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Cannot ask daughter-in-law to pay mother-in-law’s maintenance under Senior Citizens Act: Bombay High Court

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In a significant development with far reaching consequences, we saw how just recently on May 6, 2022, the Bombay High Court in a remarkable, rational, refreshing, and robust judgment titled Sheetal Devang Shah vs Presiding Officer in Writ Petition No. 3323 of 2019 observed without mincing any words that a daughter-in-law cannot be directed to pay maintenance to her ailing mother-in-law, especially in the absence of any proof of the woman’s income. The Court observed that, “We have reservations about such direction to SS (daughter-in-law) to pay maintenance amount to the mother-in-law…Be that as it may, upon perusal of the original record, we do not find a single document showing the earnings of SS (daughter-in-law).” It noted that Section 2(a) of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 that defines ‘children’ includes son, daughter, grandson and grand-daughter, but does not refer to the daughter-in-law. While observing thus, the Bench of Justice SS Shinde and Justice Revati Mohite Dere of Bombay High Court set aside the Maintenance and Welfare of Parents and Senior Citizens Tribunal’s order to the limited extent.

To start with, this learned, laudable and landmark judgment sets the ball rolling by first and foremost putting forth in para 1 that, “This Bench has been specially constituted to hear the petitioner’s aforesaid petition and other petitions, by the Hon’ble Chief Justice. Both the members of this Bench preside over their respective Benches and have to disturb their regular boards, to assemble only for these matters.

1.1. On 27th April 2022, we heard the learned counsel for the parties from 4:30 p.m. to 7:00 p.m. and closed the matter for orders.

1.2. This Writ Petition under Article 226 of the Constitution of India is filed by the petitioner thereby taking an exception to the order dated 16.08.2019 passed by respondent No.1 – Presiding Officer of the Maintenance and Welfare of Parents and Senior Citizens’ Tribunal (for short ‘Tribunal’).

1.3. The only substantive prayer in the petition reads as under:-

ii. That this Hon’ble Court be pleased to call for the records and proceedings from the Respondent No.1 and after perusing the legality and propriety of the impugned order dated 16.08.2019 passed by the Respondent No.1, this Hon’ble Court be pleased to issue a Writ of Certiorari and/or any other appropriate Writ, order or direction under Article 226 of the Constitution of India and quash and set aside the impugned order dated 16.08.2019 passed by the Respondent No.1 at Exhibit-A;.”

In hindsight, the Bench then recalls in para 2 that, “During the pendency of this petition, the Division Bench of this Court (Coram: S. C. Dharmadhikari and G. S. Patel, JJ.), by order dated 18.09.2019, directed thus,

“5.(c) Since it is stated that the Petitioner may be dispossessed tomorrow and by using force, we direct that until further orders of this Court, the operative direction No.3 which directs the Petitioner to hand over vacant and peaceful possession of the premises to her in-laws be not acted upon or implemented.”

2.1. The aforesaid direction / interim order is in force till date.””

While elaborating on the background, the Bench then states in para 3 that, “Background facts leading to the filing of this petition are as under:-

3.1. Respondent No.1 / non-applicant has passed the order (impugned in the present petition) in the proceedings instituted by Smt. Nalini Mahendra Shah – respondent No.2 herein and her husband – Mahendra Shah. Since during the pendency of the present writ petition, husband of respondent No.2 died, with the permission of the Court, his name has been deleted from the array of the respondents. Respondent No.4 – Mr. Devang Shah is the husband of the petitioner as also the son of respondent No.2. Present petitioner – Ms. Sheetal Shah is the daughter-in-law of respondent No.2 and respondent No.3 (deleted).”

As an aside, the Bench then mentions in para 4 that, “For the sake of convenience, parties shall be referred to by their names and not by their status before the Tribunal or this Court.”

To put things in perspective, the Bench then envisages in para 5 that, “Nalini Shah and her husband Mahendra Shah filed the application No.SDO/SCNo.SDO/JNVMP/Desk-6/SR-38 of 2018 before the Tribunal constituted under the provisions of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007. Briefly stated contentions of the applicants therein viz., Nalini Shah and Mahendra Shah, were as under:-

a. that, they are staying at Saprem, Plot No.20, 3rd Road, Juhu Scheme, Vile Parle (West), Mumbai – 400 056 (hereinafter referred to as the ‘residential premises’).

b. Devang Shah is the only son of Nalini Shah and Mahendra Shah and Sheetal Shah is their daughter-in-law. They all are residing in the aforesaid residential premises.

c. Nalini Shah is the housewife and her husband Mahendra Shah (deceased) was employed in the renowned business of diamond and diamond jewellery at Opera House. Mahendra Shah retired from the said business in the year 2016 and he had no other residential premises, save and except the residential premises at Saprem, Plot No.20, 3rd Road, Juhu Scheme, Vile Parle (West), Mumbai – 400 056.

d. Devang Shah is the employee of Supergems India Private Limited and Sheetal Shah is working as a fashion designer. Both of them are receiving handsome salary.

e. the aforesaid residential premises is in the name of Mahendra Shah and Nalini Shah.

f. It was alleged that Sheetal Shah and Devang Shah are unable to look after Nalini Shah and Mahendra Shah and from last one year, they are not looking after necessities of life of Nalini Shah and Mahendra Shah. From January – February 2017 till the filing of the application, they were harassed in the said residential premises though they are the owners of the said house. Sheetal Shah and Devang Shah, both, are torturing Nalini Shah and Mahendra Shah, physically as well as mentally.

g. Nalini Shah is suffering from asthma, vergio, back pain and leg pain.

5.1. In the aforesaid background, facts and circumstances, the said application was filed by Nalini Shah and her husband Mahendra Shah.”

To recapitulate, the Bench then recalls in para 25 that, “The Tribunal framed the following four issues of enquiry, which are as under:-

“1) Are the applicants capable of supporting themselves and meeting their basic needs ?

2) Is there any evidence that the respondent is not taking proper care of the applicant and is causing mental and physical harassment to the applicants?

3) Can the request made by the applicant be accepted?

4) What will be the orders?””

As it turned out, the Bench then observed in para 26 that, “The Tribunal, after adverting to the contentions raised by the parties and documents placed on record, observed that at the relevant time, applicant No.1 – Nalini Shah was 77 years old and applicant No.2 – Mahendra Shah was 79 years old. It is also observed that the said applicants are not in a position to work. The Tribunal observed that though it is contended by Sheetal Shah, that Nalini Shah is having share trading business and also Mahendra Shah has business of diamond and jewellery, Sheetal Shah has not submitted any evidence before the Tribunal to that effect. It is further observed, that even if the said contention of Sheetal Shah is accepted, in that case also, considering the age of Nalini Shah and Mahendra Shah, it cannot be said that they are capable of supporting themselves from their own earnings. It is also observed that the family members viz., Devang Shah and Sheetal Shah should treat Nalini Shah and Mahendra Shah with kindness, consideration and respect and that they should provide them basic necessities for a peaceful life. It is also observed that the kindness, consideration and respect cannot be bought with money. It is the responsibility of Devang Shah and Sheetal Shah being son and daughter-in-law of Nalini Shah and Mahendra Shah to pay attention to the daily needs of the applicants and to try their best to meet those needs. Nalini Shah and Mahendra Shah are dependent upon Devang Shah and Sheetal Shah for their daily necessities, mental support and care and accordingly, issue No.1 is answered in the affirmative.”

As we see, the Bench then mentions in para 27 that, “Upon perusal of the original record of the proceedings instituted by Nalini Shah, we are in respectful agreement with the said observations made by the Tribunal while answering issue No.1 except to the extent that, it holds Sheetal Shah, (daughter-in-law of Nalini Shah) alongwith Devang Shah, liable to pay maintenance.”

It cannot be glossed over that the Bench then notes in para 28 that, “We have carefully perused the observations made by the Tribunal while answering issue No.2 i.e., whether there is any evidence that Sheetal Shah is not taking proper care of Nalini Shah and Mahendra Shah and is causing mental and physical harassment to them. We have no doubt in our mind, that the observations made and the findings recorded by the Tribunal, that Sheetal Shah and Devang Shah are not taking proper care of the applicants and causing mental and physical harassment to Nalini Shah and Mahendra Shah, are in consonance with the documents on record. We have also carefully perused the various complaints filed by Nalini Shah and Sheetal Shah, and we find that there is no peace and harmony in the house. There is unrest and also there is a mental and physical harassment to the old aged parents of Devang Shah. While exercising writ jurisdiction, it is not desirable to undertake exercise of disputed questions of fact, and more particularly, when we find that the observations/findings recorded by the Tribunal, while answering issue No.2, that Sheetal Shah and Devang Shah in the said application are causing mental and physical harassment to Nalini Shah and Mahendra Shah, are made keeping in view the material placed on record.”

Furthermore, the Bench then enunciates in para 29 that, “The Tribunal, while discussing issue No.3 i.e., “Can the request made by the applicant be accepted?”, has made reference to various documents placed on record by the parties and in particular documents in relation to the said residential premises wherein, the parties are residing, and has reached a conclusion, that the residential premises is in the name of Mahendra Shah, who has inherited the same, from his parents. The Tribunal has also considered the effect of giving such property as a gift by Mahendra Shah to Devang Shah and after adverting to the provisions of Section 23 of the said Act, which provides for protection of life and property of senior citizens and as such, has correctly reached the conclusion, that the applicants’ (Nalini and Mahendra Shah) request for exclusion of Devang Shah from the suit property can be granted. It would be relevant to reproduce hereinbelow the provisions of Section 23(1) of the said Act, which reads as under:-

“23. Transfer of property to be void in certain circumstances.-

(1) Where any senior citizen who, after the commencement of this Act, has transferred by way of gift or otherwise, his property, subject to the condition that the transferee shall provide the basic amenities and basic physical needs to the transferor and such transferee refuses or fails to provide such amenities and physical needs, the said transfer of property shall be deemed to have been made by fraud or coercion or under undue influence and shall at the option of the transferor be declared void by the Tribunal.””

It deserves mentioning that the Bench then mentions in para 30 that, “The Tribunal, ultimately concluded, that Sheetal Shah and Devang Shah are not taking proper care of Nalini Shah and Mahendra Shah, but are causing mental and physical harassment to them. As already observed, the age of Nalini Shah and her husband Mahendra Shah was 77 and 79 years respectively, at the relevant time, when they preferred the application. It is brought on record by the parties, that during the pendency of the petition, Mahendra Shah died. At present, Nalini Shah, wife of Mahendra Shah, is aged about 82 years. On couple of dates of hearing before us, she attended Court proceedings sitting on a wheel chair, that itself shows that she is certainly dependent upon Sheetal Shah and Devang Shah for physical and mental support.”

What’s more, the Bench then discloses in para 31 that, “After answering the issues framed, the Tribunal accepted the case of Nalini Shah and Mahendra Shah and directed Devang Shah and Sheetal Shah together to pay Rs.25,000/- (Rupees Twenty Five Thousand only) per month to Nalini Shah and Mahendra Shah for their maintenance, subsistence and medical expenses, by depositing the said amount, in the bank accounts of Nalini Shah and Mahendra Shah.”

Most crucially, the Bench then minces no words to hold in para 32 that, “We have reservations about such direction to Sheetal Shah to pay maintenance amount to Nalini Shah. As already observed, in Section 2(a), ‘children’ include son, daughter, grandson and grand-daughter and there is no reference to the daughter-in-law. Be that as it may, upon perusal of the original record, we do not find a single document showing the earnings of Sheetal Shah. In that view of the matter, the Impugned Order, to the extent that it directs Sheetal Shah to pay Rs.25,000/- alongwith her husband Devang Shah to Nalini Shah and Mahendra Shah, cannot be legally sustained. However, so far direction given to Devang Shah to pay the said maintenance amount to Nalini Shah, the same is legally sustainable.”

It cannot be lightly dismissed that the Bench then clearly states in para 33 that, “The Tribunal has directed Devang Shah and Sheetal Shah to handover the possession of entire residential premises i.e., Saprem, Plot No.20, 3rd Road, Juhu Scheme, Vile Parle (West), Mumbai – 400 056 to Nalini Shah and Mahendra Shah (since deceased) in a peaceful manner. In our opinion, said direction given by the Tribunal is legally and factually sustainable, in as much as, when the application was decided by the Tribunal, the subject property stood in the name of husband of Nalini Shah, namely, Mahendra Shah. Relying upon the various documents placed on record including criminal complaints and other materials, the Tribunal has correctly reached a conclusion, that there is a continuous mental as well as physical harassment to Nalini Shah and Mahendra Shah (since deceased).”

Quite ostensibly, the Bench then holds in para 34 that, “In that view of the matter, we are of the opinion that the view taken by the Tribunal, after adverting to the material placed on record, is legally as well as factually sustainable. Therefore, we confirm the order passed by the Tribunal except the direction to Sheetal Shah to pay jointly with Devang Shah, maintenance of Rs.25,000/- to Nalini Shah and Mahendra Shah. Therefore, the direction to Sheetal Shah to that extent is quashed and set aside. However, as already observed, the son of Nalini Shah namely, Devang Shah is obliged to pay the said maintenance amount to Nalini Shah.”

Most remarkably, the Bench then holds in para 35 that, “The Tribunal in clause (3) of the operative order has observed that, within 15 days from the date of receipt of the order, Sheetal Shah and Devang Shah shall handover the entire possession of the residential premises in question, to Nalini Shah and Mahendra Shah (deceased) in a peaceful manner and at the same time, observed that Sheetal Shah and Devang Shah, should make separate arrangements for their own accommodation elsewhere. Keeping in view the said direction, we are of the opinion that Devang Shah, being the husband of Sheetal Shah is obliged to provide separate accommodation to Sheetal Shah and her sons elsewhere.”

In addition, the Bench then directs in para 36 that, “With the above observations, we dismiss the writ petition.”

Not stopping here, the Bench then holds in para 38 that, “Since the interim relief is operating till date, we deem it appropriate to grant further six weeks’ time to the petitioner, to act in compliance with the directions contained in clause (3) of the operative part of Tribunal’s order i.e. Sheetal Shah and Devang Shah should hand over the entire possession of the residential premises in question, to Nalini Shah in a peaceful manner. In the said clause (3), the Tribunal has also directed Sheetal Shah and Devang Shah to make separate arrangements for their own accommodation elsewhere. As already observed in para 35 hereinabove, Devang Shah (respondent No.4), being husband of Sheetal Shah and thus guardian of two sons is legally obliged to provide them accommodation befitting his status, income and assets.”

For sake of clarity, the Bench clarifies in para 39 that, “The observations made hereinabove, are restricted to adjudication of the present proceedings and will have no bearing on the proceedings pending between the parties and the orders passed therein, by the appropriate courts of competent jurisdiction or forum provided under the Statute.”

Finally, the Bench then concludes by holding in para 40 that, “All concerned parties to act upon ordinary copy of this order duly authenticate by court Sheristadar.”

In a nutshell, the Bombay High Court has made it unequivocally clear that a daughter-in-law cannot be directed to pay maintenance to her ailing mother-in-law under Senior Citizens Act. We have discussed the reasons in detail. All courts must abide by what the Bombay High Court has held. No denying it!

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Policy&Politics

Govt extends date for submission of R&D proposals

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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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Policy&Politics

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

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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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Policy&Politics

India to spend USD 3.7 billion to fence Myanmar border

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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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Policy&Politics

ONLY 2-3% RECOVERED FROM $2-3 TN ANNUAL ILLEGAL TRADE THROUGH BANKING: INTERPOL

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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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Policy&Politics

FM defends Atal Pension Scheme, highlights guaranteed returns

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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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Economic

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

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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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