Things we are reading today - May 15th, 2024

Nirmala Sitharaman, speaking at the “Vision for Indian Finance Markets” event at BSE in Mumbai, urged NSE and BSE to collaborate closely with SEBI to establish stringent regulatory standards. She warned that unchecked growth in retail trading of futures and options could pose challenges to markets, investor sentiment, and household finances.

Highlighting the significant role of household finances and middle-class investors in market stability, she stressed the need to protect their contributions. She also encouraged stock exchanges to leverage technology, including blockchain and AI, to enhance efficiency and transparency.

Emphasizing the importance of capital markets, she stated that they are crucial for capital mobilisation, allocation, and boosting productivity.

RBI is reviewing regulations on gold loans following an audit of IIFL Finance’s gold loan business, focusing on norms like loan-to-value ratios, cash disbursement limits, gold valuation, and auctioning processes.

The central bank plans to issue new guidelines to address operational issues and ensure industry-wide compliance. Key expected changes include banning cash disbursements for gold loans, requiring NBFCs to disburse loans through bank accounts, standardizing gold valuation using Bombay Bullion Rates, and moving towards a centralised auctioning process.

These changes aim to rectify unwritten practices and improve regulatory oversight, though they may increase compliance costs for NBFCs.

RBI and banks aim to shift beneficiaries of government direct benefit transfer (DBT) schemes to the Unified Payments Interface (UPI) to increase digital transactions and reduce cash usage. The National Payments Corporation of India (NPCI) is integrating district and rural cooperative banks into UPI to facilitate this transition.

Despite UPI’s 300 million users, the potential market includes 960 million debit card holders. To boost digital transactions, Sarvatra Technologies is assisting small lenders in offering UPI services.

However, challenges include high cash withdrawals by DBT beneficiaries and limited smartphone usage among rural users. Education and digital infrastructure improvements are needed to encourage broader adoption.

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