Regulatory
Digest
November 19, 2025
The Financial Services Bulletin
This is the November 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 sector, with a particular
focus on the listed security markets. With the Indian
listed market booming and seeing unprecedented amounts
of public listings, it is clear that it is more than
just a trend. Just in 2025, the Indian listed market
has seen more than 300 listings, which have already
raised more than USD 16 billion, with another USD 4-5
billion plus of offerings in the pipelines. Within this
backdrop, it is reassuring to see that the Indian regulators
are taking steps to secure and boost this wave even
further. Adding to this positive momentum, the Indian
stock market also saw the return of foreign portfolio
investment (“FPI”) after
3 months with net inflows of nearly USD 1.6 billion
in October 2025.1 Further, FPIs have also
invested nearly USD 1.5 billion in October 2025 in financial
services stocks alone.2
Nishith Desai Associates (“NDA”),
in collaboration with U.S.-India Business Council (“USIBC”),
is pleased to launch the November edition of our monthly
financial services roundup titled “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.
India’s retail inflation slows down.3
India’s annual retail inflation plunged to
0.25 % in October, down from 1.44 % in September, according
to government data. This was driven predominantly by
steep deflation in food and beverage prices and favorable
base-effects, and the recent tax cuts, as mentioned
in our
earlier edition. This marks the fourth consecutive
month when inflation has remained below Reserve Bank
of India’s (“RBI”)
medium target of 4%.
2.
India recently sent its first India-made multi-chip
module (“MCM”) to U.S.4
In a major boost to India’s semiconductor ambitions,
Kaynes Semicon, an Indian company, has successfully
shipped the country’s first commercially packaged
900 MCMs to U.S.-based company, Alpha & Omega Semiconductor.
An MCM is a compact electronic package that combines
several chips into a single unit, making devices faster,
smaller, and more power-efficient.
This milestone marks the first time India has produced
a complex chip module comprising 17 dyes within a single
unit, underscoring the nation’s growing technological
and manufacturing capabilities. This is also particularly
critical considering that knowledge and overall technologies
to develop MCM remain limited.
This shipment was facilitated by the India Semiconductor
Mission5 and particularly highlights India’s
emergence as a credible player in the global semiconductor
value chain (and to U.S. participants).
3.
India’s largest proposed foreign direct investment
(“FDI”) in the Indian banking sector.6
Emirates NBD, one of the largest banks in the Middle
East, has announced that it shall, subject to regulatory
approval, acquire around 60% shareholding in RBL Bank
Limited for approximately INR 26,850 crore (approximately
USD 3 billion) through a preferential allotment, marking
the largest-ever FDI and equity fundraise in the Indian
banking sector. As part of this transaction: (i) Emirates
NBD will also provide an ‘open offer’ to
the shareholders of RBL Bank Limited; and (ii) Emirates
NBD’s Indian banking branches will be merged into
RBL. Once the transaction receives the requisite approvals
and is consummated in accordance thereof, Emirates NBD
shall be categorized as the ‘promoter’ of
RBL Bank Limited, and the shareholding percentages will
be adjusted / scaled down to ensure compliance with
Indian laws.7
This proposed investment comes just months after
the RBI granted in-principle approval to Emirates NBD
to establish a wholly owned subsidiary in India.
Though this transaction is pending approvals and
consummation, it reflects a growing trend of foreign
banks deepening their presence in India through ‘control’
deals in the banking and financial services sector,
following recent examples like Sumitomo Mitsui Banking
Corporation’s investment in Yes Bank (as reflected
in our earlier edition
here), which only highlights India’s increasing
attractiveness as a destination for strategic global
banking investments.
4.
India Crosses USD 20 billion in artificial intelligence
(“AI”) investments.8
India has officially surpassed the USD 20 billion
mark in cumulative and new investment commitments in
AI as of 2025, according to recent estimates from the
Ministry of Electronics and Information Technology.
It appears that this is largely due to Google’s
decision to invest around USD 15 billion over the next
5 years in Visakhapatnam, Andhra Pradesh for the development
of an AI hub.
This is a major growth from cumulative private AI
investments between 2013 and 2024, which, as per the
Stanford Artificial Intelligence Index Report 20259
were a total of USD 11.1 billion.
5.
Blackstone enters India’s insurance intermediary
market with INR 1,700 crore (approximately USD 205 million)
acquisition of Ace Insurance Brokers.
Global private equity giant Blackstone has acquired
a majority stake in Indian insurance brokers company
Ace Insurance Brokers for around INR 1,700 crore, marking
one of the largest transactions in India’s insurance
intermediary sector. Ace provides a comprehensive range
of insurance and reinsurance services, and this deal
represents Blackstone’s first investment in India’s
insurance brokerage market, which handles annual premium
placements of approximately INR 50,000 crore (approximately
USD 6 billion).
The acquisition underscores growing investor interest
in the insurance intermediary space, seen recently with
Edme Insurance Brokers’ (formerly Aditya Birla
Insurance Brokers) acquisition of UK-based UIB’s
India operations in August 2025, reflecting a broader
trend of consolidation and global capital inflows into
the Indian insurance ecosystem.10
6.
India–U.S. relations make progress and show signs
of cooperation with signing of a 10-year defense pact.11
The India-U.S. trade relationship has lately been
marked by uncertainty, particularly over issues such
as tariffs, market access, and regulatory barriers that
have at times strained bilateral ties.12
However, the two countries have recently signed a new
defense pact to expand defense cooperation over the
next 10 years, after a meeting between U.S. Secretary
of War Pete Hegseth and Indian Defence Minister Rajnath
Singh in Kuala Lumpur.
As mentioned by Secretary Hegseth on social media,
this pact is solidified with the intent to enhance “coordination,
information sharing and tech cooperation” and
advance “regional stability and deterrence”13.
The agreement aims to deepen cooperation in all domains,
including defense-industrial collaboration, military
interoperability across land, air, sea, space and cyberspace,
as well as maritime domain awareness over the next decade.
This long-term framework not only enhances defense and
technology partnerships but also signals renewed trust
and commitment between the two nations.
That said, India and U.S. continue to be involved
in prolonged discussions on trade and tariffs, which
are expected to be concluded within this year.
PART II – LEGAL
AND REGULATORY UPDATES
BANKING, FINANCIAL SERVICES & FINTECH
1.
RBI issues Draft Directions on Banks’ Capital
Market and Acquisition Financing Exposure.14
RBI has issued draft guidelines, in the form of two
separate directions, namely one for commercial banks
and another for small finance banks, redefining how
banks participate in India’s capital markets.
Pertinently, these guidelines also include the draft
framework through which banks can finance acquisitions
(such as mergers and acquisitions) in India. The proposed
framework aims to deepen market participation while
maintaining prudential safeguards and financial stability
and are proposed to come into effect from April 1, 2026. This
follows the announcement made during the recent October
2025 Monetary Policy Committee meeting, as captured
in our previous edition
here, to review the extant prudential limits for
capital market exposure,
Few of the key provisions of the draft directions
are as follows:
Capital market
exposure (“CME”): CME includes:
(i) investment exposures (direct investment in equity
and preference shares; convertible bonds; convertible
debentures; units of equity mutual fund schemes;
and units of alternate investment fund (“AIFs”),
exposures to derivatives, etc.); and (ii) credit
exposures (such as acquisition finance, bridge loans
to companies, underwriting commitments taken up
by banks, advances, etc.). Prudential Ceilings
for CME: 40% of their Tier 1 capital at
the end of the immediately preceding financial year
(on a solo basis); and 40% of its consolidated Tier
1 capital as at the end of the immediately preceding
financial year (on a consolidated basis)15. Direct Exposure
Cap: Direct exposure and acquisition financing
is capped at 20% of solo / consolidated Tier 1 capital
(as applicable), with acquisition financing further
capped at 10%. Acquisition financing:
Banks can now fund Indian corporates for acquiring
equity stakes in domestic or foreign companies as
strategic investments (with a core objective to
create long-term value for the acquirer through
potential synergies), for up to 70% of the deal
value, while the acquirer must contribute at least
30% as equity. Further, the acquirer should be alisted
company having a satisfactory net worth and be profit
making for the last three years. A lot of other
requirements have also been prescribed in detail
in the draft circulars. All outstanding loan amounts
under the credit facilities should be disclosed
as “Notes to Account” in the balance
sheet of the bank. Loans for General
Business Purposes: Banks can finance commercial
entities (not in the nature of financial entities)
against eligible securities for financing their
working capital or for other productive purposes.
Further, they can also provide bridge finance to
corporates against the eligible securities already
held by them for financing promoters’ stake
in new companies, subject to certain conditions. Permitted Lending
Structure for Acquisition Finance: Banks
may lend directly to the acquiring company or to
a step-down special purpose vehicle formed specifically
for the acquisition. Policy and Risk
Management: Each bank must establish a
formal policy on acquisition finance, detailing
borrower eligibility, security requirements, margin,
risk management, and monitoring norms. Restrictions:
The acquiring company or SPV must be a body corporate,
not a financial intermediary such as NBFC or Alternative
Investment Fund; the acquiring and target entities
must not be related parties; the acquisition value
must be supported by two independent valuations;
and banks must also maintain sub-limits for intraday
exposures to manage risk dynamically.
This framework marks a major evolution in India’s
financial landscape, enabling banks to prudently participate
in high-value acquisitions and capital market activities,
thereby improving returns and diversification, while
providing corporates structured access to affordable
acquisition financing and reducing dependence on high-cost
private capital.
2.
RBI proposes new risk weights for NBFCs to encourage
funding in the real estate sector.16
RBI has proposed key amendments to the Master Direction
on Non-Banking Financial Company–Scale Based Regulation,
2023, aimed at recalibrating risk weights for infrastructure
exposures of non-banking financial companies (“NBFCs”).
Under the draft amendments, which are proposed to
be effective from April 1, 2026, RBI introduces the
concept of “high-quality infrastructure projects”
in sub-paragraph 5.1.14 (A) (“HQIP”),
which refers to projects that satisfy a number of criteria,
including (i) completing at least a year of satisfactory
operations, (ii) having standard exposure in the books
of a lender, (iii) contractual provisions providing
high protection to creditors, and (iv) restricting obligors
from acting to the detriment of the creditors. Further,
the prudential obligations have been modified as follows –
|
Weighted risk asset –
On balance sheet item
|
Percentage weight
|
Sr. No. to which amendment
is made
|
|
Loans to HQIP where the obligor has repaid
at least 10% of the sanctioned amount
|
50
|
(e) (i)
|
|
Loans to HQIP where the obligor has repaid
at least 5 percent but less than 10% of the
sanctioned amount*
|
75
|
(e) (ii)
|
* If the projects do not meet the HQIP
criteria, risk weights under 3 (e) / (g) apply as were
applicable previously.
By linking risk weights to repayment track record
and project quality, the amendment marks a shift from
a uniform to a risk-sensitive, differentiated regulatory
framework, fostering stability while catalyzing credit
flow to India’s infrastructure sector.
FOREIGN PORTFOLIO INVESTMENT AND PUBLIC MARKETS
1.
Securities and Exchange Board of India (“SEBI”)
proposes corporate governance relaxations for high value
debt listed entities (“HVDLE”).
SEBI has proposed a series of corporate governance
relaxations aimed at easing compliance and improving
the ease of doing business for HVDLEs. The proposals,
which focus on rationalizing thresholds, simplifying
governance requirements, and aligning disclosure norms
with existing equity listing regulations, include: (i)
increasing the HVDLE identification threshold from INR
1,000 crore (approximately USD 120 million) to INR 5,000
crore (approximately USD 600 million) of listed debt;
(ii) shifting the definition of a material subsidiary
from an income-based to a turnover-based metric; (iii)
introduction of a scale-based threshold for determination
of the ‘materiality’ of related party transactions,
for the purposes of compliance; (iv) and relaxing
board and committee requirements.17
These proposed relaxations are expected to reduce
compliance burden, enhance operational flexibility,
and streamline governance for HVDLEs, thereby improving
the overall ease of doing business and market efficiency
in India’s debt segment.
2.
SEBI released consultation paper on comprehensive review
of SEBI (Mutual Funds) Regulations, 1996.18
SEBI, in its consultation paper released on October
28, 2025, has proposed significant cuts in mutual fund
expense ratios and sharp reductions in the permissible
caps on brokerage and transaction costs charged to mutual
fund schemes. Other key recommendations also include
strengthening governance standards for trustees and
AMCs and enhancing accountability of key personnel.
These proposed changes are expected to compress the
earnings of asset management companies, brokers, and
other market intermediaries.19
3.
SEBI allows transfer of Portfolio Management Services
(“PMS”) between managers.20
In a move to streamline mergers and reorganizations
in the portfolio management industry, SEBI, through
its Transfer of portfolios of clients (PMS business)
by Portfolio Managers circular, has permitted portfolio
managers to transfer their Portfolio Management Services
(“PMS”) business, with
SEBI’s prior approval.
The regulator has allowed such transfers of the PMS
business (either within the group or otherwise). In
case these are intra-group transfers, they can be undertaken
either for specific ‘investment approaches’
or for the entire PMS operations. Where the transfer
is proposed between portfolio managers belonging to
different groups, a joint application for approval must
be filed by the transferor and transferee, and the entire
business must be transferred (with no flexibility to
transfer only selective investment approaches). If the
entire PMS business is transferred, the transferor portfolio
manager must surrender its PMS registration certificate
within 45 days from the date of completion of the transfer.
INSURANCE
1.
Liberty General Insurance fined INR 1,00,00,000 (approx.
USD 120,000) by the Insurance Regulatory and Development
Authority of India (“IRDAI”).21
IRDAI penalised Liberty General Insurance Co. Ltd.
(“Liberty General”) for
violation of outsourcing and policyholder’s interest
protection norms. As per the press release dated October
28, 2025, Liberty General defaulted on IRDAI (Outsourcing
of Activities by Indian Insurers) Regulations (“Outsourcing
Regulations”) as Liberty General engaged
certain corporate agents for the services related to
outsourced activities of seminars and other event management
programs, awareness campaigns, policy printing, signage
and other display material, distribution of marketing
material including brochure, pamphlets etc. IRDAI noted
that these payments were in circumvention of existing
regulations governing corporate agents as well.
Further, Liberty General was found engaging and paying
excessive amounts to related parties of insurance brokers
for activities outside the purview of Outsourcing Regulations
amongst other violations. The inspection conducted revealed
that Liberty General engaged related parties of multiple
insurance brokers for servicing the activities outsourced
(including data entry, data signage, policy printing,
and delivery to customers, distribution of marketing
material including brochure, pamphlets, cash / cheque
collection, etc.), whereas: (i) the payments made in
lieu of these services were exorbitant; and (ii) the
entities to whom such payments were made are not primarily
into this business.
Based on these violations, IRDAI levied a significant
penalty of INR 1 crore (approximately USD 120,000).
The IRDAI did not levy penalties on any other violations,
and instead only released caution advisories.
MISCELLANEOUS
1.
Madras High Court Recognizes Cryptocurrency as “Property”
Under Indian Law.22
In a landmark judgment, the Madras High Court has
ruled that cryptocurrency qualifies as “property”
which is capable of being enjoyed and possessed (in
a beneficial form) and can also be held in trust.
It further clarifies that cryptocurrencies qualify as ‘virtual
digital assets’ under Indian law, which are not
speculative in nature as an investment in cryptocurrencies
can be stored, traded and sold.
This decision, to some extent, provides long-awaited
clarity on the legal status of digital assets, confirming
that cryptocurrencies may be recognized and protected
under existing property and trust laws. Further, the
judgment reinforces the classification of cryptocurrency
as a ‘virtual digital asset’ under Section
2 (47A) of the Income Tax Act, 1961.
CONCLUSION
The past month reflects India’s continued progress
toward a more transparent, well-regulated, and globally
integrated financial system. With active regulatory
reforms, renewed foreign investment, and judicial clarity
in emerging areas, the ecosystem is steadily evolving
to balance innovation with stability. These developments
reaffirm India’s position as a leading and trusted
hub for global financial activity.
Authors
Sonakshi Babel,
Parina Muchhala and
Nishchal Joshipura
You can direct your queries or comments
to the relevant member.
1Available at:
https://www.livemint.com/market/stock-market-news/fpis-return-to-indian-stock-market-after-3-months-with-1-6-billion-inflows-will-the-momentum-last/amp-11761987376473.html
2Available at:
https://scanx.trade/stock-market-news/stocks/fiis-shift-focus-consumer-stocks-out-financials-in-for-october/24213953.
3Available at: https://www.reuters.com/world/india/view-indias-retail-inflation-slows-record-low-025-october-2025-11-12/.
4Available at:
https://m.economictimes.com/tech/technology/first-india-made-chip-module-sent-to-us-firm-aos/articleshow/124587489.cms.
5The India Semiconductor Mission is a
strategic initiative undertaken by the Indian government
to promote the domestic semiconductor industry. Its
aim is to enhance semiconductor design and manufacturing
capabilities within the country, fostering innovation,
employment, and economic growth. This mission was launched
in December 2021. Accessible at:
https://www.ism.gov.in/
6Available at:
https://www.emiratesnbd.com/en/media-center/emirates-nbd-to-acquire-majority-stake-in-rbl-bank
7Available at:
https://bfsi.economictimes.indiatimes.com/articles/rbl-bank-emirates-nbd-deal-key-details/124685706.
8Available at:
https://thedialog.net/india-crosses-20-billion-in-ai-investments-aiming-for-global-leadership/?swcfpc=1.
9Available at:
https://hai.stanford.edu/ai-index/2025-ai-index-report.
10Available at:
https://www.financialexpress.com/business/banking-finance-blackstone-acquires-70-stake-in-ace-insurance-for-rs-1700-cr-4020878/.
11Available at:
https://timesofindia.indiatimes.com/india/india-us-ink-new-defence-framework-for-10-years-aim-to-deepen-cooperation-in-all-domains/articleshow/125007676.cms.
12Please refer to previous editions of
our newsletter for month-wise updates on this development.
13Available at:
https://www.bbc.com/news/articles/c5y0qz701xeo.
14Available at:
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61494.
15Tier 1 capital is a bank's core
measure of financial strength, consisting of its most
stable and liquid capital like common stock, retained
earnings, and disclosed reserves.
16Available at:
https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4764.
17Available at:
https://www.sebi.gov.in/reports-and-statistics/reports/oct-2025/consultation-paper-on-relaxation-in-the-threshold-for-identification-of-high-value-debt-listed-entities-hvdles-and-measures-facilitating-ease-of-doing-measures-for-hvdle-including-provisions-relatin-_97451.html.
18Available at:
https://www.sebi.gov.in/reports-and-statistics/reports/oct-2025/consultation-paper-on-comprehensive-review-of-sebi-mutual-funds-regulations-1996-_97496.html.
19Available at:
https://www.business-standard.com/markets/news/sebi-s-cost-cut-proposal-seen-squeezing-mutual-fund-broker-margins-125102901393_1.html.
20Available at:
https://www.sebi.gov.in/legal/circulars/oct-2025/transfer-of-portfolios-of-clients-pms-business-by-portfolio-managers-_97443.html.
21Available at:
https://irdai.gov.in/document-detail?documentId=8029138
/
https://www.thehindubusinessline.com/news/irdai-slaps-rs-1-crore-penalty-on-liberty-general-insurance/article70221793.ece.
22Rhutikumari v. Zanmai Labs (P) Ltd.,
2025 SCC OnLine Mad 9290.
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