Walk the talk, Governor!
Early this month, the Securities and Exchange Board of India (SEBI) issued a caution to the public on “Digital Gold” products as being unregulated and therefore subject to significant counterparty and operational risks for investors. This advisory came in the face of rising popularity of digital gold with online sale through apps growing from Rs 762 crore in January to Rs 2,290 crore in October. Digital gold transactions are soaring through UPI, as small value purchases can be made easily. And yet the RBI has not stepped in so far. The SEBI caution seems to have had an impact. Axis Bank has announced a gradual withdrawal from digital gold, with full closure of the scheme by the year-end. As per this report by Anand J., the industry is looking towards setting up an SRO to mitigate risks and ensure that the digital gold holdings are audited and fully backed by physical gold stored in secure vaults. But Archishma Iyer points out, digital gold is in regulatory no-man’s land right now. The industry is therefore making a representation to the Finance Ministry for SRO recognition.
Given the obsession that Indians have traditionally had with gold, the high risk of fraud in such transactions, the challenges in auditing and so on, the RBI must step in immediately to tighten growth and strictly regulate this segment. It may be too late to outright shut down such schemes and ensure that existing customers do not lose out on their savings. But something needs to be done urgently. The RBI Governor recently gave a talk on the facets and contours of regulation making, emphasizing vigilance, staying alert to emerging risks. It’s time to walk the talk, Governor!
Meanwhile, the foundation of the financial inclusion network in India, the business correspondent (BC) ecosystem is facing an attrition crisis. Raghu Mohan reports on retail delivery platforms offering better commissions and work terms to gig workers, leading to many agents shifting to that channel. Even though BCs are raising more business for banks than branches in rural areas, banks are reluctant to improve the payouts. The Business Correspondent Resource Council has taken up the issue of low compensation with the Department of Financial Services. Also, as Rajesh Londhe points out, if the RBI approves the recent proposal of NPCI to allow UPI-based cash withdrawals at BC outlets, BCs will need to be appropriately equipped, and banks will be relieved of expenses on maintaining ATMs and cash management. The Finance Ministry needs to lead a relook at the commission structure to keep the BC network viable.
This month we highlight two pieces: a) Rajesh Bansal writes on the online scam economy and how to enable digital protection, and b) Sonal Jaitly, Ayushi Misra and Dr. Naveen Kumar K from MicroSave and National Institute of Bank Management (NIBM), have a comprehensive paper on gender-intelligent banking, bringing women to the center of banking from bank counters to boardrooms.
Do read 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.
RBI Deputy Governor, Swaminathan J., spoke on microfinance for Viksit Bharat.
Ateesh Tankha, Economic Times, writes on why India must rethink UPI’s zero-fee model.
Tamal Bandopadhyay, Business Standard, examines the structural shift as deposit growth lags credit expansion for Indian banks.
Edel Were, Rashmi Pillai, Larissa Shnayder, Juan Carlo Intriago Zambrano and Jamie Anderson, CGAP, delve into practical business drivers that strengthen rural women’s climate resilience and their business performance.
Jyotiraditya M Scindia, Union Minister of Communications and DONER, writes on the achievements of the India Postal Payments Bank on financial inclusion.
Shilpy Sinha, Economic Times, reports on SBI’s Chairman CS Setty’s call for national financial grid, digital payment intelligence body to fight fraud and increase credit access
Bhavin Patel, Vartis Platforms and LenDenClub, writes on finding the balance between regulation and innovation in India’s digital lending ecosystem.
NPCI BHIM Services Limited launches UPI Circle Full Delegation on BHIM Payments App, letting users authorize trusted contacts for UPI payments with set limits.
Pratik Bhakta, Economic Times, writes on the rise in smartphone EMI defaults as lenders stop remote cell blocking.
Howard Miller, CGAP, writes on what a well-financed, climate-resilient, inclusive financial sector requires, the Climate Resilience Financing Stack.
Dheeraj Tiwari and Pratik Bhakta have written on the rise of mule accounts in smaller towns across India, even as 850,000 such accounts have been frozen by banks.
Ajinkya Kawale, Business Standard, reports on the move by RBI to interlink UPI with European instant payment system TIPS.
Joep Roest, Liza Diane Gordin and Swati Sawhney, CGAP, explain how to integrate financial services into social protection programs to make low-income communities resilient to climate shocks
Pratik Bhakta, Economic Times, reports on the increased scrutiny by NPCI while approving third party payment applications.
Satyam Mishra, Businessworld, reports on the acceleration in demand for UPI-credit from small towns.
Dipali Banka and Nehal Chaliawala, Mint, report on the big push by Jio Payments Bank to increase the footprint of financial inclusion through business correspondents.