulatory Insights

1) RBI Conducts Liquidity Injection Operations

Liquidity Measures:

• RBI announced operations to manage banking system liquidity: 90-day Variable Rate Repo (VRR) of ₹25,000 crore on January 30, 2026.

• USD/INR Buy/Sell Swap auction of USD 10 billion (3-year tenor) on February 4, 2026.  

Additional Actions:

• OMO purchase auctions of Government of India securities for ₹1,00,000 crore (two tranches of ₹50,000 crore each) on February 5 and 12, 2026.

• RBI will monitor conditions and take further steps as needed.

2) RBI Penalizes Sri Satya Sai Nagrik Sahakari Bank

Penalty Imposed:

• RBI levied ₹1 lakh penalty on Sri Satya Sai Nagrik Sahakari Bank Maryadit, Bhopal, on January 20, 2026, for breaching prudential inter-bank gross exposure and counterparty exposure limits.

• Penalty under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of Banking Regulation Act, 1949.

Context:

• Based on statutory inspection as of March 31, 2025, show-cause notice, and personal hearing.

• Action addresses regulatory deficiencies without affecting transaction validity.  

3) RBI Fines Shri Kanyaka Nagari Sahakari Bank

Penalty Details:

• RBI imposed ₹8 lakh penalty on Shri Kanyaka Nagari Sahakari Bank Ltd., Chandrapur, Maharashtra, on January 20, 2026, for non-compliance with advances to builders/contractors directions.

• Violation: Sanctioned loans to builders/contractors partly used for land acquisition.  

Process:

• Penalty under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of Banking Regulation Act, 1949.

• Followed statutory inspection (March 31, 2025), show-cause notice, and hearing.  

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.