Possible ways to reduce corruption and reduce black money

India’s battle against corruption has long been linked to the country’s high cash usage, with black money, bribery, and tax evasion thriving in an opaque cash-driven economy. A few recent incidents involving high level corruption has shaken the confidence of the citizens and unless some strong measures are taken, it will have negative impact on the morale of the citizen, confidence of the business community as also the global investors. Adopting a central bank digital currency (CBDC) and reducing the highest denomination to ₹100 can be potential game-changers. Digital transactions leave a trail, making illicit dealings harder, while lower denomination notes make hoarding cash and bribing large amounts impractical. The adoption of digital currency could bring enhanced transparency, as every transaction is recorded, making tax evasion and large cash-based bribes more difficult. Additionally, a ₹100 maximum note would make cash transactions cumbersome, discouraging bulk bribery and the storage of illicit wealth. However, challenges remain. While digital currency could improve financial oversight, concerns over cybersecurity, financial privacy, and the digital divide must be addressed, as millions still rely on cash for daily transactions. Similarly, eliminating high-value notes may push corruption towards alternative assets like gold, cryptocurrencies, and foreign currencies rather than eradicating it. Lessons from India’s 2016 demonetization suggest that while such measures can temporarily disrupt corruption, they do not fundamentally eliminate it. For lasting impact, these monetary changes must be paired with broader institutional reforms, including stronger anti-corruption laws, judicial efficiency, financial literacy, and governance transparency. The real fight against corruption lies in reducing bureaucratic red tape, strengthening enforcement agencies, and encouraging digital transactions in a way that is inclusive, secure, and efficient. While digital currency and a Rs.100 note cap could curb cash-based corruption, systemic reforms and stringent enforcement remain crucial to reducing corruption.

hashtag#Digitalcurrency;hashtag#Corruption

Accelerate growth through tokenization and digitalization

Tokenization and digitalization are transformative technologies that can accelerate India’s economic growth. Using digital technologies like blockchain, physical assets can be converted into digital tokens, making them easier to manage, trade, and leverage.

Tokenization of land and property enhances liquidity and access to finance also enabling fractional ownership. Tokenizing land allows assets to be divided into smaller, tradable units, opening real estate investment to a broader population, including rural and semi-urban areas. It also increased liquidity as tokenized assets enable partial sales, unlocking tied-up capital and improving credit access for entrepreneurs. It also brings in transparency and trust in transactions by creating foolproof records. Blockchain creates a tamper-proof history of ownership, reducing disputes and corruption. Digital records minimize bureaucratic delays, making transactions more efficient. It also empowers rural and semi-urban communities as it formalizes land titles, enabling access to government support and financial products. Easier access to property assets supports local development projects and small businesses.
A few countries have success stories for us to emulate. The Swedish land registry tested blockchain for property transactions, enhancing transparency. In
Georgia blockchain-based land registries reduce fraud and disputes.

Apart from land, Indians also have large holdings of gold. Digitalization of gold
improves liquidity and market efficiency by converting physical gold into digital tokens for easier trading and enhancing liquidity. It also lower transaction costs by reducing expenses associated with storage, transport, and verification. It formalizes the market by shifting informal gold trading into the formal economy, improving tax compliance and security. Blockchain ensures secure and transparent transactions. It also supports economic growth. Digital gold attracts domestic and foreign investors. It connects with wallets and payment systems, strengthening India’s digital economy.

In Switzerland fintech firms offer secure, tokenized gold investments. UAE has Blockchain based gold trading platforms improve efficiency and attract investors. In India, GIFT City has started India’s first regulated tokenization platform enhances liquidity in real estate. AP’s Bhoomi project has initiated Blockchain-based land registry system, which ensures transparency and reduces fraud. MMTC-PAMP offers secure digital gold investments backed by physical gold. By adopting tokenization and digitalization, India can tackle liquidity constraints, improve transparency, and reduce inefficiencies in real estate and gold markets. These technologies can empower populations, integrate them into the formal financial system, and drive broader economic growth. Learning from successful international models, India can use these innovations as key pillars of its economic development strategy. hashtag#Tokenization,hashtag#Digitalization

Let us make life simpler by questioning unnecessary and redundant processes

 

Let us make life simpler by questioning unnecessary and redundant processes- Series 1

One day, two strange encounters with two Banks across two continents:

While banking has become quite easy in the internet era, with net banking substantially improving the ease of doing business, I had two frustrating yet interesting encounters with two banks on the same day across two continents. The first one is a bank in Mauritius where I had an account quite some time back and closed for over three to four years back, I had received an unsolicited credit card offer about a year back which I never bothered to activate despite repeated follow up from their so-called marketing (or pestering) team. I was surprised to receive a letter dated early February in my mail box(in mid-March) informing that I had overdue in my so called not yet activated credit card and if it is not cleared by the end of the month(presumably February) the matter will be reported to the country’s Credit Information Bureau, which obviously will impact my ability to avail additional credit(they presumed that I used the not activated credit card to avail credit facilities of low four figure amount, which they had shown as default. A few frantic calls and mail finally bring a response that it was an administrative error (how convenient). I am wondering how a bank can attribute defaults to a non-activated credit card.

Another interesting encounter with a bank where I have recently opened an account. From the day I opened the account, the Relationship Manager pestered me to place some fixed deposit in view of the attractive interest rate being offered by the bank. However, the real fun started when I tried to open a FD through internet banking. I could not proceed with creating the FD as the bank was refusing to take the nominee (same as in my savings account) when I was providing the correct address, as the bank’s internet banking did not have a provision for international address in their system. While the business side was apologetic about the faux pass, the IT team was quite indifferent to their oversight. The solution they offered was to provide a local address to affect the transaction. My question is as to why the Regulator does not standardize the KYC rules for the depositors including for the nominees. Why is the Adhaar not taken as an identification tool?

 

Let us make life simpler by questioning unnecessary and redundant processes- Series 2

I had an interesting experience recently. Had not received the superannuation payments from LIC of India. On enquiring why there has been no payment, I got a mail that I have to submit an Existence Certificate which has to be certified by a gazette officer or a bank manager. Firstly, the institution did not initiate the action at its own end. Secondly, it is a superannuation account where the deposit is already there, and you are only making an annuity payment. In case of a demise, the nominee would have approached the institution anyway. Thirdly, in the current tech enabled world, a video call with your identification documents could have resolved the existence confirmation instead of resorting to archaic processes. I know one insurance company has already initiated the same. Can the insurance regulator and the government initiate a process change?

 

Let us make life simpler by questioning unnecessary and redundant processes-Series 3

A major Indian private sector Bank insists on a branch visit to customer to open a DMat account even when the same customer may have joint D mat accounts with his name as a primary customer, the second person(wife) also has DMat account with the same bank. Both the souses have also accounts the securities trading arm of the bank also. Ideally one should be allowed to open the DMat account electronically in such a case when all the KYCs are available with the bank. While it is impractical for an NRI customer, it is equally redundant exercise for a resident customer. Do not understand the logic of the bank or have I missed something major because of which the bank is insisting on a branch visit?

 

Let us make life simpler by questioning unnecessary and redundant processes- Series 4

I received the following message from one of my banks, a reputed Indian private sector bank, a few months back.
“We refer to the Tax Identification Number (TIN) you had submitted to the Bank for FATCA/CRS Declaration for your Country of Residence. Regulatory authorities have informed that the TIN submitted in your account is incorrect. Under the applicable law, penal consequences can be levied on the Bank for cases were inaccurate, incomplete or false disclosure of statement of financial transactions or reportable accounts by you. The Bank shall be entitled to take any necessary action and recover from you such an amount levied due to such inaccuracy, incompleteness or false disclosure. “. For any compliant customer, it is quite a strongly worded warning by the bank. On an immediate reply citing my TIN to the sender with a copy to my Relationship Manager, I received no response from the sender but thankfully the Relationship Manager mentioned that ReKYC was last updated in 2022, and it is required every 10 years. The explanation still did not address the issue and on telephonic enquiry with the RM, I was asked to ignore the message as it was a system generated message. How can a system generate such wrong letters unless it is programmed incorrectly? My question is that why should banks be harassing compliant customers this way and get away with frivolous excuses. It is time the regulator looks into these areas of customer harassment. Apart from a regulatory fine, compensation to customers will ensure better behavior by banks.

 

Let us make life simpler by questioning unnecessary and redundant processes- Series 5

Recently I initiated the process of creating an FCNR deposit with a reputed Indian private sector bank, where I already have a similar deposit and have been a customer for over 20 years. Funds were transferred to the bank. However, instead of allowing the FCNR deposit creation through internet banking, the bank required physical forms to be signed, scanned, and sent. Following this, they insisted on receiving the physical copies as well, which was arranged for collection by the bank's courier.
This raises a question: why not enable the entire process through internet banking, complemented by a security check via video call if necessary?
But the challenges did not end there. After submitting the application, I was informed by my Relationship Manager that a compliance call would follow. When the call came from the compliance desk, on my registered phone number, it was also attended by a supervisor. The first security question they asked was about my registered phone number—a question I found redundant since they had called me on that very number.
In addition to standard security questions, they asked for details about the quantum of the FCNR deposit, its duration, and the applicable interest rate. I found these questions unnecessary and irrelevant, especially since this information was already available with the bank and does not appear to be appropriate security questions.

It is high time the regulator strived to streamline banking processes to enhance efficiency and accessibility while maintaining robust security standards.

Time to bring in agricultural income to the tax net

While the recent budget has brought some relief to the income tax payers at the lower income end, it is high time we bring in a radical change in the income tax system by introducing tax on agricultural income. While our vision is to become a “Viksit Bharat” by 2047, we are unfortunately in the wrong company with respect to agricultural income taxation. While countries like US, China, UK, Germany, Canada, Australia, France, Brazil and South Africa tax agricultural income(farmers continue to receive incentives on inputs, some with exemption to small farmers and in some countries exempting agricultural properties from inheritance tax), we are unfortunately in the wrong company of Pakistan, Bangladesh, Nigeria, Kenya, Zambia and Uganda in this matter.

At least to start with tax payers with significant other income and farming not being their core activity, should stop getting exemption for their farm income. It is also perhaps more politically feasible. This will plug a major loophole in the system and brings in more tax equity.

 Need structural and behavioral changes to improve the image of India and Indians.

1. Ensure proper pavements for walking. The sign of real development is to empower everyone to walk around safely. Zebra crossings should be respected. I noticed during a recent trip to Japan that there are people specially positioned at zebra crossings to help people to cross over. India certainly needs this service for sometime till we build an empathetic culture.
2. All the new developments in a city or town should compulsorily have walking and cycling tracks. It’s not not only healthy, it’s carbon neutral.
3. While one respects the self employed vendors/entrepreneurs on road side, it needs to be regulated with aesthetically designed and uniform looking kiosks. In fact the corporates can do their bit in these areas through their CSR
4. We need to completely ban posters be it political or cinema related or business promotions. They have no right to deface our towns and cities. Our traditional art work should be displayed instead which will make our towns and villages more aesthetic.
5. We need to work on reducing the noise level, starting from honking to toning down the loud speakers.
6. We are also very loud in public places. I noticed in Japan that you rarely see any one talking loudly and even in a crowded metro like Tokyo, it is relatively quiet.

7. Courteous service by public facing officials need to be inculcated. The processes should also be simplified to make them customer friendly. For each service, there has to be a centralized contact Centre on both e mail and phone for enquiry and grievance redressal. More and more such services be privatized. We have started seeing the change gradually
8. We need to respect blue collar workers. They are the backbone of any economy and with the prosperity of the economy, their size needs to expand.
9. The media should also start highlighting the positives of the society and start celebrating the real heroes of the society.
10. The hate mongering TV debates should be monitored and should be gradually stopped.
11. Our judiciary should become proactive, suggest changes of archaic laws and start dispensing justice with strict time lines. While in the last half century we have significant achievements in many areas including agriculture, white revolution, telecom, banking, travel & tourism, direct distribution of government benefits, our judiciary is still stuck in its archaic processes and dispensation. Quick dispensation of cases will also significantly reduce corruption, a bane of the Indian society.
12. The babu culture has to end. Our politicians and bureaucrats have to come down from the ivory tower and start behaving normally as it happens in most of the Western countries and also in many other Asian countries. This will also reduce the clamor for government jobs.

Covid 19 - Needs Innovative Solutions from Banks

The Covid 19 has brought in extra ordinary challenges in our life as also has completely brought in a new challenge in all areas including in business. Baring a few sectors, business across all the sectors are hugely impacted. The sudden closure of the businesses and the business cycles will open up major challenges when the businesses reopen. The companies, especially the SMEs and the MSMEs will be confronted with a situation of lack of working capital and this will be one of the major challenges. We need to focus on this immediately and the banks have to come up with an innovative solution of funding at least three to four months working capital after factoring lower receivables during the next few months as also delay collection of receivables. This funding has to be provided without seeking any additional security. The term loan should be for at least 18 months to 24 months  depending on the requirement of the company and can be repaid in monthly installments (ballooned, wherever required, with a moratorium of three to six months). The interest applicable for such funding be at the same rate of the working capital with possibly an interest rate incentive for earlier payment.    

Are the financial services companies misleading customers ?

The aggressive marketing by financial service providers despite the serious financial crisis the world saw in 2008-09 makes on the think if the banks have reallty learnt lessons from the earlier event. Here are some of the examples:

1. The bank calls a customer whose loan value is about 30 % higher than the property value(due to the massive drop in asset prives) if they would like to avail of a special offer of deferment of instalment payment of one month due to festivities.

2. The exchange houses in Dubai started a campaign when the India rupee depreciated from Rs. 12 to Rs. 12.5 against Dirham encouraging people to remit aggressively. This campaign lead to a number of indivisuals borrowing for remitting back to India. This has lead substantial loss for such remitters as the rupee further depreciated to Rs. 15. Would the regulator ever take the exchange houses to task ?

3. A self employed professional who have had no significant income for over six month receives a call from his bank for generous offer both for car loans and personal loans. What is the role of  customer intelligence analytics  department of the banks ?