Counsel entitled to physically accompany party to remote point while giving evidence via video conferencing: Karnataka HC - Business Guardian
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Counsel entitled to physically accompany party to remote point while giving evidence via video conferencing: Karnataka HC



In a very significant development, we saw how just recently on 24 June 2022, the Karnataka High Court has in an extremely learned, laudable, landmark and latest judgment titled K Lakshmaiah Reddy vs V Anil Reddy & Others in Writ Petition No. 10926 of 2022 and cited in 2022 LiveLaw (Kar) 237 held in no uncertain terms that a counsel/advocate appearing for the parties are entitled to be physically present at the remote point from where the evidence of such party is being recorded through video conferencing. It must be mentioned here that a Single Judge Bench of Justice Sachin Shankar Magadum allowed the petition filed by one K Lakshmaiah Reddy who had challenged the order of the Trial Court which had declined permission that was sought by his counsel to be present at the remote point while recording of the evidence. Very rightly so!

To start with, this brief, brilliant and balanced judgment authored by a single Judge Bench of the Karnataka High Court comprising of Justice Sachin Shankar Magadum sets the ball rolling by first and foremost putting forth in para 1 that, “The captioned writ petition is filed by the defendant No.2 questioning the order dated 30.05.2022 passed on memo filed by the petitioner/defendant No.2. Under the impugned order, the learned Judge has declined permission sought by the counsel appearing for the present petitioner/defendant No.2 to be present at the remote point while recording evidence of defendant No.2.”

To put things in perspective, the Bench then envisages in para 2 that, “The present petitioner is a resident of Michigan, USA and is aged about 87 years and is suffering from various health issues. Therefore, the petitioner filed applications in I.A.Nos.27 and 28 under Rule 6 of the Video Conferencing Rules and also application in I.A.No.36 under Order 18 Rule 16 of CPC to examine the petitioner immediately. The said applications were allowed by the Trial Court thereby permitting the present petitioner/defendant No.2 and defendant No.5 to record their evidence through Video Conference. The Trial Court accordingly with the consent of parties to the suit, fixed the date of recording evidence through video conferencing on 06.06.2022. The petitioner filed memo on 25.05.2022 requesting the Court to make further e-mail correspondence towards logistic support and to inform the remote point coordinator to issue 5 entry passes to enable the petitioner to have assistance of his Advocate and also attendants.”

While stating the precise reason behind filing of petition, the Bench then specifies in para 3 that, “The contesting defendants filed statement of objections to the said memo. The learned Judge vide impugned order at Annexure-A has refused to permit the petitioner’s Advocate to be present at the remote point while recording evidence of defendant No.2. It is this order which is under challenge.”

To be sure, the Bench then states in para 14 that, “Before I advert to the controversy involved between the parties, it would be useful for this Court to refer to the relevant Rules framed by this Court which is titled as “Rules for Video Conferencing for Courts”. The relevant definitions are culled out as under:

“2(v) ‘Court Point’ means the Courtroom or one or more places where the Court is physically convened, or the place where a Commissioner or an inquiring officer holds proceedings pursuant to the directions of the Court.

2(x) ‘Remote Point’ is a place where any person or persons are required to be present or appear through a video link. 2(xii) ‘Required Person’ includes:

a. the person who is to be examined; or

b. the person in whose presence certain proceedings are to be recorded or conducted; or

c. an advocate or a party in person who intends to examine a witness; or

d. any person who is required to make submission before the Court; or

e. any other person who is permitted by the Court to appear through video conferencing.””

Needless o say, the Bench then mentions in para 21 that, “The respondents are objecting the presence of counsel at the remote point. The moot question that has to be examined before this Court is, as to whether the Court is vested with discretion to permit the counsel on record to be present at the remote point along with his client?”

It would be instructive to note that the Bench then enunciates in para 22 that, “Rule 14 refers to ‘Conduct of proceedings’. It would be useful for this Court to refer to Rules 14.1 and 14.7 which reads as under:

“14.1 All Advocates, Required Persons, the party in person and/or any other person permitted by the Court to remain physically or virtually present (hereinafter collectively referred to as participants) shall abide by the requirements set out in Schedule I.

14.7 The Court shall satisfy itself that the Advocate, Required Person or any other participant that the Court deems necessary at the Remote Point or the Court Point can be seen and heard clearly and can clearly see and hear the Court.””

For sake of clarity, the Bench then clarifies in para 23 that, “On perusal of Rule 14.1, it is clearly evident that the said Rule clearly contemplates and enables all Advocates, required persons, party-in-person either to remain physically or virtually present who are collectively referred to as participants. The only rider to the said sub-rule is that the participants are required to abide by the requirement set out in Schedule-I to the Rules. Therefore, the “Required Person” as defined under Rule 2(xii) would not necessarily mean that it is only the witness, who has to be examined, has to be physically present at the remote point. This Court is unable to understand as to how the counsel on record can be denied a right of audience at the remote point. Rule 14 clearly contemplates and permits all Advocates including required persons or party-in-person to be physically present at the remote point. Further, Rule 14.7 also gives discretion to the Court in a given case to permit the Advocate or any other participants that Court deems necessary at the remote point or Court point.”

Frankly speaking, the Bench then observes in para 24 that, “The definition “Required Person” and further persons who can be permitted to be present at the remote point as contemplated under Rule 8.11 cannot be so narrowly construed and interpreted so as to exclude a counsel. If such a proposition is accepted, that would take away the valuable rights of a client who is entitled for apt assistance by his counsel on record. It is an established tradition that a trusting relationship between a client and Advocate is necessary for effective representation. Therefore, legal assistance before a witness is examined or cross-examined plays a vital role. The counsel appearing for either of the parties are the most important actors of most court room interactions. The Advocates on record are the central influence in the court room. Therefore, personal contact between a counsel and his client stand together in Court and therefore, is deemed very important in establishing trust which would ultimately result in establishing a litigants’ faith in the legal system overall and this trust is often built by the Advocates on record who are also officers of the Court. Mere presence of Counsel of a deponent under cross-examination at remote point would result in either prompting or tutoring the witness.”

Most forthrightly, the Bench then states in para 25 that, “The definition “Required Person” under Rule 2(xii) coupled with Rule 8.11 authorizing a coordinator at the remote point to ensure that no person is present at the remote point cannot be read in isolation. The above said relevant rules have to be conjointly read along with Rules 14.1 and 14.7. A witness is entitled for legal assistance even when he is cross-examined. However, at the time of cross-examination, his counsel cannot prompt or tutor him. Based on mere apprehension, the above said rules cannot be narrowly interpreted so as to exclude the counsel on record who is an integral part of legal system and plays a vital role in dispensation of justice. The Advocates admittedly play a role as an Officer of the Court. His presence at the time of cross- examination of his witness is further more essential. It is a common fact that cross-examination often involves a battle of wits between cross-examiner and witness. At times, Advocates cross-examining the witness may have to use guile to expose the unreliability of the witness, as when the latter is lulled into a false sense of security and does not realise that he is being trapped or set up for questions which will effectively challenge him. Advocates often adopt such an approach which are essential to break the effect created by the witness in examination-in-chief or in his affidavit of the evidence in chief. Therefore, it is the counsel appearing for the witness who is subjected to cross-examination can object to the questions posed to the witness which are found to be contrary to ethical rules. In such circumstances, it is the Advocate who has to meticulously watch the proceedings of cross-examination and has to be vigilant to see that Advocate who is cross-examining does not lie or put untruths to the witness. The essence of the principle here is that the cross- examiner must not act dishonestly. He must not mislead the Court as well as the witness who is being cross-examined. Therefore, the presence of Advocate also plays a vital role when his witness is being cross-examined at the remote point. The presence of Advocate at the remote point would create a sense of security and would help him to face test of cross-examination. That cannot be misconstrued to such an extent that it would amount to prompting or tutoring. His mere presence at the remote point will not violate the Rules.”

Quite commendably, the Bench then holds in para 26 that, “Therefore, in the present case on hand, defendant No.2 is entitled to seek legal assistance even when he is being cross-examined by way of video conferencing. Using video conferencing, the defendant’s rights cannot be sacrificed in the name of procedural efficiency. The adversarial model which is adopted for several decades cannot be abandoned under the garb that the Rules relating to video conferencing does not permit. Adversarialism is a cornerstone of the legal process; the system is predicated on this tenet. Denial of legal assistance while recording ocular evidence of a witness through video conferencing violates fundamental fairness.”

In the present context, the Bench then also makes it clear in para 27 that, “Looking to the recent trend, video conferencing does have a place in the legal system. The challenge is not to exclude it but to use it responsibly. The video conferencing can produce better results, but at the same time, certain highlighted issues which may prop up down the line have to be addressed effectively. The client is entitled to seek assistance and therefore, the clients interaction with his counsel on record is quite essential to a fair trial and a person who is supposed to be cross-examined is entitled to meet his counsel ahead of time to discuss every anticipated questions, concept or a piece of evidence. The Rules that are framed by this Court governing recording of evidence through video conferencing require all participants to follow the Rules in terms of Schedule-I which is annexed to the Rules.”

As a corollary, the Bench then observes in para 28 that, “It is in this background, the proposition floated by the counsel appearing for the contesting respondents cannot be acceded to. An Advocate should always be with his client. The Rules framed by this Court do not intend to support plaintiffs team or a defence team. The counsel appearing for respective clients are entitled to stand together and the same is necessary for an attorney-client relationship to function properly. A medium that interferes with the court’s main mission should be eliminated.”

Quite forthrightly, the Bench then also clearly states in para 29 that, “The contesting parties are entitled to have a discussion with their Advocates on record as they need to discuss important decisions concerning vital documents, basic legal strategy prior to appearing in Court. Personal meetings are better for hastening out case strategies, fact gatherings and basic legal tactics. Therefore, it is in this context, if the proposition of respondents is accepted and if counsel appearing for a witness who is supposed to be cross-examined is denied a right of audience at a remote point, the apprehension that the ocular evidence recorded through video conferencing will not satisfy the prescribed requirements of a fair trial and the same would create a doubt in regard to legitimacy of a legal process may turn out to be a hard reality. Therefore, denial of right of audience to a counsel on record has its own ramifications and may result in violation of fundamental fairness and may also have impact on due process of law.”

Furthermore, the Bench then states in para 30 that, “By introducing technology and by bringing in recording of ocular evidence through video conferencing, an attempt is made in all good faith to meet the standards of face-to-face trial. By bringing in new Rules, the Courts have to meet the established standards and traditions in recording evidence physically in the open Court. The dignity and ritual of physical presence in the Court was found to be absolutely necessary for public perception of justice. A very ceremony of trial and presence of fact finder may exert a powerful force for truth telling. The opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition. Now in a given case, where parties consent to record ocular evidence through video conferencing has to meet the above said standards. There is an apprehension that non-verbal cues are unavailable or harder to read when associated with video conferencing. Therefore, the presence of counsel of a witness to be cross-examined at a remote point becomes further more essential.”

What’s more, the Bench then stipulates in para 31 that, “In the light of the discussions made supra, now let me see whether the Court is vested with discretion to permit the counsel appearing for a witness who is supposed to be cross-examined to be present at the remote point. The remote point has to be considered as an extended court room. A Court includes a physical court and a virtual court and if a Court can have court point at one or more place, then the Rules clearly prescribe that the counsel on record can be present at all point either in the Court physically or through a video link or at a remote point physically. Rule 14.1 clearly contemplates persons who are entitled to participate in court proceedings. Rule 14.1 clearly indicates that all Advocates and required persons are entitled to remain physically or virtually present. A discretion is also vested with the Court under Rule 14.7 and it is well within the discretion of the Court in a given set of facts to permit Advocate, required person or any other participants that court deems necessary at the remote point or at the court point. If at all any mischief is played during the course of recording evidence, the Court is better placed to hold an enquiry in regard to any mischief that would be complained.”

Of course, the Bench then rightly points out in para 32 that, “Unlike face-to-face hearing, a Judge has a privilege of replaying the recording and find out as to whether the witness is hoaxed or tutored. The court can also examine whether counsel on record has interfered and assisted the witness under cross-examination. The guidelines set out in Schedule-I coupled with Rule 5.6.4 clearly provides adequate protection. It is in this background, this Court would find that the apprehension of the respondents and objections raised in regard to entitlement of counsel on record to be physically present at remote point appears to be misconceived.”

Most significantly, the Bench then lays down in para 33 that, “If the order under challenge is tested in the light of the above said discussions made supra, this Court is of the view that the order under challenge is not at all sustainable. Mere bald allegations that if the counsel is permitted to be physically present at remote point, then every possibility of petitioner getting prompted, tutored or coaxed cannot be acceded to and such an objection is not at all sustainable. In fact, Rule 14 which lays down guidelines for conducting proceedings through video conferencing clearly contemplates and authorizes all Advocates to be present physically at remote point. A discretion is also vested with the Court in a given set of facts to permit the counsel or any other unconnected participants to be physically present at the remote point. It is in this background, this Court would find that the learned Judge erred in not exercising discretion judiciously. Therefore, the finding of the learned Judge that counsel appearing for the present petitioner/defendant No.2 is already present at the remote point and he can join recording of evidence by joining the link does not satisfy the requirements of a fair trial. The learned Judge erred in not exercising judicial discretion by permitting the counsel appearing for defendant No.2 to be physically present at the remote point.”

In addition, the Bench then also most commendably notes in para 34 that, “If a coordinator at the remote point is already available and if the entire ocular evidence is video recorded, any slight mischief can be easily taken notice of and the consequences would follow if the counsel contravenes any of the courtesies and protocols applicable to a physical Court. Therefore, I am of the view that the counsel appearing for the defendant No.2 is entitled to be physically present at the remote point.”

Finally, the Bench then concludes by holding in para 35 that, “For the reasons stated, supra, I pass the following:


(i) The writ petition is allowed;

(ii) The impugned order dated 30.05.2022 passed in O.S.No.66/2016 on the file of the III Additional City Civil & Sessions Judge, Bengaluru is set aside. Consequently, the memo dated 25.05.2022 filed by the petitioner/defendant No.2 is allowed;

(iii) The coordinator at the remote point shall ensure that while recording evidence of the petitioner/defendant No.2, the persons who are permitted to be present at the remote point will not indulge in interfering with his cross-examination;

(iv) Before commencing with the recording of evidence of petitioner/defendant No.2, the Court shall satisfy itself that the counsel appearing on behalf of petitioner/defendant No.2 can be seen and heard clearly at the remote point;

(v) The Court shall also monitor and take all necessary precautions that recording of ocular evidence of petitioner/defendant No.2 is conducted by strictly following the Rules.”

In essence, the Karnataka High Court has thus made the entire picture pretty clear in this notable judgment about counsel being entitled to physically accompany a party to remote point while giving evidence via video conferencing. We have already discussed it in detail. It merits no reiteration that all the courts must definitely pay heed to what the Karnataka High Court has held so very explicitly in this leading case!

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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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