MONTHLY ARCHIVES: FEBRUARY, 2017
With increasing emphasis on digitisation and digital payments, the need for a strong privacy and data security law becomes more urgent. Making the case for privacy for the poor, (CGAP, 15th November 2016), David Medine laid out the way forward: a key first step is getting feedback from consumers about their personal preferences regarding privacy. At the same time, all stakeholders must be brought together – including providers, regulators, policy makers and investors – to discuss solutions. The questions to address include: What personal information is needed to offer products and to be profitable while still providing privacy protections? How can consumer trust regarding use of their personal information be established and preserved? What information should be permissible to use for data mining and cross-marketing? How beneficial are marketing uses of this information for the poor? How can consumers be made aware of secondary uses of their information and perhaps be given the opportunity to opt-out or opt-in to such uses?
Inadequate data privacy can lead to identity theft, to exclusion, fraud etc, and the biggest risk of not providing adequate safeguards is that if and when customers who are using formal systems for the first time experience specific harms or losses due to poor data privacy and protection, they may turn away from formal finance altogether.
India has few safeguards in place, and enforcement of the law is a serious concern. Nevertheless, it is time that the diaglogue on safeguards is stepped up to raise awareness amongst service providers and consumers to get the right structure in place to protect the customers and strengthen the financial system.
As per a report in the Mint, 23rd December 2016, the government is working on a legal framework that will define the liabilities and obligations of payment companies. Ms Aruna Sundararajan, secretary in the ministry of electronics and information technology, was quoted as follows: The government was examining if the IT Act, 2000 needs to be amended to address five key issues.“First, what should be the security framework for any kind of digital payments? Two, the standards and liabilities of the service provider. Third, data privacy and confidentiality. Fourth, storage and access of data. And if someone fails to comply, what penalty should apply, especially where details of millions of citizens (are involved),”
Vrinda Bhandari and Renuka Sane set out five key design elements for India's privacy law (Mint, 9th February 2017) a) the law should require data collectors to specify the purpose of data collection at the outset, and users should be provided with an opt-out clause, so that they can withdraw their consent for the data collection; b)the law needs to focus on use limitation (how data controllers can use the information collected about their users), putting the ultimate onus on the entities that collect and control data. This also involves devising rules of proportionality and the narrow tailoring of exceptions that will govern the balancing of competing interests; c) a law having an impact on privacy must focus on the sharing and transfer of data. Currently, there is no regulatory framework in place to control how data is shared by the data controller with third parties, much less any consideration of the different standards that govern the sharing of information with governmental and non-governmental entities, both within India and abroad; d) the design of the law should recognize the rights of users- guidance can be taken from the EU framework by recognizing the rights to data quality (ensuring accuracy of personal data by allowing individuals access and correction rights); data integrity (ensuring security of data); data-breach notification (requiring users to be informed of any privacy-related breaches); and data portability (allowing users to transmit their personal data across service providers); e) providing for supervision and redress mechanisms in the law.
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The Budget for 2017-18 was presented to the Parliament today, the following points pertain to the measures proposed towards boosting a digital economy:
88. Telecom sector is an important component of our infrastructure eco system. The recent spectrum auctions have removed spectrum scarcity in the country. This will give a major fillip to mobile broadband and Digital India for the benefit of people living in rural and remote areas.
89. Under the BharatNet Project, OFC has been laid in 1,55,000 kms. I have stepped up the allocation for BharatNet Project to ` 10,000 crores in 2017-18. By the end of 2017-18, high speed broadband connectivity on optical fibre will be available in more than 1,50,000 gram panchayats, with wifi hot spots and access to digital services at low tariffs. A DigiGaon initiative will be launched to provide tele-medicine, education and skills through digital technology.
101. Cyber security is critical for safeguarding the integrity and stability of our financial sector. A Computer Emergency Response Team for our Financial Sector (CERT-Fin) will be established. This entity will work in close coordination with all financial sector regulators and other stakeholders.
VII. DIGITAL ECONOMY
111. Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution.
112. A shift to digital payments has huge benefits for the common man. The earlier initiative of our Government to promote financial inclusion and the JAM trinity were important precursors to our current push for digital transactions.
113. Already there is evidence of increased digital transactions. The BHIM app has been launched. It will unleash the power of mobile phones for digital payments and financial inclusion. 125 lakh people have adopted the BHIM app so far. The Government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.
114. Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly. This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A Mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhar based PoS by September 2017.
115. Increased digital transactions will enable small and micro enterprises to access formal credit. Government will encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.
116. The digital payment infrastructure and grievance handling mechanisms shall be strengthened. The focus would be on rural and semi urban areas through Post Offices, Fair Price Shops and Banking Correspondents. Steps would be taken to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including BHIM App. A proposal to mandate all Government receipts through digital means, beyond a prescribed limit, is under consideration.
117. Government will strengthen the Financial Inclusion Fund to augment resources for taking up these initiatives.
118. Government will consider and work with various stakeholders for early implementation of the interim recommendations of the Committee of Chief Ministers on digital transactions.
119. The Committee on Digital Payments constituted by Department of Economic Affairs has recommended structural reforms in the payment eco system, including amendments to the Payment and Settlement Systems Act, 2007. Government will undertake a comprehensive review of this Act and bring about appropriate amendments. To begin with, it is proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems. Necessary amendments are proposed to this effect in the Finance Bill 2017.
120. As we move faster on the path of digital transactions and cheque payments, we need to ensure that the payees of dishonoured cheques are able to realise the payments. Government is therefore considering the option of amending the Negotiable Instruments Act suitably.
Promoting Digital Economy
160. There is a scheme of presumptive income tax for small and medium tax payers whose turnover is upto ` 2 crores. At present, 8% of their turnover is counted as presumptive income. I propose to make this 6% in respect of turnover which is received by non-cash means. This benefit will be applicable for transactions undertaken in the current year also.
161. I propose to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, to ` 10,000. Similarly, the limit of cash donation which can be received by a charitable trust is being reduced from `10,000/- to ` 2000/-.
162. The Special Investigation Team (SIT) set up by the Government for black money has suggested that no transaction above ` 3 lakh should be permitted in cash. The Government has decided to accept this proposal. Suitable amendment to the Income-tax Act is proposed in the Finance Bill for enforcing this decision.
163. To promote cashless transactions, I propose to exempt BCD, Excise/CV duty and SAD on miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners. Simultaneously, I also propose to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.
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