The government unleashed a raft of proposals to widen the impact of financial inclusion initiatives, help bottom of the pyramid entrepreneurs access more capital while guarding the poorest of the poor from financial frauds that rob them of hard earned money.
Alluding to the recent past when there have been rising instances of people in various parts of the country being defrauded by illicit deposit taking schemes, the finance minister proposed to bring in laws to check this problem. “The worst victims of these schemes are the poor and the financially illiterate. The operation of such schemes are often spread over many states. I, therefore, propose to bring in comprehensive central legislation in 2016-17 to deal with the menace of such schemes,” said Jaitley.
Currently, collective investment schemes (CIS) are regulated by Sebi and refer to pooling of more than Rs 100 crore from investors under any scheme or arrangement and which is not registered with capital markets regulator. However, there is no comprehensive legal framework for all kinds of illicit money pooling schemes they are mostly governed by state-level laws.
Besides, any fund raising exercise involving 50 or more investors is considered as a public offering and therefore it is also regulated by Sebi. However, there are many cases where companies claim to have raised funds from less than 50 investors and peg their total mop-up at below Rs 100 crore to avoid any regulatory glare.
Meanwhile, the Budget also announced big targets for funds for small entreprenuers. The pradhan mantri mudra yojana (PMMY) was launched for the benefit of bottom of the pyramid entrepreneurs. “Banks and NBFC-MFIs 19 have reported that the amount sanctioned under PMMY had reached about Rs 1 lakh crore to over 2.5 crore borrowers by early February this year. I propose to increase the target next year to Rs 1,80,000 crore,” Jaitley said.
Though this year’s budget does not have any surprises, we welcome the proposal to increase the target next year to Rs. 1, 80,000 crore under The pradhan mantri mudra yojana (PMMY), said Kuldip Maity, MD and CEO, Village Financial Services. “The environment of easy lending and easy access to credit through setting up of MUDRA and PMMY will drive the rural entrepreneurship and growth of MSMEs,” said George Alexander Muthoot, MD - Muthoot Finance.
To give room to NBFCs to grow, the government said FDI will be allowed beyond the 18 specified NBFC activities in the automatic route in other activities which are regulated by financial sector regulators. Besides, a deduction to the extent of 5 per cent of total income in case of NBFCs on account of provision for bad and doubtful debts, is a positive step, according to Dilip B Desai, chairman of accounting and consulting firm Baker Tilly DHC.
On the technology front, to give a boost to financial services accessed by rural India, Jaitley said the government would undertake a massive nationwide rollout of ATMs and Micro ATMs in Post Offices over the next three years. “There is continued focus on financial inclusion by the announcement of ATMs and micro ATMs in post offices,” said A Vellayan, executive chairman, Murugappa Group.
Rishi Gupta, MD and CEO, FINO PayTech feels these initiatives are clearly aimed at boosting rural economy and is directional in nature to build demand over a period of time for everyone, including corporate houses, to benefit. “Initiatives on rural development, MNREGA, infrastructure and social development augur well in creating rural demand, which is good.
Digital literacy to over 6 crore rural households, DBT of fertiliser subsidy, legislation of targeted delivery of financial services using Aadhar and increase in ATM and micro-ATM infrastructure in post offices, are big steps towards achieving the larger financial outreach. Efficient delivery of welfare payments through digital initiatives will lead to huge savings for the government,” said Gupta.
The Department of Posts (DoP) has already announced plans to open 1,000 ATMs by March this year and also bring all 25,000 departmental post offices under core banking system. The DoP has 25,000 departmental post offices and 1,30,000 rural post offices across the country.
The core banking system will enable customers to operate their accounts and avail banking services from any post office on its network, regardless of where they maintain their account.
The number of ATMs in rural and semi-urban areas has been rising in the recent years, though urban and metropolitan centres still dominate. In 2015, about 44 per cent of the total ATMs were located in rural and semi-urban centres.
