Payment banks for inclusion

Ihave been in many conferences about financial inclusion that identified the lack of a geographically deep and wide, efficient, low-cost and safe payments system as the starting point of financial exclusion. And every round table, every conference would end up bashing the banking regulator after, of course, a quick look round the room to ensure that nobody from the Reserve Bank of India (RBI) was there. What do mobile operators who offer e-wallets and other prepaid payment instruments (PPIs) want? Freedom from banks has been one of the core demands. A non-bank payment entity, such as a mobile wallet or a PPI company, is forced to tie up with a bank to provide the cash-out facility. This has its own set of issues in terms of cost and lack of protocols for this part of the market.

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Don’t wait till you get to the hospital to buy medical cover

I met a colleague recently who’d been out for a week. Holiday, I asked with just the right note of envy in my voice. Nope, he said, medical emergency—mum had a stroke. And then he cracked up. All through the hospital stay, he said, he was replaying what I would keep telling him—get a medical cover. He said he meant to but kept putting it off. He was also banking on the workplace cover he thought covered him and his dependants. But he realised at the hospital that the company, in an austerity move, had reduced the cover to his nuclear family and chucked out his dependent parents from the group cover. He dipped into his savings, of course. But the thought that the entire expense running into several lakh rupees could have come out of a policy left him really upset. It’s like discovering you’ve forgotten your mobile charger just as you step into the aircraft for a week-long trip, he said. It’s that oh-shoot moment in your life.

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A handbook for regulators and cracks in the wall

The Financial Sector Legislative Reforms Commission (FSLRC) has written the grid of a brand new regulatory structure. With 16 Acts of Parliament to be repealed and 50 Acts to be amended for the Indian Financial Code (IFC) to become a reality, the political journey ahead is complicated. The ministry of finance took a pragmatic view and used the meeting ground of regulators, the Financial Stability and Development Council (FSDC), to build consensus about implementing those parts of the IFC that need no legislative changes. The eighth FSDC meeting, held on 24 October 2013, approved 12 areas that each regulator will work on to make them IFC-complaint. These include consumer protection, framing regulations, notices, transparency in board meetings, reporting, approvals, investigation, adjudication, imposition of penalties and capacity building. They agreed that these should be implemented quickly. Two months later, on 26 December 2013, the ministry uploaded a handbook that gives guidance to the regulators to help implement these steps with the idea that there should be regulatory harmony so that market failures that occur due to regulatory blind spots, regulatory arbitrage and turf wars are reduced.

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Banks fight to stay irresponsible

Theoretically, it makes perfect sense. Banks have the branches—all 88,562 of them—across the length and breadth of India. Insurance companies find distribution tough through individual agents. Bank customers largely trust their banks in India. Put all three in a box and shake, and you have the bancassurance model, where insurance companies tie up with banks so that banks can cross-sell insurance policies to their existing customers—that is, you and me. So why’s there a bad smell around bancassurance and why has it taken a nudge from the ministry of finance to push the banks to become brokers?

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