ecommerce industry

Compliance and Control in The Ecommerce Industry: Sufficient or Crippling?

By Economy No Comments

Compliance and Control in The Ecommerce Industry

The eCommerce industry in India is a burgeoning business that is taking the Indian e-commerce market by storm. With increasing integration and usage in the economy, the government is trying to concoct compliance schemes that will help regulate the sector. The proposed amendments to the Consumer Protection Act reveal the government’s penchant and willingness to intensify its scrutiny and intervention in India’s burgeoning e-commerce business which might give fair competition to its global peers.

With the introduction of new changes in the e-commerce act, it can be scrutinized that the industry might be waltzing towards greater compliance which in hindsight appears to protect the interests of a powerful domestic retailer lobby rather than the interests of consumers, an agenda that is being vehemently supported by the government.

Though, one should make no mistake, that regulation in the eCommerce industry is long overdue. This is due to the fact that there have been various instances and episodes of sharing of consumers’ data without consent which has emphatically rendered them the quality of being a product that is being used by the multinational companies for its benefits.

Thus, increasing compliance in the industry has been a burgeoning need in recent times. The time for better alternatives for consumers needs to be provided by the government, which extensively has been exploited by the money-mongering capitalists.

The recent advisory’s requirement effectively requires eCommerce platforms to emphatically register themselves with the Department of Industry and Internal Trade. This needs to be additionally carried out with the appointment of a chief compliance officer as a nodal point for effective and positive law enforcement. This law enforcement will be enforced by the agencies and will be a useful way for the government to track the clandestine activities of the platforms.

However, suspicions have been brewing in the industry that such a compliance order will hinder the working of the platforms that already find it difficult to comply with the crippling laws. With the need for compliance through nodal officers, delays in decision-making will be seen. This will be complemented by delayed decision making and in business given the companies are still recuperating from the covid-induced slowdown and supply chain shocks.

E-commerce, as is no news, is an online-based business model. This sector or niche has been set up to effectively provide the consumers with an online market service through an online portal used by people for several functions like selling and buying products. Many might argue that it is quite a newer concept for transforming India, especially the Rural area, which is still tasting the fruit of the success of such businesses.

India’s compliance policy in a relatively newer domain raises the question about its archaic structure which might not be quite suitable for the newly invented venture. With relatively new businesses cropping up in e-commerce, it is quite odious to comply with the policies that hinder the businesses which are in their nascent stage of growth.

India, for years now, has been bearing the brunt of a low position on the freedom of business index. Such policies exacerbate the already battered business circumstances in the country.

The problem is particularly arduous and debilitating for the e-commerce sector as the legal compliances make it particularly arduous for the effective functioning of the supply chain ecosystem. However, not every law under the Indian legal system can be characterized as illegitimate or crippling. One such act is the Legal Metrology Act which is also defined as the “E-commerce entity”.

According to the aforementioned act, the entity is entitled to comply with and meet certain specific standards relating to packaging and labeling that have been set by the Legal Metrology Act of 2009. According to many deflectors, the act proves to be particularly cumbersome as it provides a hindrance at the very first step of the sale of a product.

According to the Legal Metrology (Packaged Commodity) Rules of 2011, it has been stated that an entity is needed to display mandatory information about the goods on the network. Though many might argue that this proves a specific hindrance in the ecosystem, it cannot be denied that an act of such a character is required as the right to information is a considerable, legitimate right of a consumer. Here, such an act cannot be confirmed as a hindrance as it effectively provides a customer a legitimate right to delve deeper into what he or she is consuming.

Thus, in totality, it cannot be denied that the e-commerce industry’s rapid growth reflects the public’s growing acceptance of it, but it also cannot be denied that it has also been brought to the fore that there are certain concerns that the country’s legal system has been dealing with for quite some time now. Here, particularly cumbersome is the fact that the laws pertaining to e-commerce are quite uncondensed of statutes.

This can be argued on the fact that there is no specific codified law for the functioning of the e-commerce sector. Thus, this will lead the companies to particularly look at such a perspective of the particular situation for which the laws are to be considered. To succeed in such an uncodified legal system in the sector, many multinationals and e-commerce enterprises will have to have a thorough awareness of the legal regime.

This will also include potential challenges that an e-commerce business will face due to sheer negligence and crippling laws prevailing at the moment. Further, it might not be farther than the truth to argue that the regulation of the e-commerce sector is quite emphatically dynamic in nature.

This effectively means that laws are quite scattered in nature. Thus, given such variability in the legal system, it becomes of utmost importance that entrepreneurs that are willing to venture into the e-commerce business must be quite mindful of the legal and regulatory compliances. Thus, such a structure does not very well fit with the theme of making business in India accessible for entrepreneurs. On the contrary, India’s crippling laws need a replacement, the sooner it comes the better.

wage gap

What if the wage gap means everyone earns less?

By Economy, Labour & Employment No Comments

What if the wage gap means everyone earns less?

Wage Gap Pay transparency has been a contentious issue for managers around the world. Companies, including Starbucks, whole foods, and many more have been scrutinizing the raging problems by touting their pay transparency policies as an effective means of ensuring fairness in the workplace.

wage gap

It is no news that pay transparency is a touchy topic for employees, especially when gender and race are involved. Thus, conscious steps to avoid such irregularities have gained top priority for many top-notch firms. But, as it odiously turns out in many cases, pay transparency doesn’t necessarily ensure or effectively increase workers’ wages.

Such a revelation comes as a piece of disturbing news for the employees as more than 10 European Union countries and 20 US states have enacted wage transparency laws that emphatically seek to give workers more bargaining power in the workspace.

This is ensured by making it mandatory for the firm to disclose employee salaries. Given, the law had been enacted for increasing the wage of the workers or to provide them with an instrument to bargain, it has been found out, that strategically opening your pay books for others to scrutinize and read has actually led to 2 to 3 percent less cash in workers’ pockets. This is especially true for the workers in the US private sector.

how does the wage gap work

wage gap

So one might ask what has led such discrepancies to seep into the welfare policymaking? It is to be noted that rather than empowering the workers, these laws have encouraged companies to set lower salaries for their workers in order to preserve their profits and to highly prevent any expensive renegotiations that might come through.

In earlier times, proximity between workers did the work that wage efficiency laws are trying to achieve at the moment. It is to be noted that the workers with comparable similar jobs in the same locations effectively earned around similar amounts.

In contrast, the pay for the same work was different given the varied geographical locations of the work. Thus, given the proximity between the workers, it helped them immensely to talk to one another about their wages. This, unlike today, helped the workers to re-negotiate and thus create opportunities for themselves to increase their odds of earning more.

One might argue, that such a strategy was much more effective than the wage transparency laws to re-negotiate one’s offer for his or her services.

This is due to a pertinent and a threatening fact that though the legal landscape has shifted positively towards the welfare of the workers in recent years through the inculcation of transparency, on the other hand, laws, and policies that had always protected the workers’ ability to discuss their compensation with their colleagues without fear of repercussions have also gained popularity in recent years.

But this still doesn’t concretely or statistically prove that workers in their workspace earn less due to transparency wars. Such a riddle can be resolved by studying how the labor market adjusts itself depending on pay transparency. This can be done by thoroughly analyzing and scrutinizing shifts in wages after transparency laws took effect.

According to the American Community Survey, which analyzed 4 million people living in the states with new transparency laws that were enacted between 2000 and 2016, found that a year after the transparency laws were passed, wages had effectively dropped by 2.2 percent.

What is more interesting is the fact that after three years of enactment of laws the wages had declined by 2.6 percent. Thus, one can state that the wages, after the enactment of the law, have shown a downward trend that indirectly or directly affected the wages and the bargaining power of the employees in the market.

The ultimate reason that such laws push wages lower is the fact that managers who are required to disclose salaries can credibly state unsettling facts about low-profit margins and unwillingness to give a raised pay to everyone if the concerned person is given the same. This effectively and strategically allows the profit-mongering employers to set overall salaries much lower.

what is the gender pay gap

This usually leads to lower bargain power of the employees which in turn leads to lower pay for all in a certain workspace. This allows employers to set overall salaries lower and hold firm on initial offers when employees are hired—which tends to give companies an advantage in salary negotiations.

It is also worthy of noting here that salaries are not always, monotonously handled in the same way at all companies. This is especially true when the company might not hold the law true for large superstar employees who bring exceptional talent to the table.

Thus, one might actually not have as much bargaining power as he or she might think so. This is also due to the fact that the law is not absolute in nature that guarantees the right to re-negotiate your worth.

Thus, in totality, one can argue that though the law is helping gain pay equity in the workspace, the same is being achieved at the expense of workers’ purchasing power and adequate pay. Thus, can we still appreciate the wage transparency laws in place? Hard to say when your pockets are comparatively less filled now.

cbdc cross border payments india

Will CBDCs Help Ease Cross Border Payments?

By Economy No Comments

CBDC Cross Border Payments

It is no news that the onset of the pandemic has helped cryptocurrency gain traction around the world. To state that it has wrapped investors around its fingers would be an understatement. This is due to the fact that various countries, who initially had been seen opposing the idea of digital currency, have been now seen changing their stance. In fact, El Salvador went ahead to grant the digital currency the title of fiat currency.

cbdc central bank digital currency

This has emphatically led various countries in recent months, to invest in the flurry of initiatives to announce CBDCs. CBDC will effectively be the digital form of a fiat currency which will be effectively regulated and issued by the monetary authorities of the country. But what makes us think that the development and adoption of digital currency around the world are positive? Such a claim has been corroborated by the reports by Bank for International Settlements’ 2021 that had emphatically reported that 85% of central banks are already in the process of developing a CBDC (Central Bank Digital Currency).

In fact, the claims are strong enough to suggest that the stage of speculation has been passed and various countries are in the process of developing their digital currency. But this gives rise to a pertinent question that the digital currency schemes will help simplify cross-border payments ambiguities and difficulties?
The utilities

It is to be noted that the application of digital currency in the economy can unleash various unlocked benefits pertaining to cross-border transactions and national transactions as well. With the introduction of the newer payment system which is digitalized, support and harmony can be provided to a resilient payments landscape.

This will also help in effectively countering some detestable attributes like the risks of new forms of private money creation leading to storing of wealth amongst a few. In fact, various reports suggest that with the introduction of CBDC, support to efficiency will be provided by fostering greater competition and innovation in payments.

Some other more obvious advantages of the same are that it will help counter the problem of decline in cash that is usually faced by the public, especially during arduous times. Thus, it can be rightfully be stated that the introduction of CBDC will lead to the rectifying of the future payment needs in a digital economy.

Thus, with the rectification of such attributes of the credit economy in the country, it can be stated that it will help provide a more secure and efficient building block for improved, faster, and more secure cross-border payments.

But will such rectification and introduction of CBDC be implemented anytime soon? It is to be noted that the answer is quite ambiguous. This is due to the fact that though various countries are in the development stage of CBDC, the process is being carried out in terms of retail CBDCs. Subsequently, with a larger inclination towards the retail side, even the wholesale side has garnered little attention from the authorities.

Thus, with the unformed connection between the economy itself, cross-border transactions can look like a farfetched idea.

central bank digital currency rbiThe other trend on which the future of CBDC depends is the building network of countries across continents. This shows the brighter side of the story as on 14 July the European Central Bank had confirmed the launch of its digital euro.

Also, various collaborations in the EU to are erupting to develop a wider cross-border payment system. With newer initiatives, innovations, and tests, it has been found that the blockchain-based digital euro could effectively in theory, support unlimited numbers of payments. This is a positive attribute as such payments can be processed simultaneously with a very large money supply.

The cross-border payment structure can also be carried out by rectifying and conforming with one definition of CBDC that is adhered to. Given the various kinds of CBDC like token-based and account-based, discrepancies in cross-border payments can arise.

what is cbdc in india Another classification is wholesale and retail CBDC. It is to be noted that wholesale CBDCs work by putting existing central bank reserve accounts effectively onto a blockchain. Thus, by the process of tokenizing the central bank money, one can emphatically improve the efficiency of cross-border payments.

this will be due to the fact that there would be an effective removal of intermediaries and reconciliation processes. Thus inefficiencies and lack of immediate action will be done away with which will highly improve the cross-border payment structure.

This will in fact also help in the promotion of business transactions without the effect of the intermediaries affecting business transitions and smooth business dealings. Thus, CBDC holds a lot for the development of an effective cross-border transaction scheme, but with various discrepancies and ambiguities, it is quite unclear at the moment that will such an ambitious scheme materialize anytime soon.

What actually is needed is a series of steps for the central bank to decide that whether it should expand its CBDC’s horizon to retail CBDC that would include all. Thus, the question that central banks face is that whether they should make central bank reserves exclusively for the banks to own or to make them more accessible to non-banks.

This is crucial due to the fact that once everybody has access to an account with the central bank, the central bank will need to decide whether CBDC will be available on an account or as a digital token. But given the character of both, a retail CBDC would effectively offer the added benefit of making cross-border payments more smooth and much more efficient. Thus, the future of CBDC depends on the decisions of the central banks and we hope it will be a sagacious one.


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retail sector in india

Why India Needs a National Policy for Its Retail Sector?

By Economy No Comments

National Policy on Retail Sector in India

To state the matter quite plainly, a holistic retail policy is the need of the hour. This is a suggestion that needs to be implemented for the effective working of the sector and for moving up the ladder of the ease of doing business.

The battle against corona is not over yet. The economy may be recuperating but one thing one cannot expect is complacency. With various sectors that were crippled by the covid pandemic, the retail sector was one of them.

Secondly, given the ongoing battle against the virulent virus, one cannot deny the crucial role of the retail supply chains that are facilitating essential movements and delivery in the economy. Though, it is to be noted that the first wave was quite crippling for the retail sector due to the blanket lockdown but the second wave was quite lenient given its nature of being partial.

retail tradeOne fact that is worthy of being mentioned is that the retail sector has much to offer the economy but this comes only after prerequisite incentives and policy support can be provided for the same.

Certain reports have shown that the retail sector in India has great potential for employment. One quite comprehensive report that was published was a report by CII and Kearney. This report emphatically sheds light on the potential of the retail sector given a comprehensive National Retail Policy is implemented.

It states that the retail sector has an immense potential to effectively facilitate the creation of three million jobs by the financial year 2024. Also, given the unemployment woes of India, one can rightly state that the retail sector will be a boon for reviving the economy.

It is to be noted that since the trade effectively has upstream and downstream linkages, investments in the retail sector will beneficially generate an appreciable cascading effect.

This will help produce value for the stakeholders via employment generation, value chain modernization, upskilling of employees and consumer experience, etc. this will in turn also lead to increased investment in the sector due to its increasing lucrativeness.

retail industry in indiaIn addition to creating utilities and employment in the retail sector, one will also witness the increase in employment generation in allied sectors. Talking about the gender disparity in India, retail sector up-gradation will also lead to more employment of women as the retail industry is one of India’s largest employers of women.

Thus, with its upgradation, it will also lead to the closing value of gender disparity in India. This will also help generate women-centric policy reforms which will also help the government gain political capital.

But why is the support of the government so necessary and crucial? It is mainly due to the fact that 5-7 lakh retailers were emphatically forced to close down due to various policy changes. It is to be noted that due to unpredictable policy stance and environment in India, many companies and especially the retail sector have to bear the brunt.

Thus, a stable policy mechanism is the need of the hour. Another utility that can be created out of such policy implementation is the fact that enabling such stable policies actually helps in facilitating their return to business. This can consecutively lead to the generation of employment in the economy and will help contribute to the GDP of the country.
But how does the policy framework of such policy implementation be designed? It is to be noted that according to the CII National Committee on Retail stresses such a National Retail Policy emphatically should bring all categories of retail under a single rule.

Furthermore, what is most required for the strong efficiency of such a policy program is the fact that attention needs to be paid to technological development, ease of doing business, and ease of access to capital. Consecutively, the sector also requires up-skilling of workers for the usage of technological advancement in the sector.

indian retailThe government’s response too for such a sector has been accommodating. This has been seen due to the approval that was garnered by the government for its revelation of its accommodating policies in the financial budget 2022. However, various aspects of the same remain untouched.

The retail sector’s association has expressed its concern over the effective and emphatic withdrawal of import duty exemptions that own some of the products of interest.

This is mainly due to the fact that many retail sector owners rely on imports. Given that some government policies target the same, it has garnered some disapproval from the government.

Thus given the present situation at hand, many retailers and businesses may have to emphatically and crucially depend on domestic suppliers to safeguard their margins. Thus, a robust policy that does not offer such immediate shocks is needed for the betterment of the sector.

On the other hand, it is worthy of mentioning here that the government’s ambitious plan for effectively reviewing 400-plus customs duty exemptions that will come into effect from October 1 could heavily result in a revised duty structure. This could definitely eliminate major distortions at play.

Thus, one can state that when such ambiguities have been removed earnestly, traders that are importing goods can benefit immensely and joyously.

On that note, another major announcement that has been enthusiastically welcomed by the traders is the government’s thrust on EoDB.

This will effectively help and push women’s participation in the sector as it will permit women to work in all categories without any restrictions. Thus, is the situation being to be scrutinized, much work can be done to increase the gender diversity in the sector which will emphatically help in the betterment of the sector. But how long will a robust, efficient system take to materialize in the economy is still a mystery?


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retail trade, the retail industry in India, the retail market in India, consumer retail sector, indian retail, consumer and retail sector, supply chain in retail sector, technology in retail sector, about retail sector, retail sector information
retail sector in India, national policy on retail sector.

universal credit

Towards Universal Credit Inclusion

By Economy, Banking No Comments

Universal Credit Inclusion

It is no news that digital lending has taken a great leap into the life of the customers since its inception in recent years. Given the immense potential that digital lending has to offer in the market, it is quite viable that rapid growth in technology takes place.

But with the rapid growth that is happening in the sector, is putting immense pressure on the seams. It is to be noted that some of these harmful effects of the ever-growing fast growth of digital lending had expressed themselves last year through lack of compliance with customer protection norms.

This had emphatically led the RBI to constitute a working committee to effectively recommend certain guidelines that can strategically allow digital lending to grow. This was done to grow the digital lending sector in a more coherent and orderly fashion to protect the interest and welfare of the users or customers.

what is universal creditThus, it can be argued that the issue of improving the digital lending sector should be viewed with the primary lens of consumer protection.

It is due to this reason, it is important that it is viewed in terms of stringent re-emphasizing of some of the existing guidelines, namely Fair Practices Code and Outsourced Service Provider Guidelines amongst others. it is well known that for the successful initiation of the process, a governing or regulatory authority is needed for chaperoning the ill aspects of the industry.

Thus, as recommended by the RBI committee, the proposal to effectively set up a self-regulating organization, that can a perfect sense provide in-depth analysis, oversight, and guidance. It is to be noted that the establishment of an industry-led SRO will emphatically help ensure that guidelines can keep pace with the rapid evolution of the industry.

Given that regulation plays a key role in making the industry abide by the regulations, thus it is important to ensure that unregulated lending activities are curbed as largely as possible to preserve consumer confidence and welfare.

This is also needed as last year it was discovered that unregulated lenders were emphatically the prime source for many of the aberrations that were observed in the market. On the top, such an issue garners extra importance due to the fact that such lending activities bypass various guidelines and supervision for responsible lending.


Responsible lending, if not regulated will heavily cost the customers who are largely unaware of the consequences. Some of the recent unregulated lendings that have cropped in the recent years go by the name as buy-now-pay-later.

Quite similarly to the unregulated BNPL sector, the need for curbing the authority of the loan sharks which function through fraudulent apps and technology-based measures is also needed. This can be highly achieved through app marketplace gatekeepers like apple and Google. This will strategically help curtail the immense spread of unscrupulous lending that at the moment is plaguing the market.

But what happens when the system is overburdened with regulation? The answer demands deeper introspection, especially in relation to additional regulations, such as National Financial Consumer Protection Regulation, Agency Financial Service Regulation, etc., it is to be noted that multiplicity of regulations can effectively hamper the growth of the nascent digital lending sector, as this can foster reluctance, inefficiency, and non-competitiveness.

This will be especially true for the recent startups in the digital lending sectors that are currently driven by younger startups. This is true as younger innovative startups increasingly have limited ability to invest in compliance overheads.

Another area of importance is the role of embedded finance. Embedded finance can play a crucial role in reducing information asymmetry that exists in the market and leads to inefficiency. It is no news that information asymmetry is a fundamental problem in extending credit in the market. This issue is systematically resolved through embedded finance as it provides strong end-user control and repayment mechanisms.

universal credit complaintsTalking about business lending, there are key building blocks of lending and are extensively used in supply chain financing. Given the nature of the business, it is to be noted that largely finances flow to the supplier accounts which are paid back through an intermediary account.

Thus it can be argued that the odious risk is often shared with an anchor corporate that has better operational risk management capability for transactions. Thus, disallowing such intermediary accounts will emphatically and increasingly restrict the ability of risk to flow where, as a matter of fact, it can be operationally managed the best.

Thus, in totality given the changing digital landscape in India and the massive growth potential that the sector has to offer, India needs to inculcate a sense of regulated transaction habits.

On the other hand, the authorities also need to keep in mind that the robust financial system does not need to be overregulated to foster inefficiency in the bussing ecosystem.

The need of the hour is to roll perfectly regulated public financial infrastructure, that facilitates transactions, encourages innovation, and protects the interests of the consumers.

universal credit overpayment Given the already existing framework, India today stands tall to offer its citizens and businesses the benefits of universal credit access.

At last, it needs to be concluded that digital lending is the need of the hour with increasing relevance every day, and with the right regulatory architecture, it has an immense potential to serve as a pertinent key driver to the growth in the country.


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auto debit rbi

How RBI’s Auto Debt Rule Could Emphatically Cause Tax Woes for Fintech Startup?

By Economy, Banking No Comments

Auto Debt RBI Rules for Fintech Startup Companies

In another turn of interesting events, the fintech startups could run into a problem. According to auto debit RBI new rules, Fintech companies run at the risk of attracting a 2% equalization levy. In addition to the equalization levy, the fintech startups will also attract additional goods and services tax (GST) at 18%.

This GST will be attracted on part of the money the fintech startups would make through such an arrangement. This would especially include transactions where an Indian citizen has effectively subscribed to the services of a foreign OTT player.

On the other hand, this can also levy in the case where an Indian citizen buys goods and services from a company that is effectively not based in India. Thus, one could effectively state that the Reserve Bank of India’s significant auto-debit rule could effectively and largely bring tax complications for various fintech companies that are operating in In India.

According to the reports, this will also include fintech startups that had set up platforms for banks to effectively integrate with a common e-mandate platform. This was carried out or done to ensure compliance.

auto debitThis brings various Payment aggregators like Razor pay, BillDesk and PayU under the ambit of the law as these have set up platforms like MandateHQ, SiHub, and Zion, respectively. These had been operating in the capacity to form or provide a “bridge” for banks to complete the transactions.

It is no news that since the introduction of new intermediaries, they have gained popularity in recent years. These intermediaries include platforms like Netflix and Apple stores, functioning apart from the bank. With the increase in popularity, the analysis had shown that they had become an avid link between the customer and the overseas merchant establishment. Due to such arrangement, the tax implications have cropped up and have been introduced by the RBI.

auto debit payments rbiBreaking down the tax structure

It is to be noted that if the tax structure is to be broken down, the equalization levy will constitute up to a 2 percent charge on any transaction which will involve a foreign company over the internet. Additionally, on further inspection, GST that will be charged will effectively depend on the structure of the fintech player’s entities.

Thus, it would depend on how the transaction is routed and the nature of such transactions. Thus, given the ambiguous nature of various forms of transactions that take place, one can state that the government’s new equalization levy could effectively come into play.

In other clarification that has been issued, fintech companies that would attract the 2% equalization levy will be on any overseas transaction or it could also be levied on the company or the merchants that are not based in India. Thus, one can state that such an equalization levy can effectively provide the risk of the platforms charging fees from the merchants.

The businesses that will come under the setup

Firstly, according to analysis, the overseas bank from which the money is being deducted which is effectively not based in India, it will attract an equalization levy of 2 percent. Similarly, these would also include banks that don’t have an emphatic tax presence in India.

The second criterion that will attract tax is the nature and structure of the transactions that will be carried out by the company. In this case, if it is found that a fee that is emphatically received by an Indian bank that doesn’t directly come to an Indian entity, will too effectively attract a 2% tax.

It is to be noted that RBI’s newer laws also include the money that goes through a subsidiary. These subsidiaries are usually of the fintech company, even these could effectively come under RBI’s scrutiny and could attract taxes.

On top of this, there is a GST implication too. GST will come into play if the money that is positively deducted from an Indian’s debit or credit card is done via the fintech’s books before it is remitted in the foreign merchants’ account.

Thus one could effectively state that the services that are provided by the fintech companies in pursuit of validating transactions could actually attract GST on both the transaction fees and the setup fee that is charged by them.

fintech startupit is to be noted that RBI’s newer rules have come into effect from October 1. Since then it has been stated that banks can only process auto-debit transactions if they fulfill the criteria of sending a pre-debit notification to their customers well before time. This is to say that such notifications should be given out at least 24 hours before the payment.

it is to be noted that such a law has been brought into force as many banks do not wish to indulge in such transitions and do not have the technology for undertaking such transactions. Thus, this has led many to instead turn to fintech companies to effectively provide transaction platforms.


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rbi proposes new law to regulate digital lending

RBI Proposes New Laws to Regulate Digital Lending

By Economy, Banking No Comments

RBI Proposes New Laws to Regulate Digital Lending

Once again, RBI has stepped up to protect the interests of the consumers, who in pursuit of excess money were preyed on by wealth-mongering organizations on various apps. In order to effectively safeguard the interest of the customers, the Reserve Bank working group has strongly and emphatically suggested the enactment of separate legislation. The legislation has been propped to strategically prevent illegal digital lending through apps of which innocent customers were victims.

It is no news that get-rich easy schemes are scams. With the involvement of Indian citizens in the same, leading to suicides, the RBI has come in to attack the loan sharks. It has emphatically suggested that digital lending apps should be thoroughly scrutinized and verified by a nodal agency.

This should lead to the establishment of a Self-Regulatory Organization that will effectively and positively cover the participants in the digital lending ecosystem.

Thus, one can state that RBI’s recent steps will help in enhancing customer protection and experience, protecting them from a digital or monetary felony, consequentially making the digital lending ecosystem safe. This will also promote healthy innovation in the digital lending system.

But here it is mandatory to mention that, at the moment, taking down all the apps from Appstore is only a temporary and a preventive measure to mitigate the disaster. The verification of the same should be a top priority for the apex bank.

It is to be noted that under the guidance of RBI, the working group has been set up in the backdrop of business conduct and customer protection concerns that are arising out of the spurt in digital lending activities, which really found momentum during the pandemic.

The case

But the aforementioned details, including RBI’s involvement, raise questions about the nature and motives of the customers to get involved in business with such scandalous groups on the apps? It is to be noted that the motivation for such an activity was the pandemic which has excessively curtailed the financial and monetary standing of the middle-class society in India.

rbi working group on digital lending

With curtailed earnings, increased healthcare expenses, and inflation, easy loans were found tantalizing. This led to a full-fledged affair with the fraudulent loan apps that provided easy loans with high interest. With higher interests and lower-income, people tuned to excessive steps like suicide and self-harm.

This emphatically led the RBI to get involved in the loan app fiasco and formulation of recommendations to mitigate the disaster.

Among other things, it is to be noted that the group also suggested the development of certain baseline technology standards. These standards will have to be adhered to as a pre-condition for offering digital lending solutions.

In order to counter the blackmailing aspect of the fiasco which gave the loan app companies leverage over the consumers in turning the public into an easy target, the RBI has recommended that data collection with the prior and explicit consent of borrowers should emphatically have verifiable audit trails.

In addition to having a verifiable audit trail, the data should also be stored in servers located in India. Data privacy has long needed attention in India, given the fact that India doesn’t have standard and well-crafted rules and regulations for the same.

Further, in order to impactfully curtail the unsolicited commercial communications for digital loans, the committee has also strategically advised the same to be governed by a Code of Conduct to be put in place.

rbi digital lendingThe whole loan app debacle brings to the forefront the need for transparency, better data privacy laws, and a strong vigilance mechanism by the RBI to protect the interest of the public which is currently quite susceptible to harm financially and monetarily.

With the pandemic curtailing financial freedom, it is quite a prevalent possibility that people will ultimately turn to dubious, surreptitious modes to accelerate their wealth. Thus, the need for effective governance and vigilance is the need of the hour. This can be effectively achieved through algorithmic features that are used in digital lending which will help ensure necessary transparency.

What greater attention to the loan apps fiasco is the fact that digital penetration in India is on the rise. Thus, laws to govern the same should be on the trajectory of implementation too. But given the state of data privacy and consumer protection laws, in the country, India has a long way to go. One can certainly state that the recent fraudulent disaster can help provide impetus to the process and safeguard the interest of the consumers.

It is mandatory to be mentioned here that in order to make digital lending a promising reality in India, the authorities will have to with the trust of the citizens, who are rather cynical about the process. Thus, the recent case can be a good start.

With the Reserve Bank constituting the Working Group (WG) on digital lending on to emphatically study all the aspects of digital lending activities in the regulated financial sector as well as by unregulated players in order to put an appropriate regulatory approach in place, one can positively state that future trust-building between the authorities and the citizens is on the rise.


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payment services regulations

Payment Services Framework – Demystifying Regulations

By Economy, Corporate Law No Comments

Understanding The New Payment Services Regulations

Even though the pandemic might have inflicted severe wounds on economies around the world but one silver lining that can be deciphered from such a debacle is that it has been an ushered of technology usage in various economies.

Given the rapid speed of adoption, it can be stated that it is effectively taking the speed and convenience of being a digitally savvy individual in a globalized world to new and greater heights. But with the increase of convenience and speed in the economy, is also effectively enabling cybercrime.

This is certainly leading to absurdity and discrepancy too as cybercrime is on an alarming rise. Such a claim has been corroborated by the global 2018 study that was conducted by PwC. The study revealed that at least 49% of organizations effectively admitted to being victims of fraud.

If such statistics are put in perspective, it is significantly up 36% in 2016. With the rise of cybercrime, Payment service providers and merchants are facing the challenge of reinforcing eCommerce security. This gains all the more important because it needs to be done without creating any discrepancies and obstacles that could severely lead to cart abandonment.

It is to be noted that much has materialized in the decade since the first Payment Services Directive was introduced. The inefficiency in the system can be accommodated by the fact that fraud losses are on an extreme rise year on year. This has significantly happened due to the rapid digital change. Additionally, this has been also due to the open banking and FinTech industry that has arisen in recent years and has gained momentum radically through the pandemic.

payment services

It is to be noted that the condition is applicable globally and is especially true for a progressing country like India which is imbibing the richness of the digital revolution. It is no news that electronic payments have made a humungous impact on the lives of millions of Indians. This has been seen through the increase in the usage of UPI payments around the country.

With the increased usage by Indians and increasing cyber-attacks, RBI has recently released regulations for all Payment System providers. The regulations significantly state that any payments that will be made in Indian entities for domestic payments transactions need to be stored only in India itself. As for the data for payments that are made outside India, the data has to be effectively deleted from those systems abroad. In addition to deletion of such data abroad systems, it has to be stored in India no later than 1 business day or 24 hours. from payment processing, whichever is earlier.

The need for such payment services regulations

This might give rise to a query that why is there a need for such regulations by the RBI? It is to be noted that with the growth in electronic payments systems and cyber-attacks, there is an urgent need for regulations. Such regulations are needed to protect the interests of millions of users to safeguard their primary data. This is also needed to safeguard the integrity of the newly formed payments systems.

new payment services regulationsGiven the objectives of the RBI regulation, it is quite sagacious to mention what might be the impact of such regulations. It is to be noted that the newer regulations have posed some urgency within the financial institutions and the banks.

This is mainly due to the fact that the financial system and banks need to significantly adhere to such regulations which are crippling and to the working hours of the bank. This in fact has led many of the banks to miss the deadline or breach the regulations, though extensions have been generously provided.

However, it is worth mentioning here that given the arduous list of tasks and regulations that the various banks have to adhere to, it is a significant step in the direction of imbibing the user data privacy norms and strengthening the cyber laws. Given that there has been an immense increase in online businesses, a robust payment system is the need of the hour to usher India into being a digital economy.

Though it is worth noting here that India had its payment system in place with its Level 4 data centers and major cloud providers. In addition to this, it has formidable payments technology. But given the advanced progression that has been made in the cyber-attack industry, such a system usually falters.

payment rules and regulationsThus, given the nature of the issue and the relevance and importance of such robust censoring and payment system, the recent regulations will greatly safeguard the users’ data. This has all the more important as data privacy concerns are becoming a big concern for users across the globe now. Thus the regulations will emphatically ensure that surveillance and right monitoring will ease out in the investigations.


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no proposal to recognise bitcoin as a currency

No Proposal to Recognize Bitcoin As a Currency in India

By Economy, Banking No Comments

No Proposal to Recognize Bitcoin As a Currency

In a world where the contentious digital asset namely bitcoin is garnering growing appreciation and acceptance, India is untouched by its charms.

Bitcoin, throughout this year, has gained a special status of legal tender in El Salvador and huge endorsement from public figures like Jack Dorsey and Elon Musk. But is it just the high popularity of the digital asset that has set it on the pinnacle of success in such a short period of time?

Probably not. It is to be noted that the contentious asset has many merits to it that make it an appreciable currency over others. Its property of making trading an easy business and facilitating easy cross-border transactions is what leads to its soaring merits and applicability.

Given its merits, it is crucial to also note that the contentious asset is also, quite fondly, used for nefarious purposes like money laundering and trafficking. It is this use of the currency that makes the authorities hesitant in accepting the better side of the contentious asset.

bitcoin as a currency

This gives rise to a pertinent and inquisitive question that every side has two sides to it, with its merit and demerits, thus, why is bitcoin suffering the wrath of the government authorities in India? Well, it is to be noted here that the authority loathes uncertainty and lack of action that comes with the crypto package.

With the nefarious side of the coin, the added disadvantage of not being able to regulate is what adds to the agony of the authorities. Given the anonymous character that the crypto gives to the user, authorities usually find it arduous to track the users’ activities and the user itself.

With unregulated transitions that take place through the contentious assets, the government loses a humungous amount of revenue. Thus, given the merits of the currency, its disadvantages outweigh the positives.

Such antagonizing and aversive attitude of the government can be corroborated by the fact that recently the Union Finance Minister Nirmala Sitharaman has emphatically informed the Lok Sabha that there effectively will be no proposal before the government.

Thus, the proposal recognizing bitcoin as a currency is effectively not on the table. Sitharaman, in fact, also emphasized o the fact that the government does not collect data on bitcoin transactions. This strategically shows that the government has no interest in granting the status to the currency any time soon in the future.

In fact, it is to be noted that in the recent turn of events, the Indian government had got the Indian crypto traders anxious again due to its antagonistic stance against the contentious digital currency. With its introduction of the recent crypto regulation law, many traders were found desperately trying to sell a part, if not all, of their cryptocurrency portfolio.

This was mainly due to the fact that the panic sell-off amongst crypto investors was triggered by the announcement that a crypto bill would be introduced in Parliament’s winter session. What had made the whole scenario all the more concerning and frightening for the traders and investors was the declaration of the fact that the bill mentioned that trading of all private cryptocurrencies would be prohibited.

Though, given the Indian government’s odious stance against cryptocurrency, such a step must not have come as a surprise. But given the speculative, whimsical nature of the market, this led to havoc and anxiety, which led to panic selling in the market. This had effectively led to plunging values in the crypto market, where the prices had fluctuated frequently. Given that speculation can do such harm and lead to such panic, it can be argued, that a complete ban will definitely lead to havoc in the market.

It is to be noted that Bitcoin, which is a digital currency that was introduced in 2008 by programmers, strategically allows people to buy goods and services and exchange money without involving banks.

According to the reports, the speculations remain true as the government actually plans to introduce a bill in this regard. The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 can be introduced in the ongoing session. Given the nature of the bill, it can be conjured that the bill will ban all private cryptocurrencies but might allow the underlying technologies.

is it legal to buy bitcoin in indiaBut in the pursuit to eradicate the non-conforming, non-perfect aspect of the asset, will the government forgo the positive potential of the currency? Luckily, the answer might come as good news for the investors, as the government plans to roll out its regulated version, CBDC, in the market.

This claim can be corroborated by the fact that the government has effectively received a proposal from the Reserve Bank of India strategically seeking an amendment to the RBI Act, 1934. The proposal is demanding to enhance the scope of the definition of “banknote”. This is being done to include the currency in digital form.

Given the extensive research that is going on in the CBDC, with RBI examining use cases and working of the currency, one can conjure that the CBDC can be a reality in the near future.

CBDC has its own merits if it is introduced in an undisputed, phased manner. The introduction of a CBDC has immense potential to provide significant benefits in the future. These benefits will include such as reduced dependency on cash in the society, reduced settlement risk, and higher seigniorage due to lower transaction costs.

bitcoin in indiaThus, one can finally state that the phased introduction of CBDC in India will possibly lead to a more efficient, robust, regulated, and legal tender-based payments option for the public which will be an added advantage. Though, it cannot be denied that there are associated risks with such introduction which, in the light of protecting the welfare of the user, need to be carefully evaluated, but given the potential benefits in the future, one can robustly state that something efficient can be born out of the meticulous efforts of the central bank.


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Nationalization of banks in comparison to Covid effects on the Indian economy

By Economy No Comments

Nationalization of banks in comparison to Covid effects on the Indian economy


If there are two things that have grabbed the political attention of the masses in India, it has to be the odious covid 19 pandemic that ravaged the already battered economy and the nationalization of the public assets.

Public assets, time and again have been a touchy subject for the masses of India. This is especially is true given the widespread notion or belief that government assets are invariably and emphatically public assets.

The government assets have been the talk of the town for two specific reasons. First is the selling off of the public’s property and heavy corporatization of the banking sector and secondly, the government’s close relations with the Ambani-Adani. With outrage pouring in from the masses the idea has become a contentious issue of debate.

Government’s inspiration

But what exactly inspired the government’s decision for disinvestment in the economy? The answer to the question lies in the arrival of the pandemic which severely affected and crippled the finances of the government.

With the need for robust public finance and expenditure in the economy, lower expenditure and finances spelled trouble for the battered economy. Thus, in order to finance the needs of the economy, the government innovatively thought of disinvestment of the public assets on which it could cash on.

But is disinvestment such a bad though Afterall? It is to be noted that privatization might actually ramp up the efficiency of the asset which had been reductant under the government’s rule. With higher NPAs in the public banking sector, the introduction of healthy competition can lead to the revamping of the banking sector.

What more pertinent reason for such a disinvestment spree can be? Given, the circumstances of the pandemic which the banking sector weathered, NPAs were reported to surge. Mortarium on payments and easy lending had put immense pressure on the banking sector.

Though many banks did reduce their NPA ratio, that was merely due to the act of writing off of the loans from the financial books.

As a matter of fact, RBI’s Financial Stability Report of 2020 effectively and emphatically foresaw a huge surge in the Gross NPA ratio of the banking sector. This was projected to be at a significant 13.5 percent for the month of September for the financial year 2021. The NPAs were projected to heavily surge from 7.5 percent in September 2020.

What made the Indian banking industry suffer the wrath of the covid more than the other countries was due to India’s despicable legacy of bad debt even before the COVID-19.

Thus, one can strongly argue that as the odious variants of the virus despicably assailed the country which had pervasive and floundering health sector, the already battered pre-pandemic financial infrastructure, cracked and worsened.

The aforementioned situation is even more exacerbated for the public sector, which is inefficient even under normal circumstances. Thus, the government’s solemn decision to privatize certain banks and cash on them has some merit to it.

With increased efficiency and losses, one can effectively expect the better performance of the sector in the economy which is in the nascent stage of recovery.

However, taking an ill view of the banking sector too can be a biased opinion. With strict, increased monitoring, the immense increase in market capitalization in the stock market, and the introduction of stimulus packages, there is hope that green shoots for the sector and the economy are a possibility.

This can be effectively corroborated by the fact that throughout 2020-21, SCBs’ RoE and RoA sustained a positive rise of an impressive 6% in March 2021 on their CRAR. In fact, the GNPA and NNPA ratios too displayed signs of stability over a period of time, which spells good for the economy.

As aforementioned, last year, the moratorium on compound interest, which was sanctioned by the RBI, had a despicable effect on the bank’s finances. But it is to be noted that contrary to the earlier inferences, banks are now much better equipped to manage profitability.

Their resilience in terms of higher recoveries and as higher capital buffers too has been improved. Thus, one can maintain that the moratorium and the pandemic did have a silver lining for the banking sector.

Thus, in totality, disinvestment, which has been a petulant topic for the public, can be a step in the right direction for the industry. Given the immense importance of the banking sector in the economy, which drives the demand and the investment, its timely resolution is the need of the hour.

If this required extreme means, one should brace themselves for the inevitable. Thus, one should not be much abrasive or unappreciative of the scheme the government is concocting for the banking sector. As for the future, one can only be patient to witness what the scheme will offer for the industry and how will impact the economy in the long run.