Mouth-Watering INR 54,000 crores (USD826.10 crores) can be routed through ePayments!!

          As on date, Mobile operators in India have to adhere to the below TRAI guidelines, with effect from 01/01/2016:-

RELIEF TO CONSUMERS FOR CALL DROPS

16. Measures to provide relief to consumers. - Every originating service provider providing Cellular

Mobile Telephone Service shall, for each call drop within its network,

(a) Credit the account of the calling consumer by one rupee:

Provided that such credit in the account of the calling consumer shall be limited to three dropped calls in a day (00:00:00 hours to 23:59:59 hours);

(b) Provide the calling consumer, through SMS/USSD message, within four hours of the occurrence of call drop, the details of amount credited in his account; and (c) in case of post-paid consumers, provide the details of the credit in the next bill.”

          Negotiations between the Mobile Operators and TRAI have commenced and any amendments if any will be released shortly.

          One of the paragraph in the letter to TRAI states as under: “The annual industry compensation due to dropped calls may range from ₹10,000 crore in case 10 per cent of subscribers claim compensation to ₹54,000 crore in case 50 per cent of subscribers claim the same. This amount would represent up to 37 per cent of the industry’s annualised adjusted gross revenue in case of 50 per cent claims,” .

          As per rough estimates the ratio between Prepaid and PostPaid connections is 80:20.

          This 80:20 ratio translates into a huge opportunity for Safe eTransactions to be popularised.

          As per TRAI guidelines, the monetary compensation for ‘call drop’, has to be credited to the subscribers account i.e SIM.

          To increase the banking penetration in India, the option of routing such credits to the Jan Dhan Bank Accounts/Pre Paid Instruments (eWallets/Mobile Wallets) of the subscribers should be explored.

          7 Benefits of routing the ‘Call Drop’, compensations to Jan Dhan Bank Accounts/Pre Paid Instruments (eWallets/Mobile Wallets) :

01)  Encourage MSB to open bank accounts/eWallets

02) Increase the footprint of banking in country

03) Encourage other government agencies to route transactions to the linked Jan Dhan/eWallets

04) Establish an verifiable audit trial

05) Introduce Safe eBanking channels to MSB

06) A readymade data base for Payment Banks to tap as and when their networks are ready

07) Minimise complaints of non-receipt of compensation  

The next eCommerce Frontier in India – Overdraft Finance for Shoppers

          The chief inspiration for today’s blog Post is the Star Trek Quote – “Space - Where no man has gone before"

          The eCommerce arena in India is witnessing an explosive growth with the pool of Online Shoppers increasing every minute.    

     

          This Forbes article reflects the trend.  

          One of the main reasons as to why shoppers still prefer mom and pop retail stores is the informal overdraft facility.

          Any reasonable sized mom and pop store offers overdraft facilities ranging from INR 250\-to INR5000\-.

          These overdraft facilities are offered without any security and are based on trust.

          The default levels of such overdraft are very low.

          Today’s post explores the market and the process flow for introducing Overdraft facility for online shoppers.

Q: What is an Ovedraft?

Ans:  Overdraft is an Loan arrangement under which a bank extends credit up to a maximum amount (called overdraft limit) against which the account holder can write checks or make withdrawals. An overdraft is a type of revolving loan where deposits (credits) are available for re-borrowing, and interest is charged only on the daily overdraft (debit) balance.

The most famous overdraft facility in India is the PMJDY Overdraft facility.

Q: How different is from EMI financing?

Sr No	Overdraft	EMI Loan
01)	This is like a revolving credit. There can be Debits (Withdrawals) and Deposits (Credits) in the account. Debits (Withdrawals) can be made upto the set limit.	Single Debits (Withdrawal), multiple credits
02)	Interest is charged on the daily withdrawal outstanding at the end of every month.	Interest is collected along with part of the Principal every month.
03)	Petty shopkeepers or Wholesale shopkeepers offer informal overdraft facilities. The interest portion is built into the selling price.	EMI Loans are offered by Banks or financial institutions.

Q) What are the finance options available to Online Shoppers in India?

Ans: The most common finance options in India to Online Shoppers are the EMI loans from the Credit Card Companies.

These EMI options are available only for the respective credit card holders only. New online shoppers cannot avail the EMI options.

Check out on this Google Search for more information on EMI Options.

No Finance Company in India offers Overdraft facilities, more so for online shoppers.

A couple of finance companies do offer EMI loans to online shoppers. Check out here for one such tie up between an eCommerce Company and a Finance Company.

This tie-up is a mix of online and offline model.

It is not a full fledged online model.

The following is a full-fledged model.

01) Customer profiles are created based on eKYC and allot unique customer codes.

02)                  Fix overdraft limits as per risk profile of the customers.

03)                  Obtain NACH (Debit) mandate for recovery of the monthly interest. The upper limit can be fixed as per the Overdraft Limit of the customer.

04)                  Tie up with eCommerce companies wherein the customers can interact with the finance company to finance his/her purchases till the eligible limit.

05)                  Raise alarm when the NACH(Debit) transaction is returned with any reason; financial or non-financial reason.

This Model is most suitable for Finance Companies, though Banks can also consider adopting it.

This model has the following benefits:-

a)    Increase the pool of new customers for eCommerce companies.

b)    Increase the pool of new customers for Finance companies.

c)    Encourage online customers to build a positive credit report.

d)    Encourage Digital India Transactions.

e)    Introduce advanced fraudulent detection techniques.  

f)    Introduce new earning streams for eCommerce/Logistics personnel.

g)    eCommerce companies need not invest for finance.

h)    The processing charges, if any, can be paid by the eCommerce companies if the purchases are beyond a specified level.

                   

Check out this Google search results for the various contours of ecommerce in India

         

Student Scholarship Bank Accounts should be eligible for PMJDY Overdraft

 

Over 10 crores of PMJDY accounts have been opened in bank branches all over India.

PMJDY Bank accounts have been opened in public sector bank branches as well as private sector bank branches.

The immediate priority of the stake holders is to reduce the % of Zero Balance accounts in the PMJDY bandwagon.

Routing Direct Benefit Transfers (DBT) including LPG subsidy is the preferred method to stimulate transactions in the PMJDY accounts.

Insurance coverage – both accidents and life, is another tool to keep the transactions flowing.

Another attractive feature is the INR5000/- clean overdraft facility.

The overdraft comes with lots of strings attached. The first set of PMJDY accounts will be eligible for OD facility after a couple of months.

As there is no precedent for mass clean overdrafts in the banking industry, the initial conditions are stringent.

India has a rich tradition of student scholarships. A large number of scholarship schemes are available for students in India. Both Central and State agencies offer scholarships. Private trusts too offer scholarships.

Majority of the scholarships are disbursed to the respective bank accounts. It is almost mandatory for students to have bank accounts.

scholarshipsinindia.com website offers good details of the various types of scholarships available in India.

momascholarship.gov.in displays the type of scholarships accessible to minority students in the nation.

10 reasons as to why the PMJDY Overdraft facility has to be offered to students too:-

a)     All scholarship amounts will be credited to such accounts.

b)    Calculation of the eligible overdraft amount is easy, as there will be scholarship credits.

c)     Increase the catchment populace of PMJDY OD accounts.

d)    Inculcate financial discipline amongst students.

e)    Credit report can be easily built at the time of processing education loans in future.

f)     Students can adopt batch of OD accounts in their locality and guide them for efficient utilisation of OD limits.

g)    Increase the visibility of PMJDY scheme amongst the public.

h)    Increase loyalty to the ruling party, which can be redeemed at the time of elections.

i)      Tool to reduce the number of Zero Balance Accounts.

j)     No additional investment in terms of infrastructure required. Only correct mapping required.

 

 

 

v

PMJDY Overdraft process should be fully digitised. No Paperwork please

The detailed guidelines on the overdraft process for PMJDY accounts has been hosted on the PMJDY website.

The players involved in the overdraft process are the Bankers, account holders and government functionaries.

As this is the first time that such a massive overdraft program without any collateral is being rolled out, the process is completely through Paper applications.

There is much scepticism  in the social media that this would be a failure and there would be huge defaults by the PMJDY account holders.

In my belief, we Indians especially the marginalised class are trustworthy and the defaults would be minimum.

Adequate safeguards have been built in the process to ensure that the account holder can be tracked in the banking sector.

 The overdraft facility is available only to Aadhaar number holders. NPCI has built a repository wherein the PMJDY account and the Aadhaar number is linked. Once an overdraft is granted in an account, appropriate flagging is done in NPCI database.

This flagging in the database ensures that no multiple overdrafts are allowed in the same PMJDY account.

A process review after 3 months would be great. The whole process should be digitised, with out the need for paper forms.

Below is the proposed process flow:

01) Any PMJDY account with credits from DBT/DBTL Scheme/scholarship/verifiable sources should be eligible for the overdraft facility.

1. The overdraft facility tobe a) 4 times of the average monthly balance b) INR5000/- whichever is lower.
2. PMJDY holders can approach any branch of the bank where the account is held. No need to approach the base branch only.
3. The OD request to be attested through Aadhaar finger-print verification. No need to fill in any forms or provide any income certificate.
4. The respective bank branch officials to validate the request digitally only. No paperwork is envisaged.
5. Once the bank branch officials authorises the transaction in the CBS (Core Banking System), the overdraft facility to be enabled.
6. System to generate alerts in case there are no credits for 30 days.

Indian Cooperative Banks to join the PMJDY cluster

            Buoyed by the success of PMJDY, a number of cooperative banks have sought clarification from Reserve Bank of India, as to whether the cooperative banks can open PMJDY Accounts.

            Dr.Alok Pande Director in Department of Financial Services, has issued a circular stating the minimum requirements cooperative banks should have to open PMJDY Accounts.

            As per the circular, Cooperative Banks (Urban/Rural) which are on CBS (Core Banking Solution) and are having arrangement with NPCI for issuance of RuPay Debit Cards are eligible to open accounts under PMJDY.

            This is one more step towards 100% banking coverage to all Indian households by 26^th January, 2015.   

As on date 200+ cooperative and gramin banks can issue RuPay Debit Cards. The banks are spread over all over India.  

In one of the biggest initiatives towards institution capacity building, NABARD is facilitating the process of bringing the Co-operative Sector onto Core Banking Solution (CBS) platform.

A total of 201 State and Central Co-operative Banks with 6,940 branches from 16 states & 03 UTs of the country, viz. Punjab, Haryana, Gujarat, Maharashtra, UP, Chhattisgarh, MP, Bihar, Karnataka, Tamil Nadu, Kerala, Uttarakhand, Sikkim, Himachal Pradesh, Jammu & Kashmir, Arunachal Pradesh, Chandigarh, Puducherry and Andaman & Nicobar have joined “NABARD initiated Project for CBS in Co-operatives”.

Two vendors, viz. TCS and Wipro, are implementing the ambitious project across the country.

Of the 201 banks with 6 ,940 branches under NABARD Project, 200 banks and 6,939 branches are fully on CBS as on 31st August 2014. This includes 114 new branches which were directly opened on CBS platform.