News Details
August 7, 2025
The Financial Services Bulletin
This is the August edition of Nishith Desai Associates’ monthly financial services newsletter in collaboration with U.S.-India Business Council.
INTRODUCTION
July 2025 continued to reinforce India’s position as a premier destination for global investment, despite ongoing uncertainties in international markets. With the economy maintaining robust growth momentum, and progressive policy reforms driving innovation and transparency, India recorded a sustained influx of foreign direct investments (“FDI”). FDI inflows rose to USD 81.04 billion (provisional) in financial year (“FY”) 2024–25 (April 2024-March 2025), marking a 14% increase from USD 71.28 billion in FY 2023–24 (April 2023-March 2024). With 6.5% GDP growth, India stands as the fastest growing major economy.1
Nishith Desai Associates (“NDA”), in collaboration with the U.S.- India Business Council (“USIBC”), is pleased to launch the August 2025 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 in the month of July that, in our view, “summarize the month of July”. Our roundup has been meticulously curated into two parts: Part I covers legal and regulatory developments in the financial services industry, while Part II provides updates from the broader business world, ensuring that key developments relevant to our stakeholders are concisely discussed.
PART I – LEGAL AND REGULATORY UPDATES
FINANCIAL SERVICES
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Vaibhav Parikh (New York) |
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Viral Mehta (Mumbai-BKC) |
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Nishchal Joshipura (Mumbai-BKC) |
1. New participants in the non-banking financing companies (“NBFCs”) space
Sagarmala Finance Corporation, India’s first maritime-focused NBFC, has been launched to support financing needs specific to the maritime sector, including ports, shipping, and logistics infrastructure. This specialized NBFC aims to boost growth in the coastal economy by providing tailored credit solutions aligned with the Sagarmala initiative, thereby enhancing infrastructure and financing and promoting maritime trade and industry.2
In a parallel landmark move, Flipkart, the Walmart-owned Indian e-commerce giant, secured an NBFC license from Reserve Bank of India (“RBI”) in March 2025, becoming the first major Indian e-commerce company approved to lend directly to customers and sellers on its platform. This regulatory approval allows Flipkart to offer loans without relying on third-party lenders, aiming to create a seamless credit ecosystem integrated with its e-commerce services.3
These developments show that the NBFC sector is growing fast and becoming more important in India's financial system.
2. RBI may potentially make supervisory norms for NBFCs more stringent in FY 2025-26 (April 2025-March 2026)
Public sources4 have reported that the RBI is expected to tighten supervisory norms for NBFCs (and specially for base layer NBFCs) in FY 2025-26 to enhance oversight, risk management, and compliance. While there are no details available on this development at the moment, the tightening may potentially include stricter capital adequacy requirements, improved risk management frameworks, more rigorous reporting, and disclosure mandates particularly for base layer NBFCs, and stronger governance standards.
3. RBI released new directions on pre-payment charges on loans5
On July 2, 2025, RBI issued the Pre-payment Charges on Loans Directions, 2025, applicable to loans and advances sanctioned / renewed on or after January 1, 2026. These directions were released to regulate and standardize the levy of pre-payment charges6 by commercial and cooperative banks (excluding payment banks), NBFCs, and other regulated entities on loans and advances.
Key exemptions where no pre-payment charges shall be levied include:
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Loans granted to individuals for non-business purposes, with or without co-obligants;
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Loans granted for business purposes to individuals and medium small enterprises (“MSEs”) by commercial banks (excluding small finance banks, regional rural banks, and local area banks), with or without co-obligants;
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Loans up to INR 50 lakhs (approx. USD 58,000) given by small finance banks, regional rural banks, and cooperative banks of specified tiers to individuals and MSEs for business purposes;
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Cash credit or overdraft facilities where the borrower informs the lender in advance (as per the loan agreement) that they don’t wish to renew the facility, and the account is closed on the due date; and
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Cases where pre-payment is effectuated at the instance of the lender.
Further, the directions also clarify that: (i) applicability of pre-payment charges should be disclosed within the sanction letter / loan agreement clearly and only charged in accordance with such disclosure; and (ii) any pre-payment charges previously waived cannot be re-imposed, and no retrospective or capitalized charges are allowed.
In sum, the provisions aim to primarily benefit individual borrowers and MSEs by enhancing their ability to refinance or prepay loans without facing punitive fees, thus promoting credit affordability, borrower flexibility, transparency, and competition among lenders.
4. RBI releases draft directions for novation of over the counter (“OTC”) derivative contracts7
The RBI released the draft RBI (Novation8 of OTC Derivative Contracts) Directions, 2025, to govern the process of novation in OTC derivative contracts in specified circumstances.
The guidelines clarify that novation of an OTC derivative contract can be done with the prior consent of the remaining party and at prevalent market rates. Further, the guidelines also clarify the manner in which the novation is intended to occur – the parties to the novation are required to execute a tripartite agreement so that the transferee steps in the contract to face the remaining party and the transferor steps out. The original contract is subsequently extinguished and replaced with the new contract having identical terms / parameters (solely other than the change in counterparty for the remaining party), to ensure that the credit risk is transferred and the obligations under the original contract are extinguished.
That said, the standard draft templates for novation are to be devised by the Fixed Income Money Market and Derivatives Association of India (FIMMDA) and the Foreign Exchange Dealers’ Association of India (FEDAI) and the novation is to be reported to the Trade Repository of Clearing Corporation of India Limited.
5. CareEdge Global obtains RBI accreditation as an External Credit Assessment Institution9
In July 2025, RBI published the list of credit agencies that banks can approach for the purpose of risk weighting their claims on different foreign entities for capital adequacy purposes, as per the Basel III Capital Regulations dated April 1, 2025. It added M/s CareEdge Global IFSC Limited to the existing list, which currently includes three international credit rating agencies (Fitch, Moody's, and S&P). As CareEdge Global is an Indian entity while other three are headquartered outside India, this important move is aimed at providing a locally rooted rating agency option to banks.
PUBLIC MARKETS
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Kishore Joshi (Mumbai-BKC) |
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Viral Mehta (Mumbai-BKC) |
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Nishchal Joshipura (Mumbai-BKC) |
1. Securities and Exchange Board of India (“SEBI”) releases master circular for portfolio managers consolidating all previous circulars10
The SEBI Master Circular for Portfolio Managers issued on July 16, 2025, consolidates and updates regulations for portfolio managers, superseding 39 circulars to create a streamlined regulatory framework. It mandates registration before starting portfolio management services or changing control of principal and branch offices. Additionally, it emphasizes prohibition of misleading advertisements by portfolio managers.
Key further compliances for a portfolio manager license include:
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Approval of changes in control or co-investment management;
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Obligation to maintain and report net worth certified by a Chartered Accountant annually;
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Adherence to SEBI's code of advertisement and risk-return reporting guidelines, with removal of any misleading promotional material; and
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Reporting cyber incidents and undergoing systems audits with board comments.
Key operational changes include a 30% cap on investments in associate/related party securities per client, mandatory use of TWRR and XIRR return calculations aligned to SEBI-approved benchmarks, daily fund reconciliation, enhanced cybersecurity compliance, and stricter standards for distributor registration and fee models. Portfolio managers with assets above INR 1,000 crore (approx. USD 120.5 million) must deploy automated fund management systems within six months of exceeding this threshold. The new master circular is effective immediately for reporting requirements, with a compliance monitoring module set for adoption from first quarter of FY26, reflecting SEBI’s push toward tighter oversight, higher transparency, and operational uniformity across the portfolio management sector.
2. SEBI releases a master circular for listing obligations and disclosure requirements (“LODR”) for several securities11
On July 11, 2025, SEBI released a master circular which consolidates and updates LODR for Non-Convertible Securities (“NCS”), Securitized Debt Instruments (“SDIs”), and Commercial Papers (“CPs”) listed on stock exchanges. It simplifies compliance by integrating various SEBI regulations applicable to these debt instruments, providing a single reference point for issuers, intermediaries, and market participants. The circular aims to enhance transparency, investor protection, and market efficiency by specifying detailed disclosure norms for issuers related to financials, defaults, credit rating changes, utilization of issue proceeds, and event-based reporting.
A few of the key features in the circular include:
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Harmonization of LODR for NCS, SDIs, and CPs;
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Standardization of timelines and formats for periodic and event-based disclosures to stock exchange;
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Clarified responsibilities of issuers and intermediaries in ensuring compliance with continuous disclosure obligations;
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Enhanced investor protection measures through timely updates on credit ratings, defaults, and material events impacting the listed securities;
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Emphasis on dissemination of information via stock exchanges and electronic platforms for improved market accessibility; and
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Inclusion of penalties and enforcement mechanisms for non-compliance with the circular’s provisions.
This circular supersedes two earlier individual guidelines relating to these securities, creating a streamlined regulatory framework to improve clarity and enforcement in the debt securities market.
3. SEBI mandates single volume weighted average price (“VWAP”) common contract note (“CCN”) for trade reporting12
SEBI has introduced a CCN13 featuring a single VWAP14 for all trades executed across multiple exchanges, effective from June 27, 2025. This new unified contract note replaces the earlier practice where institutional investors received separate trade confirmations for each exchange, which caused complex reconciliation, higher settlement risks, and compliance challenges.
The single VWAP CCN consolidates trade details into one harmonized document, simplifying post-trade processes, reducing operational overhead, enhancing cost efficiency, and improving regulatory clarity. The initiative marks an important effort to ease India’s market operations, increase trust, and conform to international norms.
4. SEBI proposal to allow Asset Management Companies (“AMC”) to manage family office funds sparks debate15
On July 7, 2025, SEBI released a consultation paper which includes relaxing the current broad-based requirement, allowing AMCs to manage and advise non-broad-based pooled funds (such as family offices and smaller investor groups) without needing a separate Portfolio Management Services (“PMS”) license, provided strict safeguards are implemented. The consultation paper provides great relaxation in terms of regulatory parity, competitive fairness, and market safeguards. The objective of this paper is to modernize the regulatory framework to enhance AMCs’ business scope while prioritizing investor protection.
However, concerns have been raised that permitting AMCs to offer segregated mandates to large clients under a new category may further blur the distinction between PMS and mutual funds, raising regulatory parity questions. Additionally, if AMCs deliver similar services under the mutual fund umbrella with lighter regulation or brand advantages, this could create competitive imbalance.16
MISCELLANEOUS
1. India's top think tank recommends easing investment rules for Chinese firms17
It has been reported that NITI Aayog, the top Indian think tank, has made recommendation to the Indian government to ease up the investment requirements for Chinese entities investing in Indian companies. It has proposed to expand regulation to allow Chinese entities to invest up to 24% in Indian company through automatic route. That said, formal guidance in terms of governmental press releases / press notes / regulations are awaited and as on date the result of such recommendation is unclear.
2. RBI updates and consolidates several forms for bulk filing
RBI has introduced bulk upload functionality for FCGPR, FCTRS, and DI forms on the FIRMS portal for Business Users registered on the FIRMS portal, effective July 1, 2025. This much-awaited update will streamline the filing process and significantly reduce the time and effort for handling multiple filings in deals. Few of the key highlights include the following:
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Bulk data upload is now enabled via CSV file for FCGPR, FCTRS & DI forms.
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Official templates are available under the Business User login.
For Indian companies having multiple foreign investments / transfers involving foreign parties that are simultaneously occurring, the bulk upload functionality will help in simultaneous filings to ensure that the statutory timelines for these filings are met.
PART II - BUSINESS AND NEWS UPDATES
TRADES, TRENDS, LEGISLATIONS AND LITIGATION
1. SEBI imposes major restrictions on Jane Street Group for potential market manipulation18
The SEBI interim order dated July 3, 2025, accused the Jane Street Group of engaging in manipulative trading practices in the Indian securities market from January 1, 2023, to March 31, 2025, particularly involving index manipulation during derivative expiry days. SEBI's investigation identified two main trading strategies used by the group to allegedly distort index prices and generate substantial illegal gains amounting to over INR 4,843 crore (approx. USD 566 million). SEBI had temporarily barred the Jane Street entities from accessing the securities market and required them to deposit their unlawful gains in an escrow account to uplift this ban. Jane Street Group exercised the option given by depositing the stipulated amount in an escrow account to regain market access and is now operating in the Indian public markets as on date. Recently, SEBI has hinted structural reforms to the country's massive derivatives market following allegations of manipulation by Jane Street and has signaled that further restrictions may be introduced to protect retail investors and reduce excessive trading activity.19
3. Enforcement Directorate (“ED”) registers INR 1,654 crore Foreign Exchange Management Act (“FEMA”) case against Myntra for alleged FDI violations20
ED has filed a case under the FEMA against Flipkart-backed Myntra Designs Private Limited, for alleged FDI violations worth over INR 1,654 crore (approx. USD 199 million). The ED investigation alleged that Myntra and its related firms were conducting multi-brand retail trade disguised as "wholesale cash and carry", thereby violating India's FDI policy restrictions on multi-brand retail trade. Myntra reportedly made nearly majority of its sales through a related company, which then sold products directly to retail customers.
2. Competition Commission of India (“CCI”) slaps penalty on an acquirer group affiliate for violating competition rules21
CCI recently imposed a penalty of INR 4,00,000 (approx. USD 4,600) on a certain acquirer group’s investment vehicle for non-disclosure of key information about overlaps in their acquisition of an Indian target company, which resulted in the deal incorrectly being deemed eligible for fast-track "Green Channel" approval for a notice filed in October 2023. After discovering that the transaction actually involved vertical or complementary business overlaps, the CCI found that the criteria for Green Channel approval were not met. CCI imposed a penalty and instructed the defaulters to file a fresh acquisition application. We have also analysed this order, which is available here.
3. Anil Ambani’s Reliance Media Works to face insolvency proceedings22
Reliance Group (headed by Mr. Anil Ambani) faces heat of yet another insolvency proceeding. This comes only months after the group paid off debt worth thousands of crores and was declared debt-free. An insolvency petition has been filed against Reliance Media Works for defaulting on loan worth INR 6 crores (approx. USD 700,000) granted to it by Netizen Engineering Private Limited. The petition was admitted on July 2, 2025. The date of default is recorded as July 1, 2024. The National Company Law Tribunal’s admission of this case comes shortly after admission of the insolvency petition against another Reliance Group company, named Reliance Infrastructure Limited in May 2025.23
6. RBI approves Warburg Pincus arm Currant Sea Investments B.V. to acquire 9.99% stake in IDFC First Bank24
RBI has approved Currant Sea Investments B.V., an affiliate of global private equity firm Warburg Pincus, to acquire up to 9.99% stake in IDFC First Bank. Warburg Pincus, along with the Abu Dhabi Investment Authority (ADIA), has committed to jointly investing INR 7,500 crore in IDFC First Bank through compulsorily convertible preference shares.
This move follows a similar acquisition by Sumitomo of a stake in Yes Bank, indicating a potential growing trend of global financial services firms investing in the Indian private banking sector. Such investments reflect increasing confidence in India's banking sector and may become a notable trend in strengthening the financial ecosystem through foreign investments.
CONCLUSION
July 2025 has been marked by significant regulatory advancements and enforcement actions aimed at strengthening market integrity, investor protection, and sectoral transparency. The evolving regulatory landscape underscores the commitment of India’s financial authorities to fostering a more resilient and competitive financial system with “ease of doing business” being the driving principle. As India continues to attract diverse global capital, these developments are poised to enhance the efficiency and stability of the financial markets, paving the way for sustained growth and innovation in the months ahead.
Authors
Sonakshi Babel, Parina Muchhala and Nishchal Joshipura
You can direct your queries or comments to the relevant member.
1https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=154840&ModuleId=3.
5https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12878&Mode=0.
6Pre-payment charges are fees that borrowers may have to pay when they repay a loan before its scheduled maturity, either fully or partially. These charges were often used by lenders to discourage borrowers from switching to other lenders offering better rates or terms.
7https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4678.
8“Novation” here refers to replacing one market maker with another in a contract, involving a tripartite agreement where the original contract is extinguished and replaced by a new one with identical terms except for the counterparty.
9https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12880&Mode=0.
13A “Common Contract Note” is a consolidated document that provides a summary of all trades executed on a particular day across multiple stock exchanges for a single investor.
14“Volume Weighted Average Price”, as per SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, means the product of the number of equity shares bought and price of each such equity share divided by the total number of equity shares bought and price of each such equity share divided by the total number of equity shares bought.
19https://www.ft.com/content/ccacedd7-737b-4ec5-bee5-c112826b1102.
21https://www.cci.gov.in/search-filter-details/7182.
22https://ibbi.gov.in//uploads/order/d16b8e5961aea4021d38a5d528300696.pdf.
23https://ibbi.gov.in//uploads/order/085386c1794464e9a90ce59e30df8f1e.pdf.