Tag: Rajya Sabha

We will walk the talk on introducing crypto Bill in Parliament this session: Sitharman

Banking & Finance

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Finance Minister Nirmala Sitharaman on Tuesday said that the Government was working on a new Bill on cryptocurrency and that this Bill would be introduced in the ongoing session of Parliament after Cabinet approval.

The ongoing winter session of Parliament commenced on November 29 and is slated to end on December 23.

Replying to questions on cryptocurrency in Rajya Sabha today, Sitharaman said the new Bill takes into account the rapidly changing dimensions in virtual currency space and incorporates certain features of earlier Bill that could not be taken up.

‘Genuine intent’

She asserted that the government had “genuine intent” of introducing the Bill last time itself in the Monsoon session and that it would be incorrect to infer or conclude that the government would this time too not go ahead with enactment of law. “Once the Cabinet clears the new Bill, it will come into the House,” she said.

Sitharaman, however, did not indicate how the government intends to approach the issue of private cryptocurrency and whether the new Bill will look to ban private cryptocurrencies or not.

It may be recalled that a Bill on Cryptocurrency and Regulation of Official Digital Currency for introduction in the Lok Sabha had been recently included in the Lok Sabha Bulletin-Part II, as part of the government business expected to be taken up during the ongoing winter session.

According to the Lok Sabha Bulletin, the Bill seeks to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India (RBI) for the ongoing winter session of Parliament. It also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

Asked if the government proposes to ban misleading advertisements on cryptos in the media, she told the Rajya Sabha on Tuesday that the guidelines of Advertising Standards Council of India are being studied and their regulations are also being looked into “so that we can take, if necessary, some kind of position or a decision to see how we can handle it”.

In a written reply to a few questions on cryptocurrency posed by Rajya Sabha members, Sitharaman said cryptocurrencies including non-fungible tokens are unregulated in India and the government does not collect data on transactions in cryptocurrency.

Crypto frauds

She also revealed that as many as eight cases of cryptocurrency frauds are under investigation by the Enforcement Directorate. “Further disclosure of information may not be in larger public interest”, she added.

Sitharaman also said the government, RBI and SEBI have been cautioning people about the cryptocurrencies that could be a “high risk” area and “more can be done” to create awareness.

A study was conducted by the government through a research firm on ‘Virtual Currencies: An Analysis of the Legal Framework and Recommendations for Regulation’ in July 2017. Thereafter, the government constituted an inter-ministerial committee (IMC) in November 2017 under the chairmanship of the secretary (economic affairs) to study issues related to virtual currencies and propose specific action to be taken in this matter.

The committee, inter-alia, recommended that all private cryptocurrencies be prohibited in India. The panel also recommended that it would be advisable to have an open mind regarding the introduction of an official digital currency in India.

Meanwhile, Minister of State for Finance Pankaj Chaudhary, said in a written reply that RBI has been cautioning users, holders and traders of virtual currencies vide public notices on December 24, 2013, February 1, 2017, and December 5, 2017, that dealing in virtual currencies is associated with potential economic, financial, operational, legal, customer protection and security-related risks.

Also, the RBI had, in a circular dated May 31, 2021, advised the regulated entities to continue to carry out customer due diligence processes for transactions on virtual currencies, in line with the regulations governing standards for know your customer, anti money laundering, combating of financing of terrorism, obligations under the Prevention of Money Laundering Act 2002, he said.

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FM, BFSI News, ET BFSI

Banking & Finance

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As much as Rs 26,697 crore was lying in dormant accounts of banks, including cooperative banks, as on December 31, 2020, Finance Minister Nirmala Sitharaman informed the Rajya Sabha on Tuesday. This money is lying in nearly 9 crore accounts which have not been operated for 10 years.

As per information received from the Reserve Bank of India (RBI), as on December 31, 2020, the total number of such accounts in Scheduled Commercial Banks (SCBs) was 8,13,34,849 and the amount of deposits in such accounts was Rs 24,356 crore, Sitharaman said in a reply.

Similarly, she said, the number of accounts not operated for more than 10 years and the amount in such accounts with Urban Co-operative Banks (UCBs) was 77,03,819 and Rs 2,341 crore, respectively, as on December 31, 2020.

“The number of deposit accounts (i.e. public deposits matured but remaining unclaimed for 7 years including the year in which they have matured) and the amount in such accounts with Non-Banking Financial Companies (NBFCs) was 64 and Rs 0.71 crore, respectively as on March 31, 2021,” she said.

As per the instructions issued by the RBI to banks vide their Master Circular on “Customer Service in Banks”, banks are required to make an annual review of accounts in which there are no operations for more than one year, and may approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same.

“Banks have also been advised to consider launching a special drive for finding the whereabouts of the customers/legal heirs in respect of accounts which have become inoperative, i.e., where there are no transactions in the account over a period of two years,” she said.

Further, she said, banks are required to display the list of unclaimed deposits/ inoperative accounts which are inactive / inoperative for ten years or more on their respective websites, with the list containing the names and addresses of the account holder(s) in respect of unclaimed deposits/ inoperative accounts.

As regards action taken on deposits in such accounts, she said, pursuant to the amendment to the Banking Regulation Act, 1949 and insertion of Section 26A in the said Act, the RBI has framed the Depositor Education and Awareness Fund (DEAF) Scheme, 2014.

In terms of the Scheme, banks calculate the cumulative balances in all accounts which are not operated upon for a period of 10 years or more (or any amount remaining unclaimed for 10 years or more) along with interest accrued and transfer such amounts to the DEAF.

“The DEAF is utilised for promotion of depositors’ interests and for such other purposes which may be necessary for promotion of depositors’ interest as may be specified by the RBI. In case of demand from a customer whose deposit had been transferred to the DEAF, banks are required to repay the customer, along with interest if any, and lodge a claim for refund from the DEAF,” she said.

Replying to another question, she said, the RBI as per its master circular has authorised the board of each housing finance companies (HFCs) would adopt an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium and determine the rate of interest to be charged for loans and advances.

The rates of interest and the approach for gradation of risks, and penal interest has to be disclosed to the borrowers in the application form, and in the sanction letter besides making available on their website or published in the newspapers.

Further, HFCs have been advised to put in place an internal mechanism to monitor the process and the operations so as to ensure adequate transparency in communications with the borrowers.



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Dr. K.V. Subramanian, BFSI News, ET BFSI

Personal Finance

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India should focus on supply through reforms & capital expenditure to create assets in the economy, said Dr. K.V. Subramanian, Chief Economic Adviser, Government of India.

He was speaking about the three decades of 1991 economic reforms at the 3rd Global Finance Conclave organised by the Jindal School of Banking & Finance (JSBF) today.

Elaborating on how the economy has grown since 1991, Dr. Subramanian pointed out how the country handled the demand and supply line impact during the COVID-19 crisis. “Recognising that the COVID pandemic requires social distancing and lockdowns, it was obvious that not only would there be a demand side impact, but disruptions of the supply line chains too. While demand can actually be pushed up faster, it takes at least eight to 10 months for supply to increase. What India has done during this crisis, and I hope this will become an important macro-economic template that other countries and policymakers should study in terms of the policy response, is that India actually focused on the supply side – whether it is through the reforms or the capital expenditure. He added, “If you have an aggregate supply line not changing – you only have increasing demand. In macroeconomic terms, it means there will be a path to growth but inflation will go up as well. When inflation goes up, monetary policy has to try and unwind that demand. What you have then is the increase in demand that the fiscal policy did and the monetary policy tries to unwind it. So, you come back to square one, that push to growth that you got is a temporary one because monetary policy and fiscal policy work at cross purposes.”

The theme for the conclave is “India’s Growth Story from 1991 To 2021, And Beyond” to commemorate 30 years of the transformative 1991 reforms and to understand the challenges that need to be addressed as we slowly come out of a pandemic.

The Presidential address was by Dr. Shankar Acharya, Former Chief Economic Adviser and author of An Economist at Home and Abroad.”The once-in-century pandemic has had a major impact on the Indian economy. All indices like the GDP, unemployment, female participation in the labour force, fiscal deficit and debt were impacted. Lockdowns became a common policy during this time. This led to income/consumption losses creating a high vulnerability among the poorer sections of India. There will, however, be economic recovery even though there is still a high level of uncertainty due to the pandemic. The biggest impact has been on anon-agricultural informal sector. There have been significant policy initiatives over the last two years and they are a step in the right direction. If the effects of Covid-19 and other constraints on our medium term growth performance outweigh the reform intention, then it may lead to a period of modest growth over the next five years.”

Professor (Dr.) C. Raj Kumar, Founding Vice-Chancellor of O.P. Jindal Global University (JGU) in his inaugural address said, “The 1991 economic reforms created a new vision for India which not only impacted the economic sector and the society at large but it also created new opportunities for institution building. The idea of private higher education institutions with a view to improve the quality of education and promoting excellence is an outcome of the idea whose time had come. The reality was that though India has historically contributed to knowledge society globally, the contemporary evolution of Indian education at the dawn of Independence was limited. We only had 20 universities and today we have over 1000 universities and over 50,000 colleges. We strongly believe that there are critical elements to improving the quality of governance to improve higher education. This includes commitment to internationalization, advancing research, interdisciplinary learning, high quality faculty and equitable access to education for all. The economic reforms of 1991 that were ushered in the country led to other forms of reforms that further shaped the socio-economic future of India. Today, the National Education Policy 2020 has enormous implications with the potential of reimagining the future of Indian universities, creating an intellectual, political and social consciousness and political impetus for the improvement of higher education.”

Notable addresses were delivered by Dr. Amar Patnaik, and Dr Sasmit Patra, Members of Parliament, Rajya Sabha. Other eminent speakers at the Conclave include Ajit Pai, Distinguished Expert, Economic & Finance, Niti Aayog, Dr. Ashok K. Lahiri, Former Chief Economic Adviser, Government of India and Dr. PTR Palanivel Thiagarajan, Minister for Finance and Human Resources Management, Government of Tamil Nadu and Dr. Mukulita Vijayawargiya, Whole-Time Member of the Insolvency and Bankruptcy Board of India (IBBI).

The Global Finance Conclave will host 55 speakers including the current Chief Economic Advisor to the Government of India, 2 former Chief Economic Advisors and noted economists, 1 Minister of Finance and Human Resource Management (TN), 2 Members of Parliament (Rajya Sabha), 3 Members of State Legislative Assemblies, 1 Senior Expert from the NITI Aayog along with academics, economists, bankers and lawyers.

Dr. Ashish Bhardwaj, Professor & Dean, Jindal School of Business and Finance said, “The reforms of the 1990s changed the grammar of our country and the confidence of our people forever. Since the historic developments that happened 30 years, there is a need to reflect on the implications of India’s growth story from 1991 to 2021 and beyond. Understanding where we came from and how we emerged, will help us understand where to go from here and how to get there. Answers to these tough questions will emerge from deliberations in the Conclave. To a large extent, the fate of the world will depend on what India decides to do, how fast we do it, and how quickly we learn the lessons of the past.”

This story is provided by OP Jindal University. will not be responsible in any way for the content of this article.



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Why Factoring failed to address delayed payments for MSMEs and how recent amendments can help, BFSI News, ET BFSI

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The Factoring Regulation (Amendment) Bill, was recently passed by the Rajya Sabha to provide an efficient working capital cycle for micro, small and medium enterprises (MSMEs) and in turn provide a boost to the economy of the country. The amendment bill aims at expanding credit facilities for small businesses and access to funds from thousands of non-banking financial companies (NBFCs). The basic purpose of this bill is to make available the factoring service of well over 5000 NBFCs to the starved MSME sector where currently a lot of businesses are suffering due to lack of funds.

The change is marked to bring about a key legislation to make it easier for small businesses to monetize their receivables. The bill was tabled in September last year and was recently passed on 29th July, 2021. The amendment bill makes it easier for NBFCs to participate in the factoring business. It also removes the tedious requirement of an entity in this business to report factoring information within 30 days.

The 2011 Factoring Regulation Act allowed the Reserve Bank of India (RBI) to authorise NBFCs to remain in Factoring business only if that’s their main focus of the business and over 50% of their assets have been deployed and 50% of their revenue is earned from the factoring business. This bill aims at removing this threshold which will open new avenues in this business to more non-bank lenders at the current times of financial stress during the pandemic.

What is Factoring and why is it important?
Factoring is a transaction where the accounts receivables of an entity, known as the factor, is paid by another entity, known as the assignor. A factor can be a bank or an NBFC or any institution registered under the Companies Act. Factoring helps businesses to monetize its receivables quickly and tackle cash-flow problems conveniently and in time. This bill enables NBFCs and other companies to enter the factoring businesses and help small businesses survive during these difficult times. The move will help bring down the overall cost to acquire funds and empower small businesses to generate cashflows even at difficult times. The provision of liquidity to support MSMEs have been a key element of the government’s plans and policies to cushion the impact of the pandemic. Empowering the MSMEs is important because they are a major source of employment generation in the rural and urban areas.

Finance Minister Nirmala Sitharaman said, “Amending the Factoring Regulation Act, and changing the definition of “assignment”, “factoring business” and “receivables”, “will bring them in consonance with international definitions”, she further added, “The Bill seeks to provide a strong oversight mechanism for the factoring ecosystem, and will empower the Reserve Bank of India to make regulations with respect to factoring business”.

Currently due to the number of issues, the factoring credit constitutes only 2.6 percent of total formal SME credit finance in India. The estimate points out that only 10% of the receivable market is presently covered under the bill discounting system while the rest is covered under conventional cash credit overdraft arrangements with financial institutions. The delay in getting payments against their bills, the MSMEs struggle with working capital and it hampers with the efficient activity and functioning of the MSMEs and this bill aims to remedy just that.

Factoring and its growth in China
We already discussed factoring, but China adopted Factoring in a big way a decade ago and they are far ahead of the world as far as the number of MSMEs are concerned. They have adopted debtor financing where the company sells accounts receivables at a discount to clear current debts and seek capital for smooth functioning of the business. Banking and e-commerce sector has found this to be a sustainable business model across various industries.

Large companies, especially e-commerce, set up in-house financing or Factoring company as a subsidiary to fund and support thousands of small and medium enterprise clients, with huge amounts of receivables in the ledger. This dual layered model of factoring is called double factoring. Banks finance the subsidiaries which are a separate entity from the company being funded within the umbrella.

Double factoring helps suppliers meet their immediate credit and cash flow needs and increases the asset liquidity of the in-house factoring entities. The costs of funding reduces significantly from that of a bank and proves beneficial in the long run.

Conclusion
Factoring is an important step towards stabilizing the economy in current times. NBFCS can come to the aid of the cash-starved MSMEs and help them with their financing needs.

In the current environment where access to finance is critical to jumpstarting economic growth, the Factoring Regulation Bill may play a key role in bridging the gap and helping Indian businesses push forward into 2022.

In the past, in other countries, what we’ve seen is that a more liberalized approach to factoring takes the pressure off lending institutions – this means more access to capital for the businesses that need it. In the long term, the implications here are clear. The Factoring Regulation Bill isn’t just going to help businesses come out of the pandemic induced crisis situation. As we move into the next decade, the enhanced access to capital will help Indian businesses drive consistent economic growth.

(The writer is Co-founder, Cashinvoice)



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Now, depositors can withdraw up to ₹5 lakh if bank placed under moratorium

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Parliament has given its approval to a Bill to amend the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

The amendment to the Act will enable depositors to access their deposit up to sum prescribed under deposit insurance, which is ₹5 lakh, in case the bank is placed under moratorium, and that too within 90 days. The Rajya Sabha gave its nod to this Bill last week and on Monday, Lok Sabha cleared it. Now, the Bill will be sent to the President for his assent post which it will become law.

New DICGC Bill will take care of PMC depositors’ woe: FM

Depositors of PMC Bank are likely to be covered under the new mechanism.

As of now, depositors have to wait for liquidation or passage of resolution to get the benefit of deposit insurance. This takes 8-10 years. Now, this will not be the situation. Finance Minister Nirmala Sitharaman has already said that payment is to be made within 90 days. “First 45 days will be taken by the banks for collecting the information and next 45 days for checking. Then on 91st or 92nd day or around that, payment will be made,” Sitharaman had said while announcing the Cabinet decision on July 28.

PMC Bank receives 1,229 applications for deposit withdrawal

Last year, the Government raised the deposit insurance to ₹5 lakh from ₹1 lakh. Sitharaman said that with this, 98.3 per cent in terms of number of deposit accounts and 50.9 per cent in terms of deposit value will be covered. Globally, these numbers are 80 and 20-30 per cent respectively.

Time-bound access

This Bill is a follow-up to the Budget announcement. Finance Minister had said that amendments to the DICGC Act would aim to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover.

According to the legislative agenda prepared for the Monsoon session, the purpose of this Bill is to instil confidence in depositors about the safety of their money. The objective is to enable depositors access to their savings through deposit insurance in a time-bound manner in case there is suspension of banking business of the insured bank under various provisions of the Banking Regulation Act, 1949.

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Around 1.09 crore MSME borrowers gets guarantee support under ECLGS, BFSI News, ET BFSI

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New Delhi, Jul 19 () Around 1.09 crore MSME borrowers have been provided with guarantee support amounting to Rs 1.65 lakh crore as of July 2 this year under the Emergency Credit Line Guarantee Scheme (ECLGS), Parliament was informed on Monday. The scheme is part of the Aatmanirbhar Bharat Abhiyaan package announced by the government to mitigate the distress caused by the lockdown due to COVID-19 by providing credit to different sectors, especially MSMEs.

“As part of the Aatma Nirbhar Bharat Abhiyaan, under the ECLGS, around 1.09 crore MSME borrowers have been provided with guarantee support amounting to Rs 1.65 lakh crore as on July 2, 2021,” MSME Minister Narayan Rane said in a written reply to the Rajya Sabha.

In another reply, he also said that as of July 2, 2021, an amount of Rs 2.73 lakh crore has been sanctioned under the scheme, of which Rs 2.14 lakh crore has been disbursed. RR BAL



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Dhotre, BFSI News, ET BFSI

Banking & Finance

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Over 2.9 lakh cyber security incidents related to digital banking were reported in 2020, Parliament was informed on Thursday. As per the information reported to and tracked by Indian Computer Emergency Response Team (CERT-In), a total number of 1,59,761; 2,46,514 and 2,90,445 cyber security incidents pertaining to digital banking were reported during 2018, 2019 and 2020, respectively, Minister of State for Electronics and IT Sanjay Dhotre said in a written reply to the Rajya Sabha.

These incidents included phishing attacks, network scanning and probing, viruses and website hacking, he added.

The Minister noted that the rising popularity of non-banking financial companies (NBFCs) along with e-commerce has also expanded the scope of digital payments.

“The percentage rise in digital transactions is 46 per cent in 2020 in comparison to 2018-19,” he said.

The numbers of digital transactions have increased from 3,134 crore in the financial year (FY) 2018-19 to 4,572 crore in FY 2019-20, Dhotre added.

Responding to a separate query, the minister said the number of websites/webpages/accounts blocked stood at 9,849 in 2020.

This was 2,799 in 2018 and 3,635 in the year 2019.

He said Section 69A of the IT Act empowers the government to block any information generated, transmitted, received, stored or hosted in any computer resource in the interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign states or public order.

In response to another question, Dhotre said 6,233 cases were registered in 2019 under fraud and cheating (involving communication devices as medium/ target as per Information Technology Act 2000), as per National Crime Records Bureau (NCRB) data.

“As per NCRB, number of cases registered under fraud and cheating (involving communication devices as medium/ target as per IT Act 2000) for cyber crimes are 3,466, 3,353, 6,233 during the year 2017, 2018 and 2019, respectively,” he added.



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