Magistrate not a post office to forward all complaints without application of mind: Kerala HC - Business Guardian
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Magistrate not a post office to forward all complaints without application of mind: Kerala HC

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In a simple, straightforward, and stimulating judgment titled Jibin Joseph v. Union Territory of Lakshadweep & Anr in Crl.MC No. 2184 of 2021 against the order in Crl.MP 10/2021 of District & Sessions Court, Kavaratti and cited in 2022 LiveLaw (Ker) 329 which was pronounced as recently as on June 22, 2022, the Kerala High Court has minced absolutely no words to hold that a Magistrate Court is bound to apply its mind while exercising the powers conferred to it under Section 156(3) of the Code of Criminal Procedure (CrPC). The Single Judge Bench of Hon’ble Dr Justice Kauser Edappagath stated that while taking cognizance of offences or ordering an investigation into any cognizable case, courts should not merely forward all complaints they receive like a post office. As such, it was emphasized that the powers under Section 156(3) cannot be exercised casually or mechanically but are required to be exercised judiciously.

At the outset, this brief, brilliant, balanced and bold judgment authored by a Single Judge Bench comprising of Hon’ble Dr Justice Kauser Edappagath of Kerala High Court sets the ball rolling by first and foremost putting forth in para 1 that, “This Crl.M.C has been filed to quash Annexure V order dated 27/3/2021 passed by the Court of Sessions, Kozhikode (in-charge of District and Sessions Court, Kavaratti) (for short, the court below).”

Needless to say, the Bench then states in para 2 that, “The petitioner is working as Additional Public Prosecutor and Additional Government Pleader at the District and Sessions Court, Kavaratti, Lakshadweep. The 2nd respondent is a practising lawyer at Kavaratti, Lakshadweep.”

As things stand, the Bench then notes in para 3 that, “The 2nd respondent is representing the accused in SC No. 13/2019 on the file of the Special Court for Trial of POCSO cases, Kavaratti. The allegation in the said case is that the victim girl therein aged 16 years was kidnapped and sexually assaulted by the accused therein.”

Simply put, the Bench then discloses in para 4 that, “Several other crimes were also registered on the allegation that the very same girl was subjected to sexual assault by different persons.”

To put things in perspective, the Bench then envisages in para 5 that, “As per the direction of the Special Court for the trial of POCSO cases, Kavaratti, the victim was accommodated in a Working Women’s Hostel. The victim was found missing one day from the said hostel. The police intervened and took her back to the hostel. Thereafter, the 2nd respondent published a Facebook post alleging that the petitioner is constantly contacting the victim and had a role in the missing incident of the victim girl. As the contents of the said Facebook post revealed the identity of the victim girl, a case was registered against the 2nd respondent as Crime No.35/2020 by Androth police station u/s 23(4) r/w 23(1) & 23(2) of the Protection of Children from Sexual Offences Act, 2012 (for short ‘POCSO Act’) and u/s 228A of the Indian Penal Code, 1860. Annexure II is the FIR. Thereafter, the 2nd respondent filed a complaint to the Station House Officer as well as the Superintendent of Police, Lakshadweep on 1/12/2020 without mentioning any names of the persons who are frequently contacting the victim through phone and regarding the missing incident of the victim girl. Thereafter on 25/1/2021, the 2nd respondent filed another complaint to the Station House Officer, Kavaratti Police Station alleging that the petitioner is constantly contacting the victim and hence committed the offence punishable u/s 11(iv) of the POCSO Act and u/s 75 of the Juvenile Justice (Care and Protection of Children) Act, 2015 (for short ‘JJ Act’). However, the Station House Officer did not register the case. Annexure IV is the said complaint. Thereafter the 2nd respondent filed a private complaint at the Court of Sessions, Kavaratti raising the very same allegations. Since there was no sitting at the Court of Sessions, Kavaratti, the Court of Sessions, Kozhikode which was in charge of the Court of Sessions, Kavaratti forwarded the complaint to the Station House Officer, Kavaratti for investigation u/s 156 (3) of Cr. P.C as per the order dated 27/03/2021. Annexure V is the copy of the private complaint. The order forms part of Annexure V. The said order is under challenge in this Crl. M.C.”

As it turned out, the Bench then observes in para 9 that, “As stated already, the 2nd respondent represents the accused and the petitioner, in his capacity as Additional Public Prosecutor, represents the prosecution/victim in SC No.13/2019. A reading of Annexure V complaint would show that the 2nd respondent suppressed the fact that she is representing the accused in the above case. The allegation against the petitioner is that he frequently contacted the victim girl residing in the Working Women’s Hostel over the phone and that amounts to an offence punishable u/s 11(iv) of the POCSO Act. It is further alleged that the petitioner who is an officer of the court has the duty to ensure the safety of the victim, but by frequently contacting the child over the phone, he has committed the offence punishable u/s 75 of the JJ Act as well.”

As we see, the Bench then specifies in para 10 that, “It is clear from Section 11 of the POCSO Act that only when a person does any act mentioned in sub-clauses (i) to (vi) with sexual intent, the same will constitute an offence. Similarly, to attract the offence u/s 75 of the JJ Act, the accused must have actual control or charge over the child. Without ascertaining whether there is an allegation anywhere in the complaint that the petitioner had any sexual intent to attract S.11(iv) of the POCSO Act or whether the petitioner had actual control or charge over the child, the court below simply forwarded the complaint to the police without a speaking order. The impugned order reads as follows:

“Heard complainant. Complaint is referred to SHO, Kavaratti P.S., u/s 156(3) Cr. P.C to register and investigate the case and report to this court”.”

Most significantly, what forms the cornerstone of this brilliant judgment is then laid bare in para 11 wherein it is postulated that, “Section 156(3) of Cr.P.C. which operates at the pre-cognizance stage confers powers on the Magistrate/Court, who is empowered to take cognizance of the offence under S.190, to order investigation into any cognizable case. It is settled that the powers under S.156(3) of the Cr.PC cannot be exercised casually or mechanically but are required to be exercised judiciously. True, at that stage, the Magistrate/Court is not required to embark upon an in-depth roving enquiry as to the reliability or genuineness of the allegations in the complaint. However, the Magistrate/Court should not adopt the easy way of forwarding the complaint unmindful of the consequences of forwarding such complaints. The Magistrate/Court is not merely functioning as a “post office” in forwarding anything and everything filed in the form of a complaint. The Magistrate/Judge should certainly scrutinize the allegations in the complaint to satisfy himself that it discloses the necessary ingredients of the offence for which investigation is intended to be ordered and to find out whether it is a matter to be forwarded to the police to collect materials for a successful prosecution against the accused. The Magistrate/Court should ensure that the complaint is supported by an affidavit duly sworn in by the complainant as held by the Apex Court in Priyanka Srivastava and Another v. State of U.P. and Others (2015 KHC 4242). The Magistrate/Court has a duty to protect the interest of the accused also since, at the time of conducting inquiry or forwarding of the complaint to the police under S.156(3) Cr.P.C, the accused does not get any right of hearing.”

While citing the relevant case laws, the Bench then mentions in para 12 that, “The scope of Section 156(3) of Cr.P.C came up for consideration before the Apex Court in several cases. In Maksud Saiyed (supra), the Apex Court examined the requirement of the application of mind by the Magistrate before exercising jurisdiction under Section 156(3) and held that where jurisdiction is exercised on a complaint filed in terms of Section 156(3) or Section 200 Cr. P.C, the Magistrate is required to apply his mind. In Ramdev Food Products Pvt. Ltd. v. State of Gujarat (2015 KHC 4199) and in Priyanka Srivastava (supra), the Apex Court reiterated that power under S.156(3) warrants application of judicial mind. In Anil Kumar and Others v. M.K. Aiyappa and Others [(2013) 10 SCC 705], it was held that the application of mind by the Magistrate should be reflected in the order. It was further held that the mere statement that he has gone through the complaint, and documents and heard the complainant, as such, as reflected in the order, will not be sufficient. After going through the complaint, documents and hearing the complainant, what weighed with the Magistrate to order investigation under S.156(3) Cr.P.C., should be reflected in the order, though a detailed expression of his views is neither required nor warranted.”

Be it noted, the Bench then minces no words to state unequivocally in para 13 that, “A reading of Annexure V order would show that it was passed mechanically without examining the facts of the case, nature of allegations and without ascertaining whether the information revealed any cognizable offence or not. The order does not reflect the reason to order investigation u/s 156(3) of Cr.P.C. As stated already, the offences alleged against the petitioner are u/s 11(iv) of the POCSO Act and S.75 of the JJ Act. The allegation is that the petitioner who was the Additional Prosecutor in charge of the conduct of the case of the victim frequently contacted the victim girl residing in the Working Women’s Hostel over phone. As per S.11 of the POCSO Act, the alleged act should be committed with sexual intent. There is absolutely no allegation in Annexure IV complaint addressed to the police that the petitioner had any sexual intent. In Annexure V private complaint filed at the court below also, there are no materials to show that the said act was done by the petitioner with sexual intent. To attract S.75 of the JJ Act, the accused must have actual control over the victim child. There is no such allegation either in Annexure IV or in Annexure V complaints. Law is well settled that before directing the police to investigate under sub-section (3) of S.156 of Cr.P.C., the Magistrate/court should form an opinion that the complaint discloses a cognizable offence. When the allegation made in the complaint does not disclose a cognizable offence, the Magistrate/Court has no jurisdiction to order police investigation under sub-section (3) of S.156 of Cr.P.C. As stated already, the allegations made in the complaint and the documents produced in support thereof do not prima facie disclose the ingredients of S.11(iv) of the POCSO Act and S.75 of the JJ Act.”

Finally, the Bench then concludes by holding in para 14 that, “The Station House Officer, Kavaratti conducted a thorough enquiry on the complaint preferred by the 2nd respondent and submitted a report at the court below. Annexure III is the said report. The report discloses that the allegation in the complaint of the 2nd respondent that the petitioner had been contacting the victim over the phone continuously was factually verified by taking the call detail report of the mobile phone number used by the victim as well as the petitioner. It was found that there was absolutely no phone call contact between the victim girl and the petitioner. It is further reported that the statement of the victim, warden of Working Women’s Hostel, Kavaratti and roommates of the victim girl were recorded and none of them stated that the petitioner made any attempt to contact the victim. The victim girl clearly stated that she was never contacted by the petitioner. The report further state that the security lapse at Working Women’s Hostel, Kavaratti is the main reason for the missing of the victim child. The learned standing counsel for the Union Territory of Lakshadweep has submitted before me that the complaint preferred by the 2nd respondent against the petitioner is false, frivolous ill-motivated and there is no substance in it. For the reasons stated above, I am of the view that proceeding further with Annexure V order would be a sheer abuse of the process of law. Hence, Annexure V order and all further proceedings thereto stand hereby quashed. Crl. M.C. is allowed.”

All told, the Kerala High Court has made it indubitably clear that the Magistrate/Court is not merely functioning as a “post office” in forwarding anything and everything filed in the form of a complaint without application of mind. This we have discussed in detail in para 11 as stated hereinabove. Of course, all the Courts must adhere to what the Kerala High Court has held so very commendably in this leading case.

Most significantly, what forms the cornerstone of this brilliant judgment is then laid bare in para 11 wherein it is postulated that, “Section 156(3) of Cr.P.C. which operates at the pre-cognizance stage confers powers on the Magistrate/Court, who is empowered to take cognizance of the offence under S.190, to order investigation into any cognizable case. It is settled that the powers under S.156(3) of the Cr.PC cannot be exercised casually or mechanically but are required to be exercised judiciously. True, at that stage, the Magistrate/Court is not required to embark upon an in-depth roving enquiry as to the reliability or genuineness of the allegations in the complaint.”

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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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