ARTICLE 21 AND EUTHANASIA - Business Guardian
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The word Euthanasia originated from Greek origins “eu” that denotes “well” or “good” in addition to “Thanatos” which denotes “death”, so in essence Euthanasia signifies good death.

It basically indicates a deliberate termination of someone’s life by someone else at the clear request of the individual who wants to die. In practice, it involves the action of killing an individual who is ill and not curable out of care and compassion for that individual’s agony. Some even call it ‘mercy killing’. Merriam Webster defines Euthanasia as the action of killing or letting a hopelessly ill individual die in a comparatively pain free method for merciful intentions. Black’s Law Dictionary has a similar definition stating it to be the action of killing or causing death of an individual suffering from an ailment that isn’t curable, specially an agonizing one for merciful aims. Right to die has continually been a contentious subject globally. Article 21 of the Indian constitution states that “no individual should be deprived of life or personal freedom except in accordance with legally prescribed procedures”. The term liberty is the appreciation and attainment of choice and the attributes that go with that choice and the word life denotes the aim to have the same in a dignified way. Both of these are intertwined. Liberty permits people the space to reflect and perform without constraint and life deprived of liberty would be a pointless existence. Courts have included different aspects to

Right to life like right to have a respectable existence, right to food, to get adequately educated, to have a clean environment, to get adequate shelter, privacy and numerous different rights to allow people to enjoy a better and a more fruitful life.



This generous dealing of Article 21 by the courts could be owed to the judiciary’s appreciation of the principle that constitutional provisions should be interpreted not in a limited sense but in a broad and liberal way. Benches have continually held that when understanding the correct implication and substance of right to life, the court must try to expand the scope of the fundamental right and not weaken its content.In Maneka Gandhi v Union of India, 1978 AIR 597, justice Bhagwati, in an attempt to make Article 21more meaningful, stated that “Courts should try to expand the scope and range of fundamental rights instead of attenuating their implication and substance by means of juridical construction”. This is why numerous of rights have been included in Article 21. In Francis Coralie Mullin v The Administrator, the Supreme court made huge development when it contended that Article 21 doesn’t amount to simply ‘animal existence’ but to something more than just that. It comprises of living with human dignity. In Shantisar builders v Narayanan Khimalal Totame, the Supreme Court distinguished between the shelter that humans require and those that animals require. They stated that animals require just the minimum bodily security but humans require a habitation that permits them to grow in all facets be it mentally or physically. So, it isn’t just right to survival but living a complete quality life of dignity and value. The Supreme Court has claimed article 21 to be ‘heart of fundamental rights’ and has consequently allowed very broad boundaries with widest conceivable understandings to this article and correctly so. It has evolved into a basis for many essential rights and procedural protections. It can be contended that at the very least, every individual has a right to live with modicum amount of dignity and where the existing condition drops beneath that point, the individual should be permitted to terminate such agonizing existence. There is no legislation in India that provides for Euthanasia, so people relied on the constitution to provide relief with the question being, ‘whether Right of Life under article 21 accommodates a Right to die?’.


This issue first arose in the case of State of Maharashtra v Maruty Sripati Dubal. The court here held that Right to Life included Right to die and held Section 309 of IPC that made attempt to suicide a crime as unconstitutional. 29 The court reasoned those fundamental rights have both positive and negative facets. It also distinguished between suicide and euthanasia saying that the former includes the act done by the individual himself whereas the latter meant the act done by an intervening party. As opposed to this, in Chenna Jagdeshwar v Sate of AP, the court stated that right to die isn’t secured under article 21. In P. Rathinam v Union of India, the court followed Maruty Dubal case’s reasoning and stated that article 21 included the right not to lead a coerced life that is damaging, unfavorable and detested by someone. It also held attempt to suicide as not punishable by calling the provision against this as ‘ultra-viruses. This was a drastic approach and it could not last long. The court in Gian Kaur v State of Punjab while overruling this judgment, stated that Right to Life doesn’t incorporate the Right to die a death that isn’t natural and held suicide to be a criminal offence. They held s.309 of IPC that makes attempted suicide an offence to be constitutional. They reasoned that Article 21 is a natural right whereas the right to end one’s life by committing suicide would be unnatural.36 The court stated that dignity rights under the same only exist till the ‘natural’ termination of life. They distinguished Euthanasia from suicide and asserted that the former involves ending an individual’s life who is already fatally ill or in a PVS. They stated that in euthanasia, the course of dying has already begun and it merely accelerates this process of natural death and isn’t causing an unnatural termination. They therefore held that right to die a dignified death of a patient whose ‘life is ebbing out’ may come within the preview of right to a dignified life. So, in Gian Kaur, the court already acknowledged right to a dignified death specially for incurably ill patients, but they did not exactly rule on euthanasia be it active or passive. They just primarily focused on the legitimacy of anti-suicide laws. So, this issue was again brought up in Aruna Ramchandra Shanbaug v Union of India. Runa Shanbaug was a nurse who was a victim of sexual assault, after which she wasn’t in the condition to feel anything anymore. The ruthless incident rendered her visionless, deaf, paralyzed and in a vegetative condition for 42 years. A petition was brought before the Supreme Court for her euthanasia. The court passed a ground-breaking judgement legalizing passive euthanasia. The court held that in cases were the natural progression of death had already initiated or the patient was in a permanent vegetative state, then it wouldn’t be an offense to passively quicken demise by refusal of medical support. 43 Here the court instead of dealing with right to die, dealt with whether there is a compulsion to lengthen life when the sufferer was fatally ill. It laid down the following checks and safeguards that need to be adhered to so that this aid isn’t abused, specially forbidding third party from being involved in the decision-making.

1-The decision to not continue with aids that lengthen the patient’s life must be undertaken by their lawful guardians, their partner, someone who is close to them,

2- The approval of the high court is mandatory as relatives might give approval to get inheritance benefits.

3- Two judges of the high court will take the call after taking assistance from a panel of three medical experts. The English case of Airedale has been one of the major cases that facilitated the benches to consider passive euthanasia in Indian framework. 48The aforementioned legal delivery had also been undertaken by the court in Airedale case cogitating the High Court to be ‘parens patriae’ and personally examining every case for securing the paramount interest of the individual given euthanasia like a rational and reliable parent.

In Common Cause v Union of India, the Constitutional Court performed an arduous undertaking of pronouncing Right to die with dignity as a fundamental right and a vital component of right to live a life of dignity as enshrined in Article 21. It arranged extensive system for protecting the dignity of fatally ill individuals and those in PVS with no prospect of recovery and in this course, it 1- legalized advance medical directives (AMD) and health attorneys and 2- put forth rules to give force to passive euthanasia. This is now the current law with respect to euthanasia till a legislature is made on the same. This court also scrutinized some discrepancies in the Aruna Shanbaug case. The constitutional court in Common Cause increased the extent of Euthanasia allowed in Aruna case by attaching the concept of living will, where individuals can leave written guidelines on the type of health care they could be administered with, in the occasion of them being in a unresponsive and incurably ill state .It is important to remember that only passive euthanasia has been allowed yet that involves withholding life-lengthening procedures voluntarily, when the patient requests this or when he leaves a living will behind that provides for this or, involuntarily when the patient isn’t in a conscious state and this decision is taken by his family, doctors, close affiliations with the approval of the high court. Active euthanasia is different as it involves positive action of using lethal drugs to cause deliberate demise of the individual through direct interference and this isn’t permitted. The Jurisprudence across the globe has grown on passive euthanasia and it has managed to get moral and legitimate approval more or less. This can’t be said for active euthanasia as there still exists some hesitation and doubt about it.


According to prof Upendra Baxi, dignity means respect for a person built on the value of liberty and power to construct choices and a decent social system would be where dignity is respected by allowing settings to exercise uncontrolled and informed choices. Even though the term ‘dignity’ isn’t defined anywhere in the constitution or statutes, by analysing the views taken by courts, we can see the how intrinsic it is for Article 21. To deny an individual of his dignity at the conclusion of his life would deny him of meaningful existence. A subsistence that holds meaning would include individual’s right of self-determination and independence to choose their healthcare procedure. Respect for a person, particularly their right to decide how they must live their life amounts to self-autonomy or right of self-governance. It is the right against non-intervention by people that offers a competent individual that is in his majority, the right to decide things that concern his being and body, exclusive of other’s control or meddling. Individual’s right of self-rule and autonomy include their choice to whether and to whatever degree they are prepared to submit themselves to health treatments, deciding between alternate procedures or in that regard, deciding for no procedure at all, which according to their comprehension is in consonance with their personal desires and principles. 61 Nevertheless, a critical issue is yet to be addressed of whether right to die as a part of article 21 is absolute or it would be controlled by reasonable constraints. Considering this right involves the choice vis-à-vis terminating one’s life, the circumstances that accompany the meaning of ‘dignity’ need to be lucidly articulated. Without explicit reference of reasonable constraints influencing this right, the noble intent of the constitutional court advancing this judgement may prove ineffective.

In KS Puttaswammy v Union of India, the Constitutional Court that included nine justices held privacy to be a fundamental segment of right to life that also recognizes a person’s right to refuse health treatments that prolong lifespan. Here, Justice Chelameshwar stated that “force feeding of particular individuals by the Government raises alarms for privacy. A person’s right to deny healthcare that prolongs his existence or ends the same is a liberty that comes within the preview of privacy”. Article 21 guarantees privacy rights and in cases where individuals are in PVS or are bed ridden, unconscious to an extent where they are unable to eat own their own, switch clothes or even utilize the lavatory, whether or not their privacy rights are being met is something to reflect on. These are things that no one would normally like to rely on others for.


Netherlands was the first European state that allowed euthanasia by introducing the statute ‘termination of life on request and assisted suicide act” in 2002. 69 This legislation permitted euthanasia in extremely rare and extraordinary circumstances.70 There, killing someone on their request or with their permission is illegal but this statue makes an exemption for doctors who perform euthanasia provided they meet the following factors:

1-If there isn’t any possibility for the patient’s condition to improve and they are in insufferable agony, 2-The patient themselves, voluntarily opt for this without any encouragement from others and this request should be persistent over a period,

3- The patient makes an informed decision with comprehensive information of his alternatives,

4-This issue must be discussed with other free doctors for confirming everything,

5-euthenesia must take place with proper process by competent doctors, and

6- patient must be minimum twelve years of age.


Low educational and legal knowledge being the reality of many people in India, there could be a chance of misuse of living wills by greed-stricken heirs and this should be appropriately attended by the parliament for the paramount usage of the novel right added in the binder of fundamental rights. Lack of sufficient and affordable healthcare and monetary limitations on middle class families may force them to opt for passive euthanasia or make living wills hastily out of compulsion. Therefore, mere allowing passive euthanasia by the benches isn’t enough till the parliament appropriately aids the matter by giving the required attention to health facilities and insurance, specially for economically backwards individuals. Appreciating the right of dying with dignity for terminal patients and persons in a PVS is only part of the picture, and the issue of how this right would be construed with respect to individuals wanting to die due to other serious reasons like agedness, indigence, dearth of prospects etc. to die with respect still remains. The apex court has only recognized this right to dignified death in terms of right to withdraw or deny life prolonging treatments for the aforementioned categories, so how this right should be construed with respect to patients who have terminal illnesses that hamper their life adversely but haven’t made them dependent on some life supporting machine is something to deliberate on. For instance, individuals permanently paralyzed from neck down, individuals with severe case of dementia that leaves them in a disoriented state, not recognizing themselves or their loved ones etc. These individuals aren’t dependent on life prolonging systems that they can withdraw but nevertheless they have to permanently depend on others for basic needs and their dignity, privacy, autonomy and quality of life can be said to be obstructed by their degenerated circumstances. To cause death in these situations, a positive action would be needed. This may have the capacity to unlock floodgates for Mandamus Writs before constitutional benches. In my opinion, active euthanasia, although very restrictively and only in extraordinary and rare instances, should also be included in right to dignified death under art 21. For this, heavy safeguards and riders are needed so that this right isn’t abused. This is also keeping in mind the broad frame the courts have given to ‘life’ under art21, to signify more than ‘animal survival’, to include a life of dignity, quality, good physical and psychological wellbeing. India’s legal situation shouldn’t be reviewed in isolation. We have drawn our constitution from the charters of diverse states and benches have frequently referred to several international decisions. Netherland’s statue with respect to Euthanasia should be examined and appreciated in Indian context and used to broaden euthanasia framework in India. Death is as essential is life in certain situations. Death shouldn’t be seen as negative or disappointing when the individual is going through unbearable agony from an ailment that isn’t curable for an alarmingly long time. Humane and proficient dealing for the dying is necessary.

Low educational and legal knowledge being the reality of many people in India, there could be a chance of misuse of living wills by greed-stricken heirs and this should be appropriately attended by Parliament for the paramount usage of the novel right added in the binder of fundamental rights. Lack of sufficient and affordable healthcare and monetary limitations on middle class families may force them to opt for passive euthanasia or make living wills hastily out of compulsion.

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Govt extends date for submission of R&D proposals



The Government has extended the deadline for submission of proposals related to R&D scheme under the National Green Hydrogen Mission. The R&D scheme seeks to make the production, storage, transportation and utilisation of green hydrogen more affordable. It also aims to improve the efficiency, safety and reliability of the relevant processes and technologies involved in the green hydrogen value chain. Subsequent to the issue of the guidelines, the Ministry of New & Renewable Energy issued a call for proposals on 16 March, 2024.

While the Call for Proposals is receiving encouraging response, some stakeholders have requested more time for submission of R&D proposals. In view of such requests and to allow sufficient time to the institutions for submitting good-quality proposals, the Ministry has extended the deadline for submission of proposals to 27th April, 2024.

The scheme also aims to foster partnerships among industry, academia and government in order to establish an innovation ecosystem for green hydrogen technologies. The scheme will also help the scaling up and commercialisation of green hydrogen technologies by providing the necessary policy and regulatory support.

The R&D scheme will be implemented with a total budgetary outlay of Rs 400 crore till the financial year 2025-26. The support under the R&D programme includes all components of the green hydrogen value chain, namely, production, storage, compression, transportation, and utilisation.

The R&D projects supported under the mission will be goal-oriented, time bound, and suitable to be scaled up. In addition to industrial and institutional research, innovative MSMEs and start-ups working on indigenous technology development will also be encouraged under the Scheme.

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India, Brazil, South Africa to press for labour & social issues, sustainability



The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment.

India, on Thursday, joined the G20’s two-day 2nd Employment Working Group (EWG) meeting under the Brazilian Presidency which is all set to address labour, employment and social issues for strong, sustainable, balanced and job-rich growth for all. India is co-chairing the 2nd EWG meeting, along with Brazil and South Africa, and is represented by Sumita Dawra, Secretary, Labour & Employment.

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment. India has pointed out that the priority areas of the 2nd EWG at Brasilia align with the priority areas and outcomes of previous G20 presidencies including Indian presidency, and commended the continuity in the multi-year agenda to create lasting positive change in the world of work. This not only sustains but also elevates the work initiated by the EWG during the Indian Presidency.

The focus areas for the 2nd EWG meeting are — creating quality employment and promoting decent labour, addressing a just transition amidst digital and energy transformations, leveraging technologies to enhance the quality of life for al and the emphasis on gender equity and promoting diversity in the world of employment for inclusivity, driving innovation and growth. On the first day of the meeting, deliberations were held on the over-arching theme of promotion of gender equality and promoting diversity in the workplace.

The Indian delegation emphasized the need for creating inclusive environments by ensuring equal representation and empowerment for all, irrespective of race, gender, ethnicity, or socio-economic background. To increase female labour force participation, India has enacted occupational safety health and working conditions code, 2020 which entitles women to be employed in all establishments for all types of work with their consent at night time. This provision has already been implemented in underground mines.

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This is expected to reduce the motherhood pay gap among the working mothers. To aid migrant workers, India’s innovative policy ‘One Nation, One Ration Card’ allows migrants to access their entitled food grains from anywhere in the Public Distribution System network in the country.

A landmark step in fostering inclusion in the workforce is the e-Shram portal, launched to create a national database of unorganized workers, especially migrant and construction workers. This initiative, providing the e-Shram card, enables access to benefits under various social security schemes.

The portal allows an unorganized worker to register himself or herself on the portal on self-declaration basis, under 400 occupations in 30 broad occupation sectors. More than 290 million unorganized workers have been registered on this portal so far.

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India to spend USD 3.7 billion to fence Myanmar border



India plans to spend nearly $3.7 billion to fence its 1,610-km (1,000-mile) porous border with Myanmar within about a decade, said a source with direct knowledge of the matter, to prevent smuggling and other illegal activities. New Delhi said earlier this year it would fence the border and end a decades-old visa-free movement policy with coup-hit Myanmar for border citizens for reasons of national security and to maintain the demographic structure of its northeastern region.

A government committee earlier this month approved the cost for the fencing, which needs to be approved by Prime Minister Narendra Modi’s cabinet, said the source who declined to be named as they were not authorised to talk to the media. The prime minister’s office and the ministries of home, finance, foreign affairs and information and broadcasting did not immediately respond to an email seeking comment.

Myanmar has so far not commented on India’s fencing plans. Since a military coup in Myanmar in 2021, thousands of civilians and hundreds of troops have fled from there to Indian states where people on both sides share ethnic and familial ties. This has worried New Delhi because of risk of communal tensions spreading to India. Some members of the Indian government have also blamed the porous border for abetting the tense situation in the restive north-eastern Indian state of Manipur, abutting Myanmar.

For nearly a year, Manipur has been engulfed by a civil war-like situation between two ethnic groups, one of which shares lineage with Myanmar’s Chin tribe. The committee of senior Indian officials also agreed to build parallel roads along the fence and 1,700 km (1,050 miles) of feeder roads connecting military bases to the border, the source said.

The fence and the adjoining road will cost nearly 125 million rupees per km, more than double that of the 55 million per km cost for the border fence with Bangladesh built in 2020, the source said, because of the difficult hilly terrain and the use of technology to prevent intrusion and corrosion.

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However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity.

In a press briefing held on Wednesday, Interpol Secretary General Jurgen Stock unveiled alarming statistics regarding the extent of undetected money laundering and illegal trade transactions plaguing the global banking network. Stock revealed that over 96% of the money transacted through this network remains undetected, with only 2-3% of the estimated USD 2-3 trillion from illegal trade being tracked and returned to victims.

Interpol, working in conjunction with law enforcement agencies and private financial sectors across its 196 member countries, is committed to combating the rising tide of fraud perpetrated by illicit traders. These criminal activities encompass a wide spectrum, including drug trafficking, human trafficking, arms dealing, and the illicit movement of financial assets.

Stock emphasized the urgent need to establish mechanisms for monitoring transactions within the global banking network. Currently, efforts are underway to engage banking associations worldwide in setting up such a framework. However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity. The lack of real-time information sharing poses a significant obstacle to law enforcement agencies in their efforts to combat money laundering and illegal trade.

Stock underscored the role of Artificial Intelligence (AI) in exacerbating this problem, citing its use in voice cloning and other fraudulent activities. Criminal organizations are leveraging AI technologies to expand their operations and evade detection on a global scale. Stock emphasized the importance of enhanced cooperation between law enforcement agencies and private sector banking groups. Realtime information sharing is crucial in the fight against illegal wealth accumulation.

Drawing inspiration from initiatives such as the “Singapore Anti-Scam Centre,” Stock called for the adoption of similar models in other countries to strengthen the collective response to financial crimes. In conclusion, Stock’s revelations underscore the pressing need for concerted action to combat global financial crimes. Enhanced cooperation between public and private sectors, coupled with innovative strategies for monitoring and combating illicit transactions, is essential to safeguarding the integrity of the global financial system.

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FM defends Atal Pension Scheme, highlights guaranteed returns



Finance Minister Nirmala Sitharaman defended the Atal Pension Yojana (APY) against Congress criticism, asserting its design based on choice architecture and a guaranteed minimum 8% return. She emphasized the scheme’s opt-out feature, facilitating automatic premium continuation unless subscribers choose otherwise, promoting retirement savings. Sitharaman countered Congress allegations of coercion, stating the APY’s guaranteed returns irrespective of market conditions, supplemented by government subsidies.

Responding to Congress’s claim of scheme misuse, Sitharaman highlighted its intended beneficiaries – the lower-income groups. She criticized Congress for its alleged elitist mindset and emphasized the scheme’s success in targeting the needy. Sitharaman accused Congress of exploiting vote bank politics and coercive tactics, contrasting it with the APY’s transparent framework. The exchange underscores the political debate surrounding social welfare schemes, with the government defending its approach while opposition parties raise concerns about implementation and efficacy.

Finance Minister Nirmala Sitharaman’s robust defense of the Atal Pension Yojana (APY) against Congress criticism highlights the ongoing debate over social welfare schemes in India. Sitharaman’s assertion of the APY’s design principles, including its opt-out feature and guaranteed minimum return, underscores the government’s commitment to promoting retirement savings among lower-income groups. The Atal Pension Yojana, named after former Prime Minister Atal Bihari Vajpayee, was launched in 2015 to provide pension benefits to workers in the unorganized sector. It aims to address the significant gap in pension coverage among India’s workforce, particularly those employed in informal and low-income sectors. The scheme offers subscribers fixed pension amounts ranging from Rs. 1,000 to Rs. 5,000 per month, depending on their contribution and age at entry, after attaining the age of 60. Sitharaman’s response comes after Congress criticism alleging the APY’s inefficacy and coercive tactics in enrolment.

Congress General Secretary Jairam Ramesh described the scheme as poorly designed, citing instances of subscribers dropping out due to unauthorized account openings. However, Sitharaman refuted these claims, emphasizing the APY’s transparent and beneficiary-oriented approach. The finance minister’s defense focuses on three key aspects of the APY: Choice Architecture: Sitharaman highlights the opt-out feature of the APY, which automatically continues premium payments unless subscribers choose to discontinue.

This design element aims to encourage long-term participation and ensure consistent retirement savings among subscribers. By simplifying the decision-making process, the scheme seeks to overcome inertia and promote financial discipline among participants. Guaranteed Minimum Return: Sitharaman underscores the APY’s guarantee of a minimum 8% return, irrespective of prevailing interest rates. This assurance provides subscribers with confidence in the scheme’s financial viability and incentivizes long-term savings.

The government’s commitment to subsidizing any shortfall in actual returns further strengthens the attractiveness of the APY as a retirement planning tool. Targeting the Needy: Sitharaman defends the predominance of pension accounts in lower income slabs, arguing that it reflects the scheme’s successful targeting of its intended beneficiaries – the poor and lower-middle class. She criticizes Congress for its alleged elitist mindset and suggests that the party’s opposition to welfare schemes like the APY stems from a disconnect with the needs of marginalized communities. Sitharaman’s rebuttal also addresses broader political narratives surrounding social welfare policies in India.

She accuses Congress of exploiting vote bank politics and coercive tactics, contrasting it with the transparent and inclusive framework of the APY. The exchange underscores the ideological differences between the ruling Bharatiya Janata Party (BJP) and the opposition Congress, with each side advocating for their vision of social welfare and economic development. In addition to defending the APY, Sitharaman’s remarks shed light on the broader challenges and opportunities facing India’s pension sector.

Despite significant progress in expanding pension coverage through schemes like the APY, the country still grapples with issues such as financial literacy, informal employment, and pension portability. Addressing these challenges requires a multifaceted approach involving government intervention, private sector participation, and civil society engagement.

As India strives to achieve its vision of inclusive and sustainable development, initiatives like the APY play a crucial role in promoting economic security and social equity. Sitharaman’s defense of the scheme underscores the government’s commitment to addressing the needs of vulnerable populations and ensuring their financial well-being in the long run.

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Regulatory steps will make financial sector strong, but raise cost of capital



India’s financial system regulator, the Reserve Bank of India (RBI), is demonstrating a serious commitment to improving governance and transparency at finance companies and banks, with the RBI’s recent measures aimed at curtailing lenders’ overexuberance, enhancing compliance culture and safeguarding customers.

While the global ratings firm has appreciated the RBI’s “diminishing tolerance for non-compliance, customer complaints, data privacy, governance, know-your-customer (KYC), and anti-money laundering issues”, it has cautioned that increased regulatory risk could impede growth and raise the cost of capital for financial institutions. “Governance and transparency are key weaknesses for the Indian financial sector and weigh on our analysis. The RBI’s new measures are creating a more robust and transparent financial system,” says S&P Global Credit Analyst, Geeta Chugh. “India’s regulator has underscored its commitment to strengthening the financial sector. The drawback will be higher capital costs for institutions,” Chugh cautions.

The RBI measures include restraining IIFL Finance and JM Financial Products from disbursing gold loan and loans against shares respectively and asking Paytm Payments Bank (PPBL) to stop onboarding of new customers. Earlier in December 2020, the RBI suspended HDFC Bank from sourcing new credit card customers after repeated technological outages. These actions are a departure from the historically nominal financial penalties imposed for breaches, S&P Global notes.

Besides, as the global agency points out, the RBI has decided to publicly disclose the key issues that lead to suspensions or other strict actions against concerned entities and become more vocal in calling out conduct that it deems detrimental to the interests of customers and investors. “We believe that increased transparency will create additional pressure on the entire financial sector to enhance compliance and governance practices,” adds Chugh. The global agency has also lauded the RBI’s recent actions demonstrating scant tolerance for any potential window-dressing of accounts.

These actions include the provisioning requirement on alternative investment funds that lend to the same borrower as the bank finance company. Amidst the possibility of some retail loans, such as personal loans, loans against property, and gold loans getting diverted to invest in stock markets and difficulty of ascertaining the end-use of money in these products, S&P Global underlines the faith of market participants that the RBI and market regulator, the Securities and Exchange Board of India, want to protect small investors by scrutinizing these activities more cautiously.

On the flip side, at a time of tight liquidity, the RBI’s new measures are likely to limit credit growth in fiscal 2025 (year ending March 2025). “We expect loan growth to decline to 14 per cent in fiscal 2025 from 16 per cent in fiscal 2024, reflecting the cumulative impact of all these actions,” says Chugh. The other side of the story is that stricter rules may disrupt affected entities and increase caution among fintechs and other regulated entities and the RBI’s decision to raise risk weights on unsecured personal loans and credit cards may constrain growth. Household debt to GDP in India (excluding agriculture and small and midsize enterprises) increased to an estimated 24 per cent in March 2024 from 19 per cent in March 2019. Growth in unsecured loans has also been excessive and now forms close to 10 per cent of total banking sector loans.

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