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Daily Category  (Indian Economy )

Digital Financial Inclusion-Report on ‘Connected Commerce-Creating a Roadmap for a Digitally Inclusive Bharat’

Context:

  • NITI Aayog and Mastercard today released a report titled ‘Connected Commerce: Creating a Roadmap for a Digitally Inclusive Bharat’.

Reserve Bank of India - Reports

Key Details:

  • Objective: The report identifies challenges in accelerating digital financial inclusion in India and provides recommendations for making digital services accessible to its 1.3 billion citizens.

  • Released by:  NITI Aayog and Mastercard

  • The report highlights key issues and opportunities, with inferences and recommendations on Policy and capacity building across:

    • Agriculture,

    • Small business (MSMES),

    • Urban mobility and

    • Cyber security.

  • Participants: Experts from the government, banking sector, the financial regulator, fintech enterprises, and various ecosystem innovators.

  • NITI Aayog was a knowledge partner in this endeavour.  

Key Issues Addressed During the Knowledge Series:

  1. Acceleration of digital financial inclusion for underserved sections of Indian society.

  2. Enabling SMEs to ‘get paid, get capital and get digital’ and access customers, and ensure their continued resilience.

  3. Policy and technological interventions to foster trust and increase cyber resilience.

  4. Unlocking the promise of digitization in India’s agriculture sector.

  5. The essential elements of a digital roadmap to make transit accessible for all citizens.

Key Recommendations in The Report:

  1. Strengthening the payment infrastructure to promote a level playing field for NBFCs and banks.

  2. Digitizing registration and compliance processes and diversifying credit sources to enable growth opportunities for MSMEs.

  3. Building information sharing systems, including a ‘fraud repository’, and ensuring that online digital commerce platforms carry warnings to alert consumers to the risk of frauds.

  4. Enabling agricultural NBFCs to access low-cost capital and deploy a ‘phygital’ (physical + digital) model for achieving better long-term digital outcomes.

    • Digitizing land records will also provide a major boost to the sector.

  5. To make city transit seamlessly accessible to all with minimal crowding and queues, leveraging existing smartphones and contactless cards, and aim for an inclusive, interoperable, and fully open system such as that of the London ‘Tube’.

SOURCE: PIB

National Payments Commission of India (NPCI) not to ban cryptocurrency transactions in India

CONTEXT:

  • National Payments Corporation of India which runs UPI in India has refused to ban cryptocurrency transactions.

KEY DETAILS:

  • Onus on banks: NPCI has refused to ban cryptocurrency transactions, putting the onus on banks whether to ban transactions of cryptocurrency trades or not.

    • It told banks to take a decision based on the advice of their legal and compliance departments.

  • The NPCI’s advice is significant at a time when many banks are restricting payments for cryptocurrency deals.

  • Almost half-a-dozen banks have directed payment gateway operators to blacklist merchants involved in the trade of cryptocurrencies.

  • These banks restrict customers from using online fund transfer methods such as net banking and UPI to trade cryptocurrencies.

Significance:

  • Investor Friendly: NPCI’s decision to restrict payment for cryptocurrency trades on UPI and RuPay cards would invariably be applied across all bank.

    • And investors would be left with very little option to conduct such trades.

  • Allow trade: Users of banks which have disallowed crypto trades cannot use UPI, net banking or cards but trades continue as some banks still allow it.

    • But it remains uncertain for how long it will continue.

Supreme Court’s order on cryptocurrencies:

  • NPCI’s decision is based on the Supreme Court’s March 2020 ruling.

  • It set aside a directive by the Reserve Bank of India from April 2018 to ban banks and finance companies for “dealing in virtual currencies or providing services to facilitate” anyone trading in crypto.
  • NCPI has not blocked the trades given that the RBI did not come out with any directive following the Supreme Court ruling.
  • Each bank has a different take on crypto trades based on its risk assessment.

National Payments Corporation of India:
 

  • NPCI is a not-for-profit company formed by various banks, with primary objective of providing cost-effective payment solutions to the banks. SPIRIT OF MUMBAI: Chak De India Aajma le BHIMKaDum with NPCI

  • NPCI is an umbrella organization for all retail payments system in India.

  • It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.

  • It is regulated by RBI.

  • NPCI's solutions such as IMPS, BHIM,UPI, RuPay, AEPS etc. have indeed helped in financial inclusion. 

  • NPCI launched Rupay card in 2012, as 7th payment gateway in the world.

  • Further NPCI provided the linkages to ATM network in India.

SOURCE: Times now

Model Insurance Villages

CONTEXT:

  • Insurance Regulatory and Development Authority of India (IRDAI) has come out with the concept of model insurance villages to cover the entire population in Village areas.

Indian Insurance Industry Overview & Market Development Analysis

Model Insurance Villages

  • Objective: To offer comprehensive insurance protection to all the major insurable risks that villagers are exposed to and make available covers at affordable or subsidised cost.

  • Need: At a time when the Covid pandemic is raging across the country

  • Financial support: With the financial support of various institutions like NABARD and CSR funds.

  • The concept may be implemented in a minimum of 500 villages in different districts of the country in the first year and increased to 1,000 villages in the subsequent two years.

  • Choice of villages: It is to be made carefully, considering the various relevant aspects and parameters in order to implement the concept successfully for a period of three to five years.

  • Eligible Insurance firms: Every general insurance company and reinsurance company accepting general insurance business and having office in India needs to be involved for piloting the concept.

INSURERS OFFERING IN MIV:

  • Weather index products or hybrid products combining weather index and indemnity-based insurance protection for various crops that remain uncovered under PM Fasal Bima Yojana (PMFBY)

  • Flexible farm insurance package policies targeting comprehensive needs of crops, livestock, farmer, farm implements

  • Separate products for high value agriculture, contract farming and corporate farming community as their needs are different

  • Even states can be offered macro insurance covers based on pre-defined parametric weather indexes covering large complex risks arising out of natural catastrophes affecting the agriculture ecosystem and rural economy.

Challenges:

  • Benefits visibility: The efforts in selected villages need to be continued for a minimum of 3 to 5 years so as to make insurance benefits visible to the community.

  • Affordable premium: In order to make the premium affordable, financial support needs to be explored through Nabard, other institutions, CSR funds, government support and support from re-insurance companies.

  • Target Achievement: This is to ensure that families and their property, crops get cover and the entire village community participate in the initiative.

Insurance Penetration and FDI Limit:

  • Economic Survey 2020-21: India’s insurance penetration, which was at 2.71% in 2001, has steadily increased to 3.76% in 2019, but stayed much below the global average of 7.23%.

  • Recently, the Parliament has passed the Insurance Amendment Bill 2021 to increase the foreign direct investment (FDI) limit in the insurance sector to 74% from 49%.

Insurance Regulatory and Development Authority of India (IRDAI):

  • It is an autonomous, statutory body established under Insurance Regulatory and Development Authority Act, 1999.

  • On recommendations of the Malhotra Committee report, in 1999

  • It is an apex statutory body that regulates and develops insurance industry in India.

  • HQ: Hyderabad, Telangana

  • Functions:

    • Protect the rights of insurance policy holders.

    • Provide registration certification to life insurance companies

    • Renew, modify, cancel or suspend this registration certificate as and when appropriate; promote efficiency in conduct

    • of insurance business

    • Promote and regulate professional organisations connected with insurance and reinsurance business; regulate

    • investment of funds by insurance companies

    • Adjudication of disputes between insurers and intermediaries or insurance intermediaries

SOURCE: Indian Express and Times of India

Government securities acquisition programme (G-SAP) - Moderate bond yield

CONTEXT:

  • Reserve Bank of India’s decision to step up purchase of government securities under the government securities acquisition programme (G-SAP) led to the low yield on the benchmark 10-year bond falling below 6%.