Vision 2021 Payment and Settlement System:
The Vision 2021 payment and settlement system in India is built on the core theme of Empowering Exceptional (E) Payment Experience. It seeks to empower every Indian with access to a bouquet of e-payment options that is safe, secure, convenient, quick and affordable
- enhancing the experience of Customers;
- empowering payment System Operators and Service Providers;
- enabling the Eco-system and Infrastructure;
- putting in place a Forward-looking Regulation;
- supported by a Risk-focussed Supervision
Vision 2021 concentrates on a two-pronged approach of
- exceptional customer experience;
- enabling an eco-system which will result in this customer experience
The Vision envisages four goal-posts (4 Cs) –
- Competition: For enhancement of Competition in the payment systems landscape, specific thrust areas like creating regulatory sandbox, authorising new players, etc., have been incorporated
- Cost: this along with the presence of multiple players in the market is expected to achieve optimal Cost for the customers
- Convenience: freer access with availability of multiple payment system options anytime-anywhere should cater to the requirement of Convenience
- Confidence: the ‘no-compromise’ approach towards safety of payment systems should address security vulnerabilities to retain customer Confidence
The four goal-posts of Vision 2021 with 36 specific action points over the 36-month timeframe will have the following 12 specific outcomes:
- Further decrease in the share of paper-based clearing as a percentage of retail payments, particularly in terms of number of paper instruments processed.
- Accelerated growth in individual retail electronic payment systems, both in terms of number of transactions and increased availability
- Measurably, the digital payment transaction turnover vis-à-vis GDP (at market prices-current price) is expected to further increase to 10.37 in 2019, 12.29 in 2020 and 14.80 in 2021. Payment transaction turnover, including CCIL transactions and paper, is expected to be 22.30 times the GDP (at market prices-current price) by December 2021
- Increase in use of digital modes of payment for purchase of goods and services through increase in debit card transactions at PoS and continued growth in PPI transactions
- Usage of debit cards at PoS transactions is expected to be at least 44 % of total debit card transactions (at PoS + ATM).
- Increased deployment of card acceptance infrastructure across the country including at smaller centres with a substantial portion of the infrastructure taking care of processing contactless card payments
- The enhanced availability of PoS infrastructure is expected to reduced demand for cash and thus over time achieve reduction in Cash in Circulation (CIC) as a percentage of GDP.
- Further facilitation of mobile based payment transactions as gauged on basis of the registered customer base (expected increase of 50 % considering the base effect).
- Enhanced usage of electronic payment systems is expected to reduce the marginal cost given the additional volume. The pricing of such services to customers should, over the vision period, show reduction of at least a 100 bps from current levels.
- Security of systems and customer centricity as reflected by –
Decrease in Technical Declines reported across various payment systems by 10 % year-on-year.
Reduction in Business Declines reported across various payment systems by 5 % year-on-year.
Improvement in Turn Around Time (TAT) for resolution of customer complaints by PSOs.
- FTS [Fraud to Sales (Fraud value / Sales value) x 10000] count for payment systems is expected to be less than 10 bps for most of the payment systems
- Enhanced healthy competition in the payments space and establishment of new PSOs during the Vision period is envisaged
U.K. Sinha Committee on MSME’s Economic and Financial Sustainability
A Reserve Bank of India (RBI) committee has suggested a ₹5,000 crore stressed asset fund for domestic micro, small and medium enterprises (MSMEs) in relief to small businesses hurt by demonetization, the goods, and services tax and an ongoing liquidity crunch.
- The committee to study the problems faced by MSMEs was chaired by U.K. Sinha, former chairman of the Securities and Exchange Board of India.
- The RBI had constituted the committee in January to review the current framework for MSMEs and suggest long-term solutions for their economic and financial sustainability.
- Distressed asset fund structured to assist units in clusters where a change in the external environment, e.g. a ban on plastics or ‘dumping’ has led to a large number of MSMEs becoming non-performing assets (NPAs).
Other important recommendation
- The panel said that instead of making MSMEs register with various authorities, the permanent account number (PAN) should be made sufficient for most of their activities.
- It recommended an amendment to the MSMED Act, 2006, requiring all MSMEs to mandatorily upload all their invoices above an amount to be specified by the government, from time to time. This mechanism will entail automatic display of names of defaulting buyers, and also act as moral suasion on buyers to release payments to these suppliers
The report pointed out that small industries faced problems of delayed payments and were reluctant to enforce legal provisions available to them under the MSMED Act due to their low bargaining power.
- The private sector should be incentivized by tax breaks or bonds to help MSMEs build skill sets in areas like product development, technology adoption, and marketing strategy.
The private sector’s contribution to the segment, the committee noted, was minuscule, but the research and development facilities they possessed could be of enormous value.
- The committee suggested that the PSBLoansIn59Minutes Portal should also cater to new entrepreneurs, who might not necessarily possess information, including GSTIN, income-tax returns, and bank statement.
- On restructuring MSME accounts that have turned sour, the committee said an MSME account could be considered for an upgrade to “standard” after six months of satisfactory operation, instead of the current norm of one year. The account must also have additional equity in the business or a new source of cash flow.
The RBI had announced a one-time restructuring scheme for MSMEaccounts in January, but the scheme is basically for accounts that are still standing.
- The committee has also recommended banks that wish to specialize in MSME lending, their sub-targets for farm loans under the priority sector lender could be waived off and instead can be given a target for loans to the SME sector.
The targets, the committee said, could be of 50% of the net bank credit for universal banks and 80% for small finance banks.
At present, the overall priority sector lending target for a universal bank is 40% of their net bank credit and 75% for small finance bank.
- Commercial banks have been suggested that they should develop customized products to assess the financing requirements based on expected cash flows moving away from traditional forms of assessment.
- The committee recommends expanding the role of SIDBI, the apex body responsible for the development of the MSME sector.
SIDBI should deepen credit markets for MSMEs in underserved districts and regions by handholding private lenders such as non-banking financial companies (NBFCs) and microfinance institutions (MFIs).
Further, they must develop additional instruments for debt and equity, which would help crystallize new sources of funding for MSMEs and MSME lenders.
- The committee has recommended a government-sponsored ‘fund of funds’ of Rs 10,000 crore to support the venture capital and private equity firms investing in the MSME sector on modified term sheets developed by SIDBI.
Other suggestions of the committee include;
- Introduction of adjusted priority sector lending (PSL) guidelines for banks to specialize in lending to a specific sector.
- Doubling the collateral-free loan limit to Rs 20 lakh.
- Revision in loan limit sanctioned under MUDRA by the Finance Ministry to ₹20 lakh from ₹10 lakh.
- Providing insurance coverage to MSME employees by the government.
This live session will be a Revision Class, wherein, I am going to discuss all the important Government Schemes launched in the year 2018-19. These Schemes are important from the RBI, SEBI, and UPSC Examination point of view. So, watch the session until the end.
Live Session Starts today at 5:00 PM
Live Session Link: https://www.youtube.com/watch?v=HeZyUaQHlbw
Key Announcements Of Union Budget 2019-20:
- PAN and Aadhaar will become interchangeable. One can use your Aadhaar number to file I-T Returns soon
- Rs 5 lakh minimum limit announced for taxpayers.
- 3% surcharge hike on an income of Rs 2 crore and 7% on Rs 5 crore and above
- Corporate tax with turnover of up to Rs 400 crore slashed to 25 per cent from a current rate of 30 per cent
- MDR charges waived on cashless payment
- Fiscal deficit in FY 19 at 3.3% of the GDP
- GST rate on electric vehicles lowered to 5%
- Nari tu Narayani: Women SHG Interest Subvention Programme to be expanded to all districts in India
- Rs 1 lakh loan to be provided for SHG women members under Mudra Scheme
- Additional income tax deduction of Rs 1.5 lakh on interest on loans taken to purchase electric vehicles
- Additional deduction of Rs 5 lakh on loans up to March 31 2020 for buying affordable houses, giving Rs 7 lakh benefit to home buyers.
- To provide Aadhaar cards for NRIs with Indian passports, after their arrival in India, with no waiting period.
- Rs 20 coin coming up
- Regulation of HFCs (Housing Finance Cos) to move to RBI from National Housing Bank
- Excise duty on fuel hiked by Rs 1
- To resolve the angel tax issue, startups will not be subject to any scrutiny in respect to valuation. Funds raised by startups will not require any scrutiny by the I-T department.
- TDS of 2% on cash withdrawals exceeding Rs 1 crore in a year from bank accounts, to discourage business payments in cash.
- Period of exemption for capital gains arising from sale of house for investment in startups to be extended to March 31, 2021
- Rs 70,000 crore in recapitalisation for public sector banks
- Rs 1.05 lakh crore disinvestment target for the year.
- TV channel to be launched for promoting startups and to help matchmaking for funds
- Rs 50 lakh crores proposed for Railway infrastructure
- By 2022, the 75th year of Independence, every single rural family, except those who are unwilling to take the connection, will have electricity and clean cooking facility
- The pension benefit will be extended to 3 crore retail traders under PM Karam Yogi Maan Dhan Scheme. It requires only Aadhaar numbers and bank accounts
- Rs 1 crore worth of loans proposed to MSMEs
- 2% interest subvention for GST-registered MSME on fresh or incremental loans
- Investment by FIIs and FDIs in debt securities in infrastructure debt funds to be allowed. Minimum public shareholding in listed companies can be increased from 25% to 35%
- Global Investors Meet to happen in India
Principles of Risk Management
Various organizations have laid down principles for risk management. There are risk management principles by International standardization Organization and by Project Management Body of Knowledge.
The Project management body of knowledge (PMBOK) has laid down 12 principles. This article carries an amalgamation of both PMBOK and ISO principles. The various principles are:
- Organizational Context: Every organization is affected to varying degrees by various factors in its environment (Political, Social, Legal, and Technological, Societal etc). For example, an organization may be immune to change in import duty whereas a different organization operating in the same industry and environment may be at a severe risk. There are also marked differences in communication channels, internal culture and risk management procedures. The risk management should therefore be able to add value and be an integral part of the organizational process.
- Involvement of Stakeholders: The risk management process should involve the stakeholders at each and every step of decision making. They should remain aware of even the smallest decision made. It is further in the interest of the organization to understand the role the stakeholders can play at each step.
- Organizational Objectives: When dealing with a risk it is important to keep the organizational objectives in mind. The risk management process should explicitly address the uncertainty. This calls for being systematic and structured and keeping the big picture in mind.
- Reporting: In risk management communication is the key. The authenticity of the information has to be ascertained. Decisions should be made on best available information and there should be transparency and visibility regarding the same.
- Roles and Responsibilities: Risk Management has to be transparent and inclusive. It should take into account the human factors and ensure that each one knows it roles at each stage of the risk management process.
- Support Structure: Support structure underlines the importance of the risk management team. The team members have to be dynamic, diligent and responsive to change. Each and every member should understand his intervention at each stage of the project management lifecycle.
- Early Warning Indicators: Keep track of early signs of a risk translating into an active problem. This is achieved through continual communication by one and all at each level. It is also important to enable and empower each to deal with the threat at his/her level.
- Review Cycle: Keep evaluating inputs at each step of the risk management process - Identify, assess, respond and review. The observations are markedly different in each cycle. Identify reasonable interventions and remove unnecessary ones.
- Supportive Culture: Brainstorm and enable a culture of questioning, discussing. This will motivate people to participate more.
- Continual Improvement: Be capable of improving and enhancing your risk management strategies and tactics. Use your learning’s to access the way you look at and manage ongoing risk.
WHAT SHOULD BE READ FROM THE ECONOMIC SURVEY?
The answer is really simple. Go through your ESI and FM syllabus and identify the topics which have a current/factual/data orientation and date pertaining to which can be found in the Survey.
The list of such topics is as follows:
Measurement of growth: National Income and per capita income Poverty Alleviation and Employment Generation in India Sustainable Development and Environmental issues Industrial and Labour Policy Monetary and Fiscal Policy Balance of Payments Export-Import Policy WTO Demographic Trends Urbanization and Migration Gender Issues Social Justice : Positive Discrimination in favor of the under privileged Human Development Social Sectors in India Health and Education The Union Budget – Direct and Indirect taxes; Non-tax sources of Revenue GST Thirteenth Finance Commission and GST, Finance Commission Fiscal Policy Fiscal Responsibility and Budget Management Act (FRBM), Inflation: Definition, trends, estimates, consequences, and remedies (control): WPI, CPI – components and trends. Latest trends, latest data, latest committees, latest terms and phrases, etc related to all the above topics can be found in the Survey.
More Resources at -- https://www.facebook.com/rbigradebcoachingbydassir/
IMPORTANT TOPIC FOR RBI GR B 2019 EXAM
Forward Markets Commission (FMC)
What are forward markets?
‘Forward’ or ‘Futures’ are contracts for commodities that are traded at futures exchange similar to shares, but here, actual physical goods are traded. Futures/forwards contracts are traded on foreign currencies and interest rates also. The commodities that are traded in futue contracts are corn, crude oil, silver, gold, etc. There are certain benefits of these futures trading :
This hedges the participants against price risk(fluctuation in prices influenced by ecological, political or economic factors)
Commodity exchanges help in production(farmers observe the price trends and decide which product to cultivate and in what amount) as well as procurement planning(for industries which buy agricultural products as raw materials).
It enables the participation of various informed industry participants, which allow for efficient price discovery, discounting the local and global factors.
What was the NSEL Crisis?
National Spot Exchange of India (NSEL), an electronic trading platform where producers and traders could buy and sell agriculture and industrial commodities. NSEL had permitted bidding greater than the underlying assets and for longer durations than its mandated T+10=11 days duration. Therefore, a payment crisis at NSEL. Dues went unpaid to the tune of Rs. 5,600 crore.
The NSEL was being regulated by APMC(Agricultural Produce Market Committee) because it was a spot exchange not a futures exchange. But, it was acting as a futures exchange in violation of the rules without proper margin and settlement systems in place.
Therefore, after this crisis FMC is brought under finance ministry from Consumer affairs. This follows the logic that – regulations for commodities and stocks are similar since both are securities and involve trading of underlying assets.
forward market commission
Let us study the details about the FMC now:
The Forwards Market Commission is a statutory entity which is involved in monitoring and regulating the operations, activities of the Commodities futures market in India.
It is setup under the Forward Contracts (Regulation) Act of 1952.
FMC has its headquarters in Mumbai and a regional office in Kolkata.
It earlier functioned under the Ministry of Consumer affairs, this was prior to the NSEL crisis. Now it functions under the Department of Economic Affairs of Ministry of Finance.
Objectives of Forward Markets Commission (FMC):
The Forward Markets Commission (FMC), is the chief regulator of the Forwards and Futures market in the country. The Commission gives regulatory insights to ensure financial integrity, and market integrity. It works towards protecting and promoting the interest of consumers or non-participants.
The FMC assesses the market situation and takes into account the recommendations made by the Commodity exchanges for prescribing the rules and regulations of the Exchange. The Commission accords permission for conducting trade in distict contracts, while monitoring the market conditions continuously. It takes remedial measures wherever necessary to impose regulatory measures.
According to the Forward Contracts(Regulation) Act,1952 the commission should comprise of 2 members and a Chairman. These all three are appointed by the Central government. Generally, the Chairman is a member of the Indian Administrative Services and the members are from the Indian Economic Services.
Functions of FMC:
Forward Market Commission functions as a sole institution governing the commodities market in India. It executes a variety of roles.
It counsels the Central Government for matters regarding recognition or withdrawal of the previously accorded recognition from any of the registered association.
It also provides advice on any other matters that arise as a result of the administration of the Forward Contracts (Regulation) Act 1952.
FMC provides suggestions to uplift and improve the functioning of the Commission as well as the Futures markets.
The Commission can cross-check and inspect the accounts as well as any other documents of the registered associations and their members.
It keeps a vigil on the Future commodities market and also exercises its discretionary powers in the interest and growth of the markets and consumers.
FMC is mandated to source, collect and publish the information about trading conditions for various commodities covered under the purview of the governing act. These details are generally about the demand, supply and prices.
There are 22 exchanges in the country. Out of these twenty two, there are 6 National level exchanges involved in the Forward Commodity trading in India. These important six national exchanges are:
MCX (Multi-commodity Exchange of India Limited) located in Mumbai.
NCDEX (National Commodity and Derivatives Exchange Limited) situated in Mumbai.
NMCE (National Multi-commodity Exchange of India Limited) located in Ahmedabad.
ICEX (Indian Commodity Exchange Limited) based in New Delhi.
ACEINDIA (Ace Derivatives and Commodity Exchange Limited) located in Mumbai.
UCX (Universal Commodity Exchange Limited) located in Navi Mumbai www.facebook.com/groups/rbi.grade.b.prelim.main
Hello Everyone, I have come up with a new series for RBI Grade B 2019 Examination. In this Daily RBI Series, I will be discussing some topics or MCQs on different topics important from the Examination point of view. So, today I am discussing MCQs related to Government Scheme.
Purchasing Power Parity (PPP)
It states that the exchange rate of a currency with another (currency) is in equilibrium when their domestic purchasing power are equivalent at that exchange rate.
It means that a good should cost same in India and USA after considering the exchange rate of Indian Rupee (INR) and US Dollar (USD).
Suppose, the current exchange rate of Indian rupee to US Dollar is Rs. 60 perUSD (i.e., 1 USD = Rs. 60). Now suppose a laptop costs Rs. 60,000 in India.
According to the PPP theory, the laptop should cost USD (60,000 / 60) = USD 1,000 (considering the current exchange rate of these two currencies) to maintain parity in purchasing power of these two currencies.
But, it may happen that the actual market price of the laptop in USA is USD 800 (say) (equivalent to Rs. 48,000 in India). Therefore, there is an advantage of buying the laptop in USA at much less price than India (Rs. 12,000 less) (it means that the purchasing power is not in parity between these two currencies)
Indian consumers will go to the exchange office and sell their INR and buy USD, and then buy the laptop from USA. It will cause the Indian currency less valuablethan the US dollar.
The demand of laptop sold in India will decrease (since high price), and the priceof laptop will go down. In contrast, the demand of laptop in USA will increase, and the price will rise accordingly.
These factors will cause the exchange rate (of the currencies) and the prices (of laptops) to change such that there is purchasing power parity in both the currencies.
PPP theory tells us that the price differences between countries are not sustainable in the long run, as market forces will equalize prices between the countries and change the exchange rates accordingly.
(Relate the above example with companies that can buy goods in much less price from foreign countries and sell in much less price in India than its counterparts. For this reason, there are several laws or restrictions on imports and a provision of levying customs duty, etc.)