10 Points on boosting Fintech Sector

Steering Committee on Fintech Recommendations:

1. Virtual Banking System: Department of Financial Services and the Reserve Bank of India may examine the suitability of virtual banking system’ in the Indian context, costs and benefits regarding allowing virtual banks and prepare for a possible future scenario where banks do not need to set up branches and yet deliver the full-scale retail banking services ranging from extending loans, savings accounts, issuing cards and offering payment services through their app or website.
2. Level Playing Field: The panel had also urged the government and the RBI to take steps to eliminate any discrimination in access to payment infrastructure to non-banks as compared to banks, with a view to enhance competition and innovation.
3. Fintech for Security: The committee recommends the use of fintech, especially by PSE [public sector enterprise] financial service companies to bolster cybersecurity, fraud control and anti-money laundering.
4. Encourage Private Players: The committee also recommends that fintech firms specialising in this field should be encouraged to set up their businesses in India.
5. NBFC for Farms: NBFCs had made significant progress in leveraging fintech to increase their outreach, such companies should be incentivised to “work in the agricultural space by including them in credit guarantee schemes.”
6. Ease KYC Compliance: In a bid to ease the KYC process, the committee recommended that various options, including video-based KYC, making available validated electronic versions of KYC-related documents through a DigiLocker, and making these available for verification by service providers with customer consent, be considered early.
7. Harness Tech for Insurance: The Committee recommends that insurance companies and lending agencies in the agri sector should be encouraged to use drone and remote sensing technology, directly or using services of fintech companies, to assess discrepancies in self-reported cropping patterns and crop cutting experiment processes, enabling more efficient delivery of both credit and insurance products and reduce credit/insurance risks.
8. Digitisation of Land Records: Committee said the government should take up “on a war footing” was the digitisation of land records and also recommended a deadline of three years within which this must be completed.
9. Consumer Protection Framework: Committee said that a legal framework for consumer protection should be put in place early keeping in mind the rise of fintech and digital services, and also said a law must also be enacted for this.
10. Ease Access to Social Schemes: To further ease access to pension schemes and small savings schemes, the committee recommended that a common digital platform be created for all micro-pension schemes and Government pension schemes through which pension subscribers can subscribe to specific schemes seamlessly and reduce access barriers by allowing payments through various modes such as Jan Dhan Yojana accounts, debit cards, credit cards, internet banking, mobile wallets, etc.

5 Points on Chief Minister Employment Generation Programme

1. The scheme aims to develop small and micro businesses and generate employment by setting up one lakh industries. The programme will be implemented through the Directorate of Industries and Khadi and Village Industry Commission.
2. The investment limit for projects in the service sector and the manufacturing sector is ₹10 lakh and ₹50 lakh respectively. The State government will be granting 15% to 35% of the project cost. The beneficiary will have to invest 5% to 10% of the cost, while 60% to 80% of it would be provided through a loan from nationalised or private banks. Under this scheme, industries won’t have to offer collateral as the government will guarantee to repay the loan.
3. The age-limit for beneficiaries has been set between 18 and 45 years for women, and 50 years for the Scheduled Castes and Scheduled Tribes.
4. Women entrepreneurs will be eligible for 30% reservation in the scheme, while SCs/STs will get 20% reservation.
5. The State government has set apart ₹500 crore for the scheme this year.

5 Reasons Why RBI Transferring Rs 1.76 Lakh Crore Surplus to GoI is OK

1. Sovereign Guarantee: The central bank is a unique institution; it is backed by the faith reposed on it by the the Central government, and therefore, a huge amount of reserves with the central bank is in the nature of idle cash which could have been utilised more productively in the economy.
2. RBI most capitalized central bank in world: The Economic Survey of 2016-17 found that the RBI is one of the most capitalised central banks in the world and noted, “There is no particular reason why this extra capital should be kept with the RBI”. Later, the former Chief Economic Adviser, Arvind Subramanian in his book Of Counsel: The Challenges of the Modi-Jaitley Economy (2018) has caricatured the syndrome of treating the government’s capital at the RBI by RBI officials as “prudence or paranoia”.
3. Based on Jalan Committee Reco: Jalan committee does not seem to have compromised on arriving at the economic capital framework of the RBI and has calculated the extent of excess capital of the RBI under a set of fairly standard and conservative assumptions.
4. Helpful for Recapitalisation: When the spectre of a slowdown is looming large and when channels of credit disbursements are choked because of a lack of capital with the commercial banks — a transfer of such additional money to the government could enable the government to go in for bank recapitalisation in a big way and would be good for the economy.
5. Help maintain budget discipline: The transfer of the additional surplus from the RBI could enable the government to pursue efforts towards stimulating the economy while maintaining budget discipline. Remember, in pursuing the fiscal stimulus of 2007-08, fiscal deficit went up from 2.5% to 6%.

5 Concerns Around PSB Mergers

1. Are mergers driven by synergies — in products, costs, business, geographies or technology and the most important, cost synergies?
2. Public sector banks are over-staffed. Will they realise cost synergies through branch and staff rationalisation?
3. Narasimham Committee in the late 1990s recommended shutting down weaker banks. Is that ever going to happen, or we just going to saddle strong banks with weaker banks?
4. Will there be adequate reforms in governance and management of these banks? Key reforms to be made are at the board level, including in appointments, especially of government nominees.
5. Will the government be able to manage the fallout of unleashing four mergers simultaneously which is bound to cause upheaval in the industry?

5 Reasons Why India's Growth Collapsed

1. Manufacturing Slowdown: There is a dramatic slowdown in the manufacturing sector. The data show that the manufacturing sector grew at an anaemic two-year low of 0.6% in the first quarter of 2019-20, down from 12.1% in the same quarter of the previous year.
2. Exogenous factors: The impact comes, especially, from global headwinds due to the deceleration in developed economies, the Sino-American trade conflict, etc.
3. Farm crisis: The agriculture sector also saw a dramatic slowdown in growth to 2% from 5.1% over the same period.
4. Real estate in dumps: The plight of the real estate sector was also highlighted by the slowdown in its growth rate to 5.7% in the first quarter of this financial year, compared with 9.6% in the same quarter of 2018-19.
5. Demand collapse: The growth slowdown was led by private final consumption expenditure, which grew 3.1% only (18 quarter low). Investment demand also remained lacklustre and fixed capital formation grew 4%.

5 Reasons why PSBs have been merged

1. These bank mergers, and the ones already carried out, will lead to the creation of big banks with an enhanced capacity to give credit.
2. These big banks would also be able to compete globally.
3. Merged banks will increase their operational efficiency by reducing their cost of lending.
4. The banks that are being merged with each other run the same or very similar platforms, and so there will be no disruption in their activities.
5. The merger also has the potential to lead to large cost reductions due to network overlaps.

5 Benefits of 100% FDI in Coal Mining

1. This step will also lead to energy security of the country as 70 per cent of India’s electricity is generated from thermal power plants. This will help provide power to all 24x7.
2. Influx of international players will create an efficient and competitive coal market in India.
3. It is expected to bring state of the art coal mining technology to the country & will help in environmentally sustainable mining.
4. This decision will also create direct and indirect employment in coal bearing areas and will have a positive impact in the economic development of these regions.
5. Reform is likely to help the coal bearing states get more revenue.

5 Steps taken to Ameliorate NBFC Crisis

1. Government nudges PSBs: The government has nudged public-sector banks to give a helping hand to the NBFCs in a bid to ease the liquidity crunch.
2. Partial Credit Gaurantee by GoI: Finance Minister Nirmala Sitharaman’s plan is that the government will provide one-time six months partial credit guarantee to public sector banks for purchase of assets of financially sound NBFCs, amounting to a total of Rs1 lakh crore, during the current financial year. This is for first loss of up to 10 per cent. As per the scheme, the guarantee will be valid for 24 months from the date of purchase. The assets will need to have a minimum AA credit rating, the eligible NBFCs should have made a profit in at least one of the past two years and their NPAs should not be more than 6 per cent.
3. Additional Liquidity: The RBI has announced additional liquidity facility to banks for purchase of assets from and on-lending to NBFCs and HFCs, which would help banks avail an additional liquidity of Rs1.34 lakh crore.
4. Relaxation in ECB Norms: RBI also relaxed end-use restrictions on external commercial borrowings (ECB). Eligible borrowers will now be able to raise ECB with a minimum average maturity period of 10 years for working capital purposes and general corporate purposes, and ECB with a minimum average maturity of seven years for repayment of rupee loans availed domestically for capital expenditure.
5. Continuous Monitoring: RBI Governor Shaktikanta Das said NBFCs were being monitored intensively on a regular basis to ensure that a situation of an institution collapsing would not arise.

5 Reasons Why NBFC Sector is Important

1. One-fifth credit share in economy: Credit rating agency Fitch estimates that NBFCs now account for 20 per cent of credit to India’s economy, compared with 15 per cent five years ago.
2. Critical lenders for housing and auto: They accounted for 30 per cent of auto loans in 2018, and, along with housing financing companies, for 44 per cent of home loans. The automobile and residential real estate segments have been hit by the crisis in the NBFC sector.
3. Important for jobs: Most vehicle makers have cut down production, and ancillary units have fired many employees owing to the slow demand. The liquidity crisis is the major factor preventing completion of more than 5.6 lakh stalled housing units across top seven cities
4. Key for FMCG Growth: Many fast moving consumer goods makers have seen their growth slowing down over the last few quarters. NBFCs play an important role in driving consumption pattern and fund important sectors that drive Indian economy.
5. Important for $5T target: Any slowdown in lending to these crucial sectors will adversely hamper our country’s plan to become a $5 trillion economy.

5 Causes of NBFC Crisis in India

1. Asset-Liability Mismatch: Many non-banking financial companies (NBFCs) relied on raising short-term funds by issuing commercial papers to provide long-term loans. When the commercial papers matured, they would simply raise fresh short-term debt. Thus the cycle continued, but then the IL&FS crisis happened. The NBFCs’ over-reliance on short-term funds seems to have led to a huge asset-liability mismatch.
2. Small Debt Market: As India does not have a big debt market, banks and mutual funds are the major sources of funds for the NBFCs.
3. Banks Cautious: Banks, which are fighting their own battle of reining in non-performing assets, reduced the funding to NBFCs 
4. Mutual Funds Shy Away: Debt mutual funds, which were hit by their exposure to IL&FS and a few other troubled entities, also started cutting their exposure to the NBFC sector. 
5. Drop in Management Standards: Availability of easy money from banks, drop in lending standards, ineffective risk management, lack of appropriate checks and balances, improper regulatory norms, and non-transparent and complex business procedures.

5 Solutions for India's RCEP Apprehensions

1. Protect & Promote domestic industry: Given the costs and benefits in RCEP, it is important for India to strike a balance between domestic and external interests to minimise the adverse effects of RCEP on its domestic engineering industry. If domestic industry has to thrive, it needs protection as also the enabling conditions created by factor and product market reforms.
2. Use of skilled labour: India has been insisting on capitalising on its pool of 'skilled' labour force to gain from improved access to employment opportunities in these economies. This has been expected to come about by increasing the ease of movement of professionals through the liberalisation of what is called Mode 4 in services trade.
3. Protect tariff structure: India should continue to maintain its position of proposed dual tariff structure in the RCEP as it will help India to protect its tariff lines which are more vulnerable to cheap Chinese imports. It must emphasise on a special and differential treatment based on stages of economic development.
4. Restrict Rules of Origin (RoO): It can be used as a strong instrument in RCEP to curb the free flow of Chinese goods into the domestic market. India should restrict RoO to high value-addition to prevent the imports of cheap Chinese goods, which may come to India through our existing FTA partners. Strict RoO in RCEP will provide a safety wall to domestic producers against cheap Chinese goods.
5. Placing suitable safeguards: Within the FTA, provision should be made for safeguard measures like antidumping etc which should be invoked if a volume or price trigger for the concerned products is reached.

10 Points of Shillong Declaration

1. Improve the citizen’s experience with Government services by promoting timely implementation of India Enterprise Architecture (IndEA) and implementing a single sign-on for interoperability and integration among e-Government applications throughout the country
2. Consolidate the plethora of successful State level e-Governance projects and domain-based projects with a focus to replicate them as a common application software with configurable features
3. Ensure improvement in ease of living and ease of doing business by making a big shift in the role of government from Service Provider to Service Enabler, thus moving from development of applications to making available public digital platforms where multiple competitive applications can be developed
4. Take steps to further improve connectivity in North Eastern States by addressing the issues and challenges of telecommunications connectivity at grassroot level and formulate and implement a comprehensive telecom development plan
5. Take steps to enhance the activities of Electronics Sector Skill Council in North Eastern States and explore the possibility for opening an electronics skill center in Shillong
6. Promote use of e-Office and move towards less paper State Secretariats in the North-Eastern States and in the District level offices
7. Improve the quality of delivery of e-Services in the North East to fulfil the vision of improved citizen experience
8. Develop India as a global cloud hub and facilitate development of Government applications and databases on Cloud by default
9. Adopt emerging technologies for finding e-Governance solutions
10. Promote the Digital India Projects with focus on Smart Cities and Smart Villages through Startups and Smart Entrepreneurship

5 Alternatives to Local Job Reservation

1. Tackle Core Issues of Unemployment by more job creation and industrialisation rather than such moves. Government should provide incentives to industries for more investments and create an enabling environment for it.
2. Government should focus on making the youth of a state employable with proper investments in education, health and skill development.
3. Need to promote labour intensive industries, sunrise sectors (hi-tech companies) to absorb all kinds of job seekers.
4. Promote Self-employment: So that people create opportunities for themselves. E.g.: MUDRA; STAND UP INDIA
5. Promote services sectors such as tourism with high positive spillover on other sectors.

5 Difficulties in Implementing Local Job Reservation

1. May not pass legal scrutiny: Article 16 does not empower the state government to provide for such reservation, rather the Parliament is empowered to do so.
2. Politically Motivated Move: Rather than addressing the core concerns like structural reforms, infrastructure development and so on, states are using reservation as a tool to capture votes in the short term.
3. Dangerous for unity of the country: Such moves could lead to opening of a Pandora’s Box where other states start implementing such policies, which result in fractures in unity of India.
4. Concerns of the industry: Factories may be employing labour migrating in from different states. It may be difficult/expensive to find locals for the jobs and consequently their ease of doing business will be hampered.
5. Polarisation and Communal Strife: Such a move may disturb social harmony as many workers and their families may get uprooted because of disruption of their income source.

5 Reasons Why Local Job Reservation is Demanded

1. Agrarian Distress: Agrarian sector is under tremendous stress across the country, and young people are desperate to move out of the sector.
2. Lack of jobs: There is a serious dearth of jobs (private and government). Mot only are the jobs too few, they are precarious and do not pay well.
3. Displacement of Landowners: Since most of the land requirement is met by acquiring private agricultural lands, the landowners are being displaced and deprived of their occupation and thereby loss of income.
4. Discrimination: Several reports like the State of Working India 2018 released by the Centre for Sustainable Employment of the Azim Premji University have shown that discrimination is one of the reasons for under representations of Dalits and Muslims in the corporate sector.
5. Sentiment against workers migrating from distressed regions and ‘stealing’ limited local opportunities have created pressure upon regional politicians to take some steps.