Welcome to Bon

Knowing the Credit Rating Agencies & Credit Bureaus in India

Introduction

SEBI (Credit Rating Agencies) Regulations, 1999 (as amended up to December 27, 2011) regulate Credit Rating Agencies (CRAs) in India. The global analytics company CRISIL is the foremost rating agency in India, providing rating services across sectors. As reported by Centrum Broking (considering its Q4 2018 research figures), CRISIL tops with a revenue market share of approximately 30%. The following two CRA revenue market share spots are claimed by CARE with 28% and ICRA with 21%.

Continue reading “Knowing the Credit Rating Agencies & Credit Bureaus in India”

Financial Inclusion & Financial Stability: National & International Frameworks

“If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.” – Charles Darwin

The realisation of Sustainable Development Goals (in particular, SDG’s Goal 1—No Poverty) set by the United Nations (UN) requires giving considerably stringent attention and concerted efforts also to financial inclusion. In 2004, the Khan Commission was setup by the Reserve Bank of India (RBI) to explore Financial Inclusion. The recommendations of the commission were included in mid-term policy review (and so arrived the advent of simplified banking accounts).

Continue reading “Financial Inclusion & Financial Stability: National & International Frameworks”

GPFI 2019 Japan: Elderly Financial Inclusion & India

The Global Partnership for Financial Inclusion (GPFI), launched in 2010, carries the mission of ensuring comprehensive financial inclusion. The platform for the G20 countries, non-G20 countries and pertinent stakeholders also aims to execute the G20 Financial Inclusion Action Plan (readied at the G20 Summit in Seoul). The Germany GPFI Presidency in 2017 was held with the theme, “Sustainable and Responsible Financial Inclusion of Forcibly Displaced Persons.” In 2018, the Argentina GPFI Presidency was held with the theme, “Building Consensus for Fair and Sustainable Development.” Building on the German and Argentina themes, in 2019, the Japan GPFI presidency fulfils the troika (of immediately preceding, present, and future presidency nations) of GPFI partnerships with the theme, “Aging and Financial Inclusion.” The G20 Leaders’ Summit 2019 will be held on June 28 – 29 in Osaka, Japan. Financial inclusion is essential for elevating livelihoods of the deprived and the elderly population. Continue reading “GPFI 2019 Japan: Elderly Financial Inclusion & India”

India on the World Bank Global Findex

The World Bank Global Findex

The Bill & Melinda Gates Foundation-funded Global Findex (GF) database is the benchmark for “Measuring Financial Inclusion and the FinTech Revolution.” Published first in 2011 by the World Bank (WB), the Global Findex is the comprehensive global database depicting the adult behaviour pertaining to saving, borrowing, payments, and risk management. The Global Findex data is collated in association with Gallup, Inc. (a global analytics and advice firm), comprising detailed survey insights of over 150,000 adults in 140 economies. The latest Global Findex is the 2017 edition (published in April 2018), including revised indicators on reception to and utilisation of official and casual financial services. Also included is the new data on the utilisation of FinTech (mobile phones and the internet to initiate financial transactions).

Continue reading “India on the World Bank Global Findex”

FinTech Valley: The Vizag Agenda

FinTech Valley Vizag (launched in Visakhapatnam on 17 December 2016) is a global FinTech Ecosystem focusing on converging finance and technology for generating massive growth prospects via industry facilitators, exceptional infrastructure, and innovative entrepreneurship. It is an ambitious initiative of the Government of Andhra Pradesh (India) to endorse business infrastructure, and draw investors and MNCs to open offices in the state. In September 2016, the Chief Minister of Andhra Pradesh released the ambitious document titled ‘Sunrise Andhra Pradesh Vision 2029’ carrying the blueprint of the growth trajectory for the state.

Endeavouring to be a “happy and globally-competitive society” by 2029, the Andhra Pradesh state, as stated in the vision statement, envisages transforming into an inclusive, accountable, and competitively innovative society. Initiating structural transformations and committing to sustain high economic growth, the state government of Andhra Pradesh placed FinTech as the epicentre of focus to create an ecosystem of digital banking, financial analytics, cybersecurity, and blockchain (database) technology. Among the various promising initiatives taken under the auspices of the FinTech Valley Vizag, the two initiatives pertaining to the FinTech ecosystem are: 1. The Andhra Pradesh – Purse mobile wallet offering 13 mobile banking and 10 mobile wallets for transactions. 2. The Marpu Nestam—an incentivised setting of agents for educating people on digital financial literacy.

Following the FinTech Spring Conference (March 2017) and Blockchain Business Conference (October 2017), the successful 5-day Vizag FinTech Festival (22—26 October 2018) directed towards GovTech (technological advances fostering invisible government, visible governance), BankTech (future of banking, investments and payments), InsurTech (technology enablers in insurance), EmergeTech (emerging technologies: AI, Cybersecurity, Blockchain, IoT, & Big Data), and Financial Inclusion (increased access to financial services for the underserved) was organised to set the good governance and inclusive growth agenda right for 2022. According to J.A. Chowdary, Special Chief Secretary & IT Adviser to the Andhra Pradesh government, under the auspices of the Vizag FinTech Festival, 25 out of a total of 40 startups were shortlisted for participating in the finale of $1-million FinTech Challenge.

Notably, the Andhra Pradesh government’s accord with FinTech Association of Hong Kong is aimed at utilising Hong Kong’s FinTech ecosystem and developing an Andhra Pradesh—Hong Kong entrée for FinTech startups and knowledge transfer.

Given the incumbent and future ambience of FinTech ecosystem in India—with 1 billion smartphone users by 2020, FinTech market projected to reach $2.4 billion, 600+ operational FinTech startups, massive growth potential in digital banking, government support (Startup India initiative), and a CAGR of 22%—such promising initiatives like the FinTech Valley Vizag should also be modelled in other promising IT & Financial hub states such as Karnataka, Maharashtra, and Gujarat. An entire ecosystem of such promising initiatives can lead to winningly achieve the aspired financial inclusion objectives. This milieu can make the dream of India ideally transforming into a digitally smart nation a resounding reality.

RBI & the Central Bank Digital Currency

Paper and metal printed currencies often referred to as “fiat money, is a government-issued currency that is not backed by a physical commodity, such as gold or silver”—Investopedia. Digital currency is essentially a form of intangible currency offered in digital form. It makes possible immediate transactions and ownership transfer across geographies.

The good old paper currency has been in vogue since long, with the stability of the respective governments maintaining its value. It is worth noting that it is not possible to convert these paper currencies. The central banks have also often been expressing their concern in regards to printing costs and management of paper and metal currencies.

As an alternative, of late, the Reserve Bank of India (RBI), following consultation with the Monetary Policy Committee (MPC), had expressed its intention of issuing a central bank digital currency (CBDC). For the same reason (as informed in the Reserve Bank’s Annual Report 2017-18), an interdepartmental group was formed to study and offer consultation on the requisites and viability of launching a centrally backed (fiat) digital asset. The logic, as stated by the RBI, was to control and minimise the elevating cost of printing paper (fiat) currency. Paradigm shifts experienced lately in the payments industry has directed the interests of the central banks to act proactively in this sphere. RBI opines that a (fiat backed) digital currency will, apart from minimising its bills of printing paper currency, also place the economy in a global spotlight of the digital currency world.

However, all of this is easier said than actually done. The banking watchdog realised later that the user-dependent value of cryptocurrencies and the volatile nature of it pose an imminent risk in using it as value storage or exchange medium. Entrusted with the task of ensuring enough safeguard for the investor community and protection of the consumers, RBI also acknowledged the cryptocurrency market bubble possibilities. This retreat was also an outcome of the ban on cryptocurrency exchanges in India imposed by the RBI. What followed this was the phase when the RBI totally cancelled (as reported by the Hindu Business Line) its idea to launch a CBDC.

Experts opine that RBI’s of late distrust (postponement of issuing a national cryptocurrency) for central bank digital currency also emanates from the limited comprehension of the cryptocurrency economy. For this, as suggested by industry practitioners, it is crucial to monitor the maturing sphere of the peer-to-peer economy. There is also a dire need to first prepare a comprehensively meticulous policy development framework for digital currency and blockchain technology (the facilitator of digital cryptocurrency).