S. 389 Crpc: ‘Application for suspension of sentence should be considered liberally if punishment is less than 10 years’ - Business Guardian
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S. 389 Crpc: ‘Application for suspension of sentence should be considered liberally if punishment is less than 10 years’

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It is really most heartening to see that in an extremely commendable, cogent, concise composed and courageous judgment titled Ghulam Mustafa & Anr V/s UT of J&K&L in Crl A(S) No. 48/2019 CrlM Nos. 2432 & 1080/2021 CrlM Nos. 391 & 445/2022 that was reserved on May 17 and then finally pronounced on May 19, 2022, the Jammu and Kashmir and Ladakh High Court has most rightly, robustly and rationally reiterated that as per the provision under Section 389 of CrPC, if the convict is punished with imprisonment for a term less than ten years, no notice is required to the Public Prosecutor/State regarding the application filed by the accused for suspension of his sentence and release on bail. This clearly implies that the Court wants that the application for suspension of sentence should be considered liberally if punishment is less than 10 years. The Court was hearing a criminal appeal under Section 374 of CrPC which was directed against the judgment of conviction and order of sentence where the appellant were found guilty of offence under Section 307, 451, 34 of the Ranbir Penal Code and sentenced to go for rigorous imprisonment for ten years with a fine of Rs 10,000.

CRLM NOS. 391 & 445 OF 2022

To start with, this brief, brilliant, bold and balanced judgment authored by a single Judge Bench comprising of Hon’ble Mr Justice Mohan Lal of Jammu and Kashmir and Ladakh High Court sets the pitch in motion by first and foremost putting forth in para 1 that, “Instant criminal appeal under Section 374 Cr.P.C is directed against judgment of conviction dated 30.10.2019 and order of sentence dated 30.10.2019 rendered by the Court of learned 2nd Additional Sessions Judge, Jammu in file No. 33/Sessions titled “State v/s Ghulam Mustafa & Anr.” where under appellants/convicts have been found guilty of commission of offences u/s 307, 451, 34 RPC and sentenced to undergo rigorous imprisonment for (10) years and also fine in the sum of Rs.10,000/.”

Needless to say, the Bench then aptly mentions in para 2 that, “Feeling aggrieved of the impugned judgment of conviction, appellants/convicts have assailed it’s correctness, propriety and legality on the grounds, that as a result of miss-appreciation of facts and misapplication of law so far as the finding of the trial court relating to holding appellants guilty of having committing of offences under Sections 307, 451, 34 RPC and convicting them of the same is bad in the eyes of law, therefore, prayed that the present appeal be allowed the judgment of learned 2nd Additional Sessions Judge, Jammu be set aside.”

To put things in perspective, the Bench then enunciates in para 3 that, “Alongwith the appeal, appellants/convicts have filed applications for suspension of conviction and sentence pending the hearing of appeal, with further prayer for ordering them release on bail primarily on the ground that there is no likelihood of the appeal being heard in the near future, and in view of the law laid down by the Supreme Court wherein it has been held that when a convicted person is sentenced to a fixed period of sentence, on filing of appeal, suspension of sentence should be considered liberally unless there are exceptional circumstances; that the bail applications of both the appellants/convicts filed earlier were rejected vide order dated 02.07.2020 of this Court and to obviate the apprehension of the appellants of there being no likelihood of hearing of the appeal in near future and this Court directed the matter to be listed for hearing on 18.08.2020, thereafter the matter was listed more than 10 times but the arguments in the appeal could not be considered which further constrained the appellant/convict No.2 to file another application for grant of bail bearing CrlM No. 1612/2020, which was further rejected by this Court vide order dated 03.09.2021 on the ground that the appellant No.2 has not even undergone a substantial period of sentence and therefore, it was not a stage for showing indulgence of this Court; that the appellant/convict No.2 is suffering from kidney related ailments and is having only one kidney and the other one stands removed even before the conviction.”

As it turned out, the Bench then observes in para 4 that, “Respondent has filed objections wherein it has been stated that both the appellants/convicts are the main accused in case FIR No. 14/2005 for commission of offences U/S 307, 326, 451, 34 RPC registered at Police Station Gharota, Jammu; that it has been established by the court below that appellants/accused persons have been convicted after full trial and the entire testimonies of the witnesses would narrate as how brutally and with scant regard and fear of the convicts has chopped the arm of the victim; that the appellants deserve no lenience and there are cogent reasons and chances that they would escape the clutches of law as they have come to know that they cannot be absolved of the crime, thus there is every eventuality of the fleeing away justice; that no case of suspension of sentence is made out as the offences for which the accused persons/appellants are charged is of heinous nature and these offences definitely constitute a class apart and need to be viewed with a different approach in the matter of bail; that the case of the appellants are also not covered under the Supreme Court judgments as they have not been in the prison for half of their sentence, therefore, the application be dismissed.”

Most significantly, the Bench after hearing the learned counsels from all sides then while citing relevant provisions and relevant case laws expounds in para 7 that, “Heard & considered. Section 389 of Code of Criminal Procedure deals with the provisions of suspension of sentence pending the appeal. For the sake of convenience Sec. 389 Cr.PC is reproduced hereunder:-

389. Suspension of sentence pending the appeal; release of appellant on bail.—(1) Pending any appeal by a convicted person, the Appellate Court may, for reasons to be recorded by it in writing, order that the execution of the sentence or order appealed against be suspended and, also, if he is in confinement, that he be released on bail, or on his own bond:

[Provided that the Appellate Court shall, before releasing on bail or on his own bond a convicted person who is convicted of an offence punishable with death or imprisonment for life or imprisonment for a term of not less than ten years, shall give opportunity to the Public Prosecutor for showing cause in writing against such release:

Provided further that in cases where a convicted person is released on bail it shall be open to the Public Prosecutor to file an application for the cancellation of the bail.]

(2) The power conferred by this section on an Appellate Court may be exercised also by the High Court in the case of an appeal by a convicted person to a Court subordinate thereto.

(3) Where the convicted person satisfies the Court by which he is convicted that he intends to present an appeal, the Court shall,-

(i) where such person, being on bail, is sentenced to imprisonment for a term not exceeding three years, or

(ii) where the offence of which such person has been convicted is a bailable one, and he is on bail, order that the convicted person be released on bail, unless there are special reasons for refusing bail, for such period as will afford sufficient time to present the appeal and obtain the orders of Appellate Court under Sub-Section(1); and the sentence of imprisonment shall, so long as he is so released on bail, be deemed to be suspended.

(4) When the appellant is ultimately sentenced to imprisonment for a term or to imprisonment for life, the time during which he is so released shall be excluded in computing the term for which he is so sentenced.

Cursory glance of Section 389 Cr.PC makes the legal proposition abundantly clear, that pending an appeal preferred by a convicted person notice shall only be issued to the Public Prosecutor/State in case the convict is punished for offences punishable with death or imprisonment for life or imprisonment for a term not less than ten (10) years, which clearly connote that if the convict is punished with imprisonment for a term less than 10 years no notice is required to be given to the Public Prosecutor/State in regard to the application filed by the convict/accused for suspension of his sentence and his release on bail.

In the case of BHAGWAN RAMA SHINDE GOSAI AND OTHERS Versus STATE OF GUJARAT [(1999) 4 Supreme Court Cases 421], Hon’ble Supreme Court while discussing the power and scope of section 389 Cr.PC regarding suspension of sentence pending the appeal filed by the convict, and while holding that the prayer for suspension of sentence should be considered liberally unless there is any statutory restriction, and while suspending the sentence and directing appellant/accused/convict to be released on bail found guilty for commission of offences u/ss 392 r/w 397 IPC for rigorous imprisonment of 10 years by the trail court, in paras 3&4 of the judgment held as under:-

3. When a convicted person is sentenced to fixed period of sentence and when he files appeals under any statutory right, suspension of sentence can be considered by the appellate court liberally unless there are exceptional circumstances. Of course if there is any statutory restriction against suspension of sentence it is a different matter. Similarly, when the sentence is life imprisonment the consideration for suspension of sentence could be of a different approach. But if for any reason the sentence of limited duration cannot be suspended every endeavour should be made to dispose of the appeal on merits more so when motion for expeditious hearing the appeal is made in such cases. Otherwise the very valuable right of appeal would be an exercise in futility by efflux of time. When the appellate court finds that due to practical reasons such appeals cannot be disposed of expeditiously the appellate court must bestow special concern in the matter of suspending the sentence. So as to make the appeal right meaningful and effective. Of course appellate courts can impose similar conditions when bail is granted.

4. In this case as the High Court was not inclined to hear the appeal expeditiously we are of the view that the sentence passed on appellants can be suspended on some stringent conditions. We, therefore, suspend the sentence and direct the appellants to be released on bail on each of them executing a bond to the satisfaction of Additional Sessions Judge, Nadiad. We direct the appellants to report to Kapadwang Police Station on all Mondays and Thursdays between 4.00p.m. and 6.00 p.m. until disposal of the appeal pending before the High Court.

Ratio of the judgment (Supra) makes it manifest, that Section 389 Cr.PC does not contain any “statutory restriction” in suspension of sentence and granting of bail to the accused/convict and the prayer should be considered liberally and the Appellate Court may impose restrictions considering the gravity of offence.

Similarly, in the case of Vajida Bano and Ors V/s State Through Advocate General, this Court while relying upon the judgment of BHAGWAN RAMA SHINDE GOSAI’S (Supra) suspended the sentence of appellant/convicts, convicted and sentenced in FIR 09/2014 for commission of offences u/ss 363/317/ 302/ 120-B & 201 RPC of P/S Kargil.

In the case of State of Haryana Vs Hasmat (decided by Hon’ble Supreme Court of India on 26th July 2004 in Appeal Crl. 715-717 of 2004), relied by Ld. Counsel for respondent/victim, Hon’ble Supreme Court set aside the order of Punjab & Haryana High Court regarding the suspension of sentence and enlargement of accused/convict on bail convicted for commission of offences u/ss 148/302/307/324 r/w Sec. 149 of IPC r/w 25/27 Arms Act on the ground of seriousness of offence wherein the relevant facts like the “nature of acquisition” the manner in which crime was committed, “the gravity of offence” and the desirability of releasing the accused on bail after they were convicted for committing serious offence of murder, and the said aspects were not considered by the High Court which passing the impugned order of suspension/bail.

In the case of Bholu Vs State of U.P. (Crl. Misc. Application No. 124973 of 2017) decided by Allahabad High Court on 04-05-2018 relied by Ld. Counsel for respondent/victim, Hon’ble Allahabad High Court rejected the 1st and 2nd bail applications of accused/appellant/convict even though he was in jail for 9 years on the ground that the appellant/convict was convicted for heinous offence of 2 murders.

In another case relied by Ld. Counsel for respondent titled Mahesh Pahade Versus State of Madhya Pradesh) [Criminal Appeal No. 933/2014 decided on 18th July 2018] the Division Bench of Madhya Pradesh High Court relaying upon the plethora of decisions of Hon’ble Supreme Court viz; 1. (2018) 3 SCC 187 (Lachhman Dass vs. Resham Chand Kaler and Another); 2. (2016) 6 SCC 699 (Amanullah and Another vs. State of Bihar and others); 3. (2009) 6 SCC 767 (National Human Rights Commission vs. State of Gujarat and others); 4. (2006) 3 SCC 374 (Zahira Habibullah Sheikh and another vs. State of Gujarat and others); 5. (2001) 6 SCC 338 (Puran etc. vs. Rambilas and another etc.); 6. (2000) 2 SCC 391 (R. Rathinam vs. State by DSP); 7. (1980) 3 SCC 141 (P.S.R. Sadhanantham vs. Arunachalam and another); 8. (1979) 4 SCC 719 (Rattan Singh vs. State of Punjab), held, that the victims of heinous crime cannot be denied the right to address their grievances before the court of law. In the decision (Supra) Hon’ble 8 CrlM Nos. 391 & 44 Madhya Pradesh High Court held, that Section 372 of Code of Criminal Procedure gives right to victim to file an appeal against order of conviction which clearly gives right to the prosecutrix a victim of heinous crime on her person to approach the court for cancellation of bail. The case laws relied upon by Ld. Counsel for respondent/victim only lay down an invariable principle of law that in cases punished with imprisonment of less than ten (10) years even no notice is required to be given to the State/Public Prosecutor, however, in heinous offences like that of murders u/s 302 IPC, the court has the power/jurisdiction to grant or refuse the suspension of sentence and bail. In the case in hand, appellants/convicts have been found guilty by the trial court of 2nd Additional Sessions Judge Jammu for commission of offence u/s 307, 451, 34 RPC and sentenced to undergo rigorous imprisonment for (10) years and also fine in the sum of Rs.10,000. Vide ratio of the judgment of Bhagwan Ram Shinde Gosai’s and others case (1999) 4 Supreme Court Cases 421 (Supra), relied by Ld. Counsels for appellants/convicts, there is no statutory restriction/prohibition in not considering the application for suspension and releasing of appellants/convicts on bail. Appellant/convict No.1 is resident of Sagar Nallah Graint Ranjan, Tehsil Jammu while appellant/convict No.2 is resident of Bye Dhara Gursai, Tehsil Mendhar and both them have deep roots in the society and do not possess the golden wings to flee from justice, as nothing substantial has been brought before the notice of this court that appellants/convicts have absconded during trial. The seriousness or gravity of offence is to be seen in cases where accused/convict is punished with death penalty, life imprisonment or imprisonment of 10 years and above, wherein, while considering the application for suspension and bail the judicial description lies in the wisdom of the court. Right to life and liberty of an individual is precious under Article 21 of the Constitution of India and is also a very valuable right of accused/convict which also continues during the appeal period as appeal is the continuation of the trial.”

While batting for suspension of sentence, the Bench then hastened to add in para 8 that, “Keeping in view the facts that the applicants/appellants are in custody for the last more than two and half years of the total sentence imposed and applicant/appellant No.2 is suffering from kidney related ailment and there is no immediate prospect of the main appeal being heard in near future, a fit and proper case for suspension of sentence is made out.”

As a corollary, the Bench then stipulates and directs in para 9 that, “As a sequel to the aforesaid discussion, I am of the considered opinion that applicants/appellants have made out a strong case for suspension of sentence and grant of bail in their favour. I, therefore, suspend the sentence inflicted upon the applicants/appellants and direct them to be released on bail by executing surety bonds in the sum of Rs.50000/- each to the satisfaction of Registrar Judicial of this court with the direction to furnish personal recognizance of like amount before Superintendent Central Jail Kot Bhalwal Jammu where the applicants/appellants are presently serving the sentence term in judicial lockup. It is further ordered, that the applicants/appellants shall appear before this court on each and every date of hearing except for the reasons beyond his control and unless exempted.”

What’s more, the Bench then observes in para 10 that, “Applications are disposed of.”

Finally, the Bench then concludes by holding in para 11 that, “List the main appeal for final hearing on 29.07.2022.”

All told, the sum and substance of this extremely learned, laudable and landmark judgment by Jammu and Kashmir and Ladakh High Court is that application for suspension of sentence should be considered liberally if the punishment awarded is less than 10 years and the case is genuine and needy as we see in this leading case also! Of course, all courts must definitely abide by what has been laid by the J&K&L High Court in this learned judgment and consider similar such cases compassionately! There can certainly be just no denying or disputing it whatsoever!

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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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