TACKLING THE MALLYAS OF THE FUTURE : by Rhythm Aggarwal

The government is pondering to make amendments to the Passport Act to prevent economic offenders who pose a serious Financial Risk to the country from fleeing. A committee headed by Financial Services Secretary Rajiv Kumar was formed recently to tighten laws to prevent loan defaulters from fleeing the country. The committee panel also comprised members from Ministry of Home Affairs and External Affairs, Enforcement Directorate, Central Bureau of Investigation, Intelligence Bureau and Reserve Bank of India.

The shift is of great importance as India is trying to bring back loan defaulters like Vijay Mallya, Mehul Choksi, Nirav Modi who fled the country before the law enforcement agencies could act against them.

The recent amendments would ensure that whenever there is a financial risk to the banking sector, defaulters get asked to participate in the resolution of the loan. The amendments would prevent an offender from leaving the country by issuing a look-out notice. Passport details of those people who have borrowed over Rs. 50 crore would be mandatory from now on-wards.

RBI VS NEW DELHI : by Ayush Srivastav

When Raghuram Rajan exited the RBI’s office in 2016, and replaced by Urjit Patel was elevated to head the bank,it was thought that the tussle between the govt. and RBI would end.Two years down the line,Urjit Patel’s defense has turned into defiance.

The government and RBI are speaking alien languages on the state and direction of the Indian economy. Infact, the deputy governor Viral Acharya accused the govt. of interfering.On the contrary,Union Finance Minister Arun Jaitely for the unmanageable figures of stressed assets causing NPA crisis in the banking industry.

Tensions were brewing between both right from February when a new 180-day deadline was set for declaring an asset as non performing which left the public banks in red.The  Nirav Modi scam further deteriorated the relations, the government accusing RBI of lax lending and Urjit Patel refuting the allegations.

Interest rates form the core of this fight.The government wants RBI to cut interest rates.Lower interest rates gives an impetus to the economy.But RBI has a different perspective.Not only has it refused to decrease rates but also increased rates.

A similar tussle is seen in context of IL&FS as it defaulted on payments.The government wanted a bailout but RBI refused to take the advice and toe the line.It also refused the demand for greater dividends from banks.

Nachiket Mor,who was a strong critic of govt’s demand for higher dividends was sacked unceremoniously two years ahead of his tenure.Secondly,the appointment of Gurumurthy,an RSS affiliate, disappointed the top brass of the RBI.

On Nov 20,2018,tensions between RBI and New Delhi eased with the RBI appearing to climb down on several issues pushed by New Delhi,such as loan restructuring for small businesses,easier norms for weak banks and pumping of more cash into the system,at a board meeting that lasted nine hours.The meeting was held in what directors claimed to be a “congenial and conciliatory” atmosphere.The 9 hour meeting ended a stalemate,however,investors and markets are closely watching the development.

PAYMENTS BANKS IN INDIA : by Rhythm Aggarwal

India’s payments banking ecosystem, launched in 2015, is in a survival dilemma today as Reserve Bank of India (RBI) has halted payments bank from enrolling new customers.
There have been concerns over KYC policies and the limit of 1,00,000 bucks was also mismanaged. These two events had a major impact and prompted RBI to put processes on hold and also prevented Paytm to bring on board new customers.

As per the reports, the nodal agency has been conducting an audit over the last two months, and factors like non-compliance have halted the growth of payments bank. Concerns over the digital process of KYC and non-maintenance of proper paper trails has forced RBI to stop new enrolling processes. RBI is conducting audits to check if the banks have deposits of more than 1,00,000 rupees. As per RBI’s operating guidelines for payments bank, the limit for a customer account shall not exceed 1,00,000. However, this limit is not followed in many rural areas where bank correspondents deposit more money intentionally.

Fino had started with a base of 410 branches across 14 states, 25000 banking points across the country, and has more than 15 million monthly transactions.
Airtel’s Payment Bank just restarted its customer on-board services, after the services were put to halt by RBI as the company was violating operating guidelines around KYC norms.