Of course, all is not well with our world. The pandemic is far from over. India’s
exports have faltered in October, with another surge and lockdowns in Europe.
rail passenger traffic remain at extremely diminished levels. While complete lockdowns are now unlikely in India, we are bearing the brunt of the shutting down for a quarter of the year - the fiscal deficit at the end of September stands at 114.8% of the annual budget estimate. The news on our state governments is quite dire, with the
latest RBI report noting that their gross fiscal deficits are set to double in 2020-21. And households have sold (that is, recycled) the highest amount of their most trusted asset,
gold, in eight years! Going ahead, full opening is also unlikely as the risk of repeated waves cannot be ruled out (Read
Mihir Sharma on why India cannot take it easy on Covid).
Despite the sparkle in data points, businesses continue to reel under uncertainty and basic financial stress. While the government has extended the Emergency Credit Line Guarantee for MSMEs by another month, of the provided funds of Rs. 3 lakh crore, so far only 1.93 lakh crore has been sanctioned, and 1.45 lakh crore disbursed. As Chandrakant Salunkhe, founder chairman of the SME Chamber of Commerce notes, just 45 lakh MSMEs have bank loans, out of over 6 crore registered MSMEs- clearly, despite government mandates, banks remain risk averse and financial inclusion has a long way to go in addressing small business credit needs (See
Latha Venkatesh, CNBC TV18).
When it comes to credit to small businesses, this year has seen unprecedented pressure on both borrowers and financial service providers. Two reports from CGAP look at the ongoing experiences with moratoria in India, Pakistan, Peru and Uganda ( summary available in
this post). One of the papers, “
Consumer Protection and COVID-19: Borrower Risks as Economies Reopen” is a must read as it puts together recommendations for policy makers, regulators, and service providers on keeping the borrower financial needs upfront,
without putting excessive stress on the service providers. The report looks at current moratoria terms and restructuring and at the responsible provision of new credit.
The pandemic has helped push digital payments as small vendors across the country have adopted cashless modes through their phones. So we find UPI transactions crossing one more milestone in October,
passing the 200 crore mark. For a roundup of relative performance, read this data story, “
Where India leads in digital payments, and where it lags”. Looking beyond the numbers, as digital transactions catch on, the potential from open banking regimes to enhance financial inclusion increases.
CGAP has a Working Paper out, identifying twelve design components that are critical to any open banking regime and five specific considerations that regulators and policy makers in emerging economies should consider, if they want an open banking regime that will support financial inclusion, by design, as a policy objective.