India Shining, Yes! But...
The year ahead is projected as one of global slowdown and India is emerging, not just an outlier, but the fastest growing economy. There are a range of factors playing a role in this growth story - digitisation, financialisation, formalisation, government support and more- and yet there are concerns being flagged this year that impact the financial well-being of households. Renu Kohli’s analytical piece looks at the trends coming through the national income estimates including the slowdown in private consumption, the halving of growth in nominal disposable income in the face of higher inflation in basics like cereals that lead to “sacrificing other non-essential expenditure as a rational self-coping mechanism”, the steep fall in household financial savings and rise in borrowings which shows up in increased personal loans etc. In a recent essay on inequality, Chief Economic Advisor Anantha Nageswaran has succinctly summed up the challenge we face today in reducing absolute poverty i.e “being the fastest-growing major economy is an achievement as much as the need of the hour.” When it comes to financial inclusion schemes specifically, for all the achievements so far, we still have gaps to close and Anand Adhikari has a comprehensive overview on where we stand today.
All eyes are now on the Interim Budget which will be announced on 1st February. There is news about possible increased outlay on rural employment, for women farmers etc. Then there are asks – on microfinance, Sa-Dhan proposes a special equity fund for support to small MFIs, Digital Lenders Association of India would like a dedicated India Fintech Credit Fund to enable fintechs reach out beyond Tier 4 towns, industry would like policies to strengthen digital banking units, uniform KYC policy across all financial services and so on – the wish list is long.
Meanwhile, the industry is still adjusting to the increased risk weights on consumer credit and bank credit to NBFCs placed by the RBI in November so fintech NBFCs are reportedly turning to the bond market for funds as bank borrowing has become costlier. Benjamin Parkin reported in the Financial Times on the impact of the changed risk weights on the industry, while HowIndiaLives did a data piece on the viability of fintechs, concluding that the move from riskier loans towards a more balanced portfolio will be a challenge for these firms. Jyoti Banthia reported on large fintechs like PhonePe, Groww and others getting into the consumer durable loans segment.
To conclude this month’s news, three must reads: a) a sobering piece by Nandkumar Saravade on the IMPS glitch in UCO Bank accounts, why an effective fraud monitoring system has to be implemented by all banks and why public sector banks in particular have to get their act together in managing technological challenges; b) Edoardo Totolo explains why climate change will increase financial stress but will not necessarily lead financial exclusion and gives specific measures for governments and banks to support those affected; c) Seema Prem reminds us why designing financial services for women makes good business sense.
There’s more news and views in our curated list below. Please also follow our Indicus Centre for Financial Inclusion page on Linkedin to continue the conversation.
IRDA is in the process of revising operational guidelines of PM Fasal Bima Yojana to fix implementation challenges, nudging insurers to join the account aggregator ecosystem as well as looking at reducing regulatory cholesterol.
RBI Governor Shri Shaktikantha Das spoke on the turnaround in the banking system, touching on various aspects of improvement - guidelines on digital lending, increased risk weights to reduce over exuberance in certain credit segments, moving from entity-based supervision to activity-based approach etc.
Arshi Aadil and Vanya Gupta, MicroSave, give five keys to building trust in financial services.
Ramneek Singh Ghotra, Finvasia Group, writes on the challenges holding women investors back.
Reserve Bank of India updated the Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector, allowing the certificate issued on Udyam Assist Portal (UAP) to Informal Micro Enterprises (IMEs) to be treated at par with Udyam Registration Certificate for the purpose of availing Priority Sector Lending benefits. IMEs with an Udyam Assist Certificate shall be treated as micro enterprises for the purpose of PSL classification.
The RBI placed on its website, a ‘Draft Omnibus Framework for recognising Self-Regulatory Organisations for Regulated Entities’, giving broad parameters applicable to any Self-Regulatory Organisation (SRO) viz., objectives, responsibilities, eligibility criteria, governance standards, application process and other basic conditions for grant of recognition to the SRO. Comments/ feedback from the stakeholders and members of the public on the above draft omnibus framework may be submitted by January 25, 2024, through e-mail feedbackforsro@rbi.org.in.
The RBI has extended the Payments Infrastructure Development Fund for another two years till December 2025 with three enhancements: Beneficiaries identified under the PM Vishwakarma Scheme shall be included as merchants for deployment under the PIDF Scheme; subsidy of deployment of acceptance infrastructure has been extended to enable devices like soundbox devices, Aadhaar-enabled biometric devices and the amount of subsidy for devices deployed in special focus areas is increased from 75% to 90% of the total cost, irrespective of the type of device.
Additional Secretary, DAY-NRLM Shri Charanjit Singh and SBI Chief General Manager Shri Shantanu Pendsey signed an MoU on ‘Svyam Siddha’- SBI’s Financial Product to finance SHG Women led Enterprises in Rural India
Zennon Kapron does a deep dive for Forbes India on GPay's strategy in India.
Mahima Dixit and Damini Mohan, MicroSave, write on how consent terms can be better designed to protect customers.
Piyush Shukla, Financial Express, interviewed K Srinivas, MD & CEO of India1 Payments Limited Payments on the viability of White Label ATMs.
The Inclusive Finance India Report 2023, edited by Ramesh Srivatsava Arunachalam, has ten chapters delving into various aspects of financial inclusion, authors include N. Srinivasan, Gaurav Gupta, C S Reddy and his team, R Bhaskaran, Prabhat Labh, Indradeep Ghosh and Misha Sharma.