Disciplinary proceedings continuing ad infinitum would be destructive of the rule of law: Delhi High Court - Business Guardian
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Disciplinary proceedings continuing ad infinitum would be destructive of the rule of law: Delhi High Court



While granting relief to CBIC officer named Anish Gupta, the Delhi High Court in an extremely learned, laudable, landmark and latest judgment titled Anish Gupta vs Union of India in J-1 W.P. (C) 2267/2022, CM APPL. 6521/2022 (for Ad-Interim Relief), CM APPL. 10543/2022 (for additional documents) & CM APPL. 10544/2022 (Exemption) and J-2 W.P. (C) 2590/2022, CM APPL. 7398/2022 (Stay), CM APPL. 7399/2022 (Exemption) & CM APPL. 7400/2022 (Exemption) that was reserved on June 3, 2022 and then finally pronounced on July 5, 2022 has minced absolutely no words to hold most forthrightly that allowing disciplinary proceedings to continue ad infinitum would not only be highly prejudicial to an individual but is also destructive of the rule of law. Of course, this begs the moot question: Why should the disciplinary proceedings be allowed to continue ad infinitum? Also, it must be asked: How can the individual right to get speedy justice be held to ransom in the most arbitrary and whimsical manner?

To start with, this brief, brilliant, bold and balanced judgment authored by Hon’ble Mr Justice Siddharth Mridul for a Bench of Delhi High Court comprising of himself and Hon’ble Mr Justice Anoop Kumar Mendiratta sets the ball rolling from para 1 itself wherein it is put forth that, “The present Writ Petitions are in the nature of cross-petitions against the common order dated 29.07.2021, passed by the Central Administrative Tribunal (hereinafter referred to as “CAT”). Writ Petition No. 2267/2022 has been preferred by one Shri Anish Gupta against the Union of India and Ors. (hereinafter referred to as the “Petitioner”). Writ Petition No. 2590/2022 has been preferred by Union of India against the Petitioner herein. Since the facts and issues are common, both these petitions were heard together and are being disposed off by way of this common order.


(i) The Petitioner was serving as Officer on Special Duty (Legal at the Central Board of Indirect Taxes and Customs), when he was suspended on 21.08.2013.

(ii) He was served with a Departmental Charge Sheet/ Memorandum of Charge dated 16.07.2015, pursuant to an incident of July, 2013.

(iii) Admittedly no criminal investigation or prosecution was ever initiated or contemplated against the Petitioner.

(iv) Since the Departmental Inquiry, as contemplated under the extant rules did not commence within the stipulated time, the Petitioner filed OA 1396/2016 before the CAT praying for quashing the aforesaid Charge Sheet.

(v) Vide Order dated 13.05.2016, CAT granted the Respondent-Union of India, 04 (four) months time to complete the Disciplinary Proceedings arising from the subject Charge Sheet.

(vi) Since, the Union of India did not comply with the aforesaid directions; the Petitioner was constrained to file OA 3426/2016 before the CAT, seeking a declaration of closure of the said Charge Sheet. The Union of India admittedly did not file any application for extension of time.

(vii) The aforesaid OA 3426/2016 remained pending for a period of about 04 (four) years before the CAT and the Petitioner herein simultaneously was subjected to Disciplinary Proceedings. Despite this, vide an order dated 22.12.2020, CAT granted further extension of 06 (six) months to the Union of India to complete the proceedings, while granting liberty to the Petitioner to approach the Tribunal if the same was not competed.

(viii) Despite the efflux of almost 05 (five) years from the issuance of the Charge Sheet and the aforesaid grant of two extensions by the CAT, the Departmental Inquiry was still not completed.

(ix) Hence, in terms of the liberty granted by the CAT, the Petitioner filed MA No. 1880/2021 before the CAT for closure of Disciplinary Proceedings.

(x) The Union of India also caused to be filed MA No. 1879/2021 for further extension of time, but admittedly after the expiry of time granted to it by the Tribunal, vide the said Order dated 22.12.2020.

(xi) Vide the impugned Order dated 29.07.2021, the CAT has allowed the Petitioner’s MA No. 1880/2021 (for closure of the Charge Sheet) and rejected the Union’s MA No. 1879/2021 (for extension of time). The CAT further directed that the sealed cover qua the Petitioner be opened forthwith, and he be granted promotions at par with his juniors.

(xii) Subsequently, MA No. 3647/2021 was filed by the Petitioner seeking clarification/ modification of certain inadvertent errors that had crept in the order dated 29.07.2021.

(xiii) During the pendency of MA No. 3647/2021 before CAT, the Union of India filed W.P.(C) No. 2590/2022 before this Court and also opposed the said MA No. 3647/2021 pending before the Tribunal inter alia on the ground of challenge pending before this Court. Given the pendency of the Writ before this Court, the Petitioner withdrew his MA No. 3647/2021 pending before Ld. Tribunal to approach this Court, and accordingly filed W.P.(C) No. 2267/2022 before this Court.”


As things stand, the Bench then observes in para 7 that, “Thus the primary issue that arises for our consideration in these proceedings, is whether the Union of India was entitled for further extension of time as prayed for by it before the CAT. If the answer to the above is in the negative; what then would be the consequences of such a rejection.”


To be sure, the Bench then lays bare in para 8 that, “We have given our thoughtful consideration to the submissions canvassed across the Bar as well as perused through the relevant documents placed on the record. We are of the considered opinion that the Petitioner’s Writ Petition must succeed for the reasons elaborated hereinbelow.”

While citing the relevant case law, the Bench then fortifies its stand by mentioning in para 9 that, “In Prem Nath Bali (supra), a case with facts analogous to the present Petition, the Hon’ble Supreme Court held that :-

“28. Keeping these factors in mind, we are of the considered opinion that every employer (whether State or private) must make sincere endeavour to conclude the departmental enquiry proceedings once initiated against the delinquent employee within a reasonable time by giving priority to such proceedings and as far as possible it should be concluded within six months as an outer limit. Where it is not possible for the employer to conclude due to certain unavoidable causes arising in the proceedings within the time frame then effort should be made to conclude within the reasonably extended period depending upon the cause and the nature of the enquiry but not more than a year.” [Emphasis Supplied].”

As an aside, the Bench then states in para 10 that, “Immediately thereafter, the Central Vigilance Commission (CVC) issued a Circular dated 18.01.2016 containing instructions to comply with the said directions of the Hon’ble Supreme Court in all Disciplinary Proceedings including those involving CBI investigations, in Prem Nath Bali (supra).”

Quite rightly, the Bench then states in para 11 that, “In view of the foregoing, the Petitioner’s contention that the Respondent-Union of India has failed to abide by the dicta of the Hon’ble Supreme Court in Prem Nath Bali (supra) as well as the CVC Circular, ex-facie carries force.”

As we see, the Bench then discloses in para 12 that, “The Respondent-Union of India has sought to urge that the Petitioner’s reliance on Prem Nath Bali (supra) is misplaced as the said judgment is per incuriam and was rendered only in the peculiar facts of the case. It is urged that the ratio thereof is mere obiter. It was further submitted that the Circular dated 18.01.2016 issued for following the said precedent of the Hon’ble Supreme Court in Prem Nath Bali (supra) is also merely directory and compliance thereof is not mandatory.”

Be it noted, the Bench then specifies in para 13 that, “We cannot commend ourselves to accept the aforesaid contentions. The Respondent- Union of India has not placed any material to show that the said judgment is per incuriam, as asseverated. A mere ipse dixit, or a bald assertion cannot a fortiori render a judgment of the Apex Court as per incuriam.”

Quite forthrightly, the Bench then holds in para 14 that, “Under Article 141 of the Constitution of India, the law laid down by the Apex Court is binding on all Courts throughout the territory of India. We too are bound by the judicial discipline of Article 141 of the Constitution of India and the principle of stare decisis. We cannot, in law and the facts attendant, declare the judgment of the Hon’ble Supreme Court as per incuriam. On the contrary, once it is discernible that the said judgment of the Supreme Court is applicable to the facts of this case, we are duty bound to de rigueur apply the same.”

No doubt, the Bench has a valid point when it observes in para 15 that, “Even if the CVC Circular is arguendo assumed to be directory and not mandatory- as sought to be canvassed by the Respondent — there must exist cogent, persuasive and compelling reasons for noncompliance or non-adherence of the same. The Respondent cannot merely decide not to comply with the CVC circular, without persuasive and tenable reasons, as such a course of action would not only be impermissibly capricious and arbitrary action on the part of the Respondent but also render the said CVC circular as nugatory rather than merely directory as contended.”

Needless to say, the Bench then states in para 16 that, “The facts of the present case also do not provide for any scope to grant any indulgence to the Respondent. It cannot be said that the Respondent did not receive ample opportunities to conclude their Departmental Proceedings. An authority must be strictly held to the standards by which it professes its conduct to be judged.”

While elaborating on the sequence of events, the Bench then enunciates in para 17 that, “The following dates shed light on the cavalier and casual manner in which the Respondent has sought to pursue the proceedings against the Petitioner herein :-

(i) 21.08.2013 : Petitioner was suspended, while contemplating Disciplinary Proceedings against him.

(ii) 12.02.2015 : The suspension was revoked on this day.

(iii) 16.07.2015 : The Departmental Charge Sheet was issued and served upon the Petitioner after a further 5 month delay.

(iv) 31.07.2015 : Reply was submitted promptly by the Petitioner.

(v) 04.03.2016 : For 08 months thereafter, no Inquiry Officer was appointed, when the time prescribed limit is only 15 days.

(vi) 18.04.2016 : The Petitioner challenged the Departmental Charge Sheet vide OA 1396 of 2016 before the CAT.

(vii) On 13.05.2016, the first CAT Order was passed, directing the Respondent to complete the inquiry within 04 (four) months.

(viii) On 03.10.2016, after expiry of the said period of 04 (four) months, an OA 3426/2016 was filed by the Petitioner seeking closure of the impugned proceedings, on the ground of the enquiry not being completed within the time stipulated by the CAT, vide order dated 13.05.2016.

(ix) Vide order dated 22.12.2020, the OA pending before the CAT for more than four years whilst the inquiry proceedings continued, but were not completed during this long further period of more than four years; the CAT disposed off the same and granted further time of 6 (six) months to the Respondent to complete the Disciplinary Proceedings.”

As anticipated, the Bench then maintained in para 18 that, “Thus, the CAT was extremely generous in granting two extensions to the Respondent-Union of India, vide Order dated 13.05.2016 for 04 (four) months, and another after more than four years, vide Order dated 21.12.2020 granting further extension for 06 (six) months. The Respondent has evidently received a time period of more than 05 years, which is many times more than the time period contemplated under the dicta of the Hon’ble Supreme Court in Prem Nath Bali (supra) and the CVC circular; for completion of the Departmental Proceedings; and yet failed to conclude the said proceedings.”

Most significantly, the Bench then minces absolutely no words to hold clearly in para 23 that, “There is no gainsaying the legal position that the Disciplinary Proceedings cannot continue ad infinitum. Allowing such proceedings to continue ad infinitum would not only be highly prejudicial to the Petitioner herein but destructive of the Rule of Law. The Respondent-Union of India, being a ‘State’ under Article 12 of the Constitution is bound to act in a fair non-discriminatory, reasonable and non-capricious manner. The conduct of the Respondent in the facts of the present over a long period of 05 years and not merely on one two dates of hearing, disentitles it for any discretionary relief of extension of time.”

No less significant is what is then stated aptly in para 24 that, “Once the application for extension of time to complete Disciplinary Proceedings filed by the Respondent was rejected, the Disciplinary Proceedings did not survive and all steps taken subsequent thereto by continuing the Disciplinary Proceedings were manifestly arbitrary, illegal and non-est in the eyes of law.”

It cannot be lightly dismissed that the Bench then maintains in para 25 that, “The contentions on behalf of Union of India regarding the Petitioner not cooperating in completion of Disciplinary Proceedings after the impugned Order dated 29.07.2021 are mere bald assertions averments and do not warrant acceptance by us.”

Quite frankly, the Bench then points out in para 26 that, “Had the extension to continue disciplinary proceedings been granted, there was no question of opening sealed cover in terms of K.V. Janakiraman (supra). However, axiomatically, the application for extension of time was categorically rejected. Hence, the direction to open sealed cover cannot be faulted with.”

For sake of clarity, the Bench then in its best wisdom seeks to clarify in para 27 that, “It is not in dispute that no other Disciplinary Proceedings were contemplated against the petitioner. The use of the words “the pendency of any disciplinary proceedings” in para 6, and observation in Para 7 of the order impugned before us, to the effect that benefits thereunder “shall be subject to the outcome of the disciplinary proceedings” appear to be wholly unwarranted and have created unnecessary anomaly, warranting interference therewith in the instant petition. The aforesaid limited and apparent error of CAT has caused unnecessary prejudice to the petitioner and resultantly in the interest of justice, the said unwarranted words are required to be eschewed from the said para 6 and 7 of the impugned common Order.”


Most forthrightly, the Bench then holds in para 28 that, “For the foregoing reasons, we hold:-

(i) That the CAT had rightly rejected the request of the Respondent for extension of time for completion of Departmental Proceedings. Consequent to such rejection, the Departmental Proceedings stood lapsed. As a further Consequence, the direction given by the CAT to open the sealed cover and to consider the Petitioner for promotion cannot be faulted with.

(ii) Accordingly, in the above peculiar facts and circumstances, the Writ Petition filed by the Union of India bearing W.P.(C) No. 2590/2022, assailing the rejection of their application for extension of time has no merit and it is hereby dismissed.

(iii) The Writ Petition filed by the Petitioner herein bearing W.P. (C) No. 2267/2022 is allowed in the aforesaid terms. The proceedings arising from the Departmental Charge Sheet dated 16.07.2015 no longer survive and stand closed. All consequential proceedings will also terminate and be considered non-est ab initio. The Petitioner must therefore be given all consequential benefits, including the necessary promotions at par with his juniors, within 04 weeks of the receipt of this judgment.”

Finally, the Bench then concludes by holding in para 29 that, “All the pending applications stand disposed of. No order as to costs.”

In sum, we thus see that the Delhi High Court has made it indubitably clear that the disciplinary proceedings continuing ad infinitum would be destructive of the rule of law. So there can certainly be no justification for such proceedings to dilly dally on one pretext or the other. Also, there can be no gainsaying that they must be concluded at the earliest and not at the latest. We thus see that in this leading case the Delhi High Court very rightly grants relief to CBIC officer named Anish Gupta.

Most significantly, the Bench then minced absolutely no words to hold clearly in para 23 that, “There is no gainsaying the legal position that the Disciplinary Proceedings cannot continue ad infinitum. Allowing such proceedings to continue ad infinitum would not only be highly prejudicial to the Petitioner herein, but destructive of the Rule of Law. The Respondent-Union of India, being a ‘State’ under Article 12 of the Constitution is bound to act in a fair non-discriminatory, reasonable and non-capricious manner.”

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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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