Syllabus: General Studies Paper 2

Context:

The devastating impact of the covid pandemic on essential services, especially family planning and sexual and reproductive health, has worsened access to healthcare, especially for women.

• It has put millions of women at high risk of unintended pregnancies, unsafe abortions, illnesses and even death.

Challenges for family planning measures in India

• High population growth: Phase-1 data from the fifth National Family Health Survey (NFHS-5) shows an impressive decline in the fertility rate in almost all states. 
  • India’s total fertility rate (TFR) is declining. It is now 2.2 per woman, nearing the replacement rate of 2.1, according to the latest government data.
  • TFR indicates the average number of children expected to be born to a woman during her reproductive span of 15-49 years.
  • The replacement level is the number of children needed to replace the parents, after accounting for fatalities, skewed sex ratio, infant mortality, etc. Population starts falling below this level.
  • But overall population growth still appears high because India has a high proportion—about 30%—of young people and adolescents who are either of reproductive age or will soon be. 
  • Therefore the population continues to grow even if its fertility rate is declining. 
  • Some modelling studies project that India will reach a peak population of 1.6 billion by 2048 and it will then decline steeply to 1.12 billion by 2065.
• Lack of access to family planning measures: NFHS-4 showed that in 2015-16, nearly 13% women in the reproductive age group (15-49 years) had an unmet need for family planning, including 6% of women who had an unmet need for spacing methods.
• Contraceptive use is the lowest among women from Schedule Tribes, at 48%, followed by Other Backward Classes, at 54%, and Schedule Castes, at 55%. 
• Inequities in access to family planning have translated into poor health and development outcomes.
• Myths about demographic trends in the country: Many believe that certain religious minorities contribute greatly to India’s population growth, a notion that is not supported by data. 
  • The decadal growth rate decline has been sharper among Muslims than Hindus over the last three decades, at 4.7% and 3.1% respectively between 2001 and 2011 . 
  • The share of Hindus in India’s population reduced marginally, from 80.5% in 2001 to 79.8% in 2011, while the Muslim population registered a slight increase, from 13.4% in 2001 to 14.2%. 
  • Contrary to popular belief, the steepest decline in total fertility rate (TFR) was observed among Muslims (0.8%) followed by Hindus (0.5%), Sikhs (0.4%), and Christians (0.3%), between 2005-06 and 2015-16.

For a large proportion of India’s backward communities, social development programmes remain out of reach. 

Syllabus: General Studies Paper 2

Context:

The UN working group on ‘human rights, transnational corporations (TNCs) and other businesses’ has published a new report on human rights-compatible international investment agreements. 

• The  term  “transnational  corporation”   means  an  enterprise whether  of  public, private  or  mixed  ownership,  comprising  entities  in  two  or  more countries, which operates under a system of decision-making, permitting coherent policies and a common strategy through one or more decision-making centres

Key points of the UN report

• Bilateral Investment Treaties can be harnessed to hold TNCs accountable under international law. 
• It emphasises investor obligations at the international level i.e., the accountability of TNCs in international law. 
• It urges states to ensure that their bilateral investment treaties (BITs) are compatible with international human rights obligations. 

Need for holding TNCs accountable under international law. 

• Transparency issues: There have been many instances where the misconduct of TNCs has come to light such as the corruption scandal involving Siemens in Germany.
• Loopholes in Bilateral investment treaties: These treaties promised protection to foreign investors under international law by bestowing rights on them and imposing obligations on states. 
  • This structural asymmetry in BITs, which confer rights on foreign investors but impose no obligations, relegated the demand for investor accountability.
• States do not impose positive and binding obligations on foreign investors. They fall short of creating a framework to hold TNCs accountable under international law.

Past efforts

• Effort was made at the UN to develop a multilateral code of conduct on TNCs. However, due to differences between developed and developing countries, it was abandoned in 1992.
• It aimed to use international law to institutionalise the forces of economic globalisation, leading to the spread of BITs. 
• In 2014, the UN Human Rights Council established an open-ended working group with the mandate to elaborate on an international legally binding instrument on TNCs and other businesses concerning human rights. 

Syllabus: General Studies Paper 2

Context:

US President Joe Biden, UK Prime Minister Boris Johnson and Australia’s Prime Minister Scott Morrison launched the AUKUS security partnership in a joint virtual appearance. It will supplement Quad and ASEAN. 

• The strategic implications of AUKUS for the geopolitics of the extended Indo-Pacific region in general, and the maritime domain in particular, are significant and multi-layered.
• This major policy decision comes just ahead of the first in-person Quad summit to be held in Washington and the annual United Nations (UN) General Assembly deliberations.

What is AUKUS?

• AUKUS will strive over the next 18 months to equip Australia with nuclear propulsion technology.
• As part of this, Australia will acquire nuclear-powered submarines with help from the UK and the US.
• So far, the United States has shared only with the United Kingdom under a decades-old arrangement put together in the face of the threat from the then Soviet Union.
• Australia’s nuclear-powered submarines, when they deploy, will be armed with conventional weapons only and not nuclear weapons

Rationale: 

• The future of each involved nation and the world depends on a free and open Indo-Pacific.
• The strategic environment of the Indo-Pacific has been disturbed by China’s muscular assertiveness in the South China Sea in recent years. 
• Beijing blatantly rejects international law, the UN Convention on the Law of the Seas (UNCLOS), related to the maritime domain.
• The People’s Liberation Army (PLA) Navy resorted to unilateral muscle-flexing to advance its own interpretation of historical territorial claims over disputed waters. 
• Smaller Association of SouthEast Asian Nations (Asean) neighbours were intimidated by China. 
• Also China has contested the “free and open Indo-Pacific” formulation of the global community.

Geopolitical significance of AUKUS

• • United States: In the Pacific, the U.S. and others have been concerned about China’s actions in the South China Sea and its antipathy toward Japan, Taiwan and Australia.
    • AUKUS is the first step that conveys the US resolve to punctuate the maritime domain in a manner that will not only protect Australia’s core security interests, but shape the regional strategic environment. 
  • Australia: Under the arrangement, Australia will build at least eight nuclear-powered submarines using U.S. expertise.
    • A nuclear submarine has reach and stealth that is of a much higher order than a conventional diesel boat, and will be able to ensure a very high degree of sea-denial to any potential adversary.
    • Barring the US, there is no other navy that has nuclear submarines in China’s proximity, and the inclusion of Australia into this category will inhibit the PLA Navy in a variety of ways.
    • In the context of the AUKUS agreement, nuclear-powered submarines will give the Royal Australian Navy the capability to go into the South China Sea, where China is increasingly getting aggressive.
  • Britain: The US said it was about ensuring peace and stability in the Indo-Pacific over the long term. 
    • Leaving the EU under Brexit has left Britain seeking to reassert its global position. Part of that has been an increased focus towards the Indo-Pacific.
  • France: Australia told France it would end its contract with state majority-owned DCNS to build 12 of the world’s largest conventional submarines. 
    • The contract was worth tens of billions of dollars. France is furious and demanding explanations from Australia.
    • A harsh legal battle over the contract appears inevitable.
  • New Zealand: Australia’s neighbour New Zealand has been left out of the new alliance. It has a long-standing nuclear-free policy that includes a ban on nuclear-powered ships entering its ports. 
    • AUKUS leaves New Zealand out of a deal to share a range of information, including artificial intelligence, cyber and underwater defence capabilities.
  • China: China has criticised the US for building “exclusionary blocs targeting and harming the interests of third parties”, and accused Washington of being in transgression of the nuclear non-proliferation treaty (NPT). 
    • The Treaty on the Non-Proliferation of Nuclear Weapons, otherwise commonly known as the Non-Proliferation Treaty or NPT, is an international treaty with an objective to limit the escalation of a nuclear arms race and the technology related to it.

• Impact on QUAD

• The new alliance does not and will not supersede or outrank existing arrangements in the Indo-Pacific region such as the Quad, which the US and Australia form with India and Japan, and Asean, and that it will complement these groups and others.
• Japan, India, Australia and the U.S. already have a strategic dialogue known as ‘the Quad’. 
• Quad nations have been consistent in upholding the principle of freedom of navigation, as contained in UNCLOS, at the political and diplomatic levels. 

Advantages of nuclear-propelled submarines

• Conventional diesel-engine submarines have batteries that keep and propel the vessel underwater. The life of these batteries can vary from a few hours to a few days.
• The newer Air-Independent Propulsion (AIP) submarines have additional fuel cells that allow them to stay underwater for longer and move faster than the conventional vessels. 
• Both conventional and AIP subs need to come to the surface to recharge their batteries using the diesel engine. 
• Nuclear-powered propulsion gives the submarine a near-infinite capacity to stay dived. Since it is propelled by a nuclear-powered engine rather than by batteries, it does not have to emerge on the surface at all, except to replenish supplies for the crew.
• They are also able to move faster underwater than conventional submarines. 

Syllabus: General Studies Paper2

Context:

The Union Cabinet has approved a crucial plan to provide relief to the ailing telecom sector.The relief package will provide much-needed relief to telecom companies like Vodafone Idea and Bharti Airtel.As per earlier reports, the relief package is likely to include a four-year moratorium on adjusted gross revenue (AGR) related dues besides allowing telecom firms to surrender unused spectrum.

About Adjusted Gross Revenue (AGR) in Telecom Sector:

Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).

The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.

It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively. The definition of AGR has been under litigation for 14 years.

While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.

Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why Adjusted Gross Revenue (AGR) has been a contentious issue?

• When the AGR issue, first went under litigation there were about 15 operators. However, until now 10 of them have either closed operations or are undergoing insolvency proceedings in the last 14 years.
• Further, at the current juncture, profits for telcos are under pressure from severe competition and the falling ARPUs (Average Revenue Per User).
• Given this, AGR due will seriously hurt financial stability of whatever telecom companies are doing business in the Indian market.
• Also, Telecom equipment suppliers may also go down as their dues will not be paid.
• In 2019, the Supreme Court of India upheld the Department of Telecom (DoT)’s interpretation of Adjusted Gross revenue (AGR).
• This meant a huge blow to telecom service providers, as the telcos had to pay an estimated ₹1.4 lakh crore to the government.
• The definition of AGR has been such a contentious issue because it has huge financial implications for not only telcos, government but on the Indian economy at large.

Government choses reforms in Telecom sector:

• In the backdrop of the outstanding performance of the Telecom Sector in meeting COVID-19 challenges, with huge surge in data consumption, online education, work from home, interpersonal connect through social media, virtual meetings etc., the Reform measures will further boost the proliferation and penetration of broadband and telecom connectivity.
• The Cabinet decision reinforces the Prime Minister’s vision of a robust Telecom Sector.
• With competition and customer choice, antyodaya for inclusive development and bringing the marginalized areas into the mainstream and universal broadband access to connect the unconnected.
• The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
• A number of structural and process reforms in the Telecom sector. These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on Telecom Service Providers (TSPs).

Structural Reforms by the government:

• Rationalization of Adjusted Gross Revenue:  Non-telecom revenue will be excluded on prospective basis from the definition of AGR.
• Bank Guarantees (BGs) rationalized: Huge reduction in BG requirements (80%) against License Fee (LF) and other similar Levies. No requirements for multiple BGs in different Licenced Service Areas (LSAs) regions in the country. Instead, One BG will be enough.
• Interest rates rationalized/ Penalties removed: From 1st October, 2021, Delayed payments of License Fee (LF)/Spectrum Usage Charge (SUC) will attract interest rate of SBI’s MCLR plus 2% instead of MCLR plus 4%; interest compounded annually instead of monthly; penalty and interest on penalty removed.
• For Auctions held henceforth, no BGs will be required to secure instalment payments. Industry has matured and the past practice of BG is no longer required.
• Spectrum Tenure: In future Auctions, tenure of spectrum increased from 20 to 30 years.
• Surrender of spectrum will be permitted after 10 years for spectrum acquired in the future auctions.
• No Spectrum Usage Charge (SUC) for spectrum acquired in future spectrum auctions.
• Spectrum sharing encouraged- additional SUC of 0.5% for spectrum sharing removed.
• To encourage investment, 100% Foreign Direct Investment (FDI) under automatic route permitted in Telecom Sector.

However, concerns that need to be take care:

• Gross revenue has dropped by 15% to 20% for the year 2017-18 over the preceding year for the incumbents and overall sector revenue has dropped. Also, there is drop in voice and data revenue per user.
• Service providers have to incur huge initial fixed cost to enter semirural and rural areas. Key reasons behind these costs are lack of basic infrastructure like power and roads, resulting in delays in rolling out the infrastructure.
• The change in definition of AGR that will reduce the burden on telcos, applies only prospectively, so those past dues remain payable.
• While it provides time to put their house in order, the telcos’ overall liability does not come down and ultimately they will have to raise tariffs to generate sufficient cash flows. AGR dues will have to be paid with interest.
• A long-standing demand for the government’s intervention in setting telecom floor tariffs, as it has done in the civil aviation sector to protect competition, did not find a place in the relief package.
• Available spectrum is less than 40% as compared to European nations and 50% as compared to China. Hence, it is imperative that spectrum auctioning at sustainable prices is the need of the hour.
• Also, government auction spectrum at an exorbitant cost which makes it difficult for mobile operators to provide services at reasonable speeds.
• However, the government was keen on ensuring that there were more players in the sector and customer retaining choices. Competition in the sector will always lead to better prices and better technology.

Syllabus: General Studies Paper 1

Context:

Mumbai saw black oil-emanating balls lying on the shore. The popular beaches were covered in sticky tarballs that gave off a foul fuel smell.

More in the news

• In August 2021 alone, the Brihanmumbai Municipal Corporation (BMC) removed over 20,000 kg of tarballs from Juhu and Versova beaches.
• Earlier this month, several popular beaches in Goa were covered with a black sticky carpet.

About the Tarballs

• Tarballs are dark-coloured, sticky balls of oil that form when crude oil floats on the ocean surface.
• Tarballs areformed by weathering of crude oil in marine environments.
• They are transported from the open sea to the shores by sea currents and waves, according to a recent research paper.
• Some of the balls are as big as a basketball while others are smaller globules.
• Tarballs are usually coin-sized and are found strewn on the beaches.
• However, over the years, they have become as big as basketballs and can weigh as much as 6-7 kgs.
• BMC, which has cleared the beaches of the tarballs, said the tarballs stick to the cleaning machinery and are very difficult to wash off.

How are these tarballs formed?

• According to the recent study of the National Institute of Oceanography (NIO),
  • Wind and waves tear the oil slick into smaller patches that are scattered over a much wider area.
  • Various physical, chemical and biological processes (weathering) change the appearance of the oil.

Syllabus: General Studies Paper 1

Context: The latest IPCC report has warned that increasing global warming will result in reductions in Arctic permafrost and the thawing of the ground is expected to release greenhouse gases like methane and carbon dioxide.

About Permafrost.

• Defined as ground (soil, rock and any included ice or organic material) that remains at or below zero degree Celsius for at least two consecutive years.
• Permafrost is spread across an area of over 23 million square kilometers, covering about 15% of the land area of the globe.
• These permanently frozen grounds are most common in regions with high mountains and in Earth’s higher latitudes near the North and South Poles.

The immediate effects as permafrost melts due to increasing global temperatures

• The first impacts that are very rapid will affect countries where roads or buildings were constructed on permafrost. 
  • The Russian railways are an example. In the northwest of Canada, now we have a short section of the road where it has been necessary to chill the ground to make the foundation of the road colder than it is, in order to preserve the permafrost.
  • And for the 500 metres of road, the expense was $4 million. Now, this is a large amount of money for a short length of road.
• The potential for organic material, which is now entombed and frozen in the ground. 
  • If the ground begins to thaw, this material will become available for microbiota to break down.
  • In some environments, the biota will release carbon dioxide, and in others release methane which is about 25 to 30 times more potent as a greenhouse gas than carbon dioxide.
  • So there is a considerable concern.
  • The total quantity of carbon that is now buried in the permafrost is estimated at about 1500 billion tonnes and the top three meters of the ground has about 1000 billion tonnes.
  • The world currently emits into the atmosphere, approximately 10 billion tonnes of carbon a year.
  • So, if the permafrost thaws and releases even only one per cent of the frozen carbon in any one year, it can nullify anything that we do about industrial emissions.

Syllabus: General Studies Paper 3

Context:

If stock Market exchanges agree to the proposal for the T+1 settlement system made by the Securities and Exchange Board of India (Sebi), investors will get money for shares they sold or bought in their accounts faster, and in a safer and risk-free environment.

About T+1 Settlement

• Sebi allowed stock exchanges to start the T+1 system as an option in place of T+2. 
• If it opts for the T+1 settlement cycle for a scrip, the stock exchange will have to mandatorily continue with it for a minimum 6 months. 
• Thereafter, if it intends to switch back to T+2, it will do so by giving one month’s advance notice to the market. 
• Any subsequent switch (from T+1 to T+2 or vice versa) will be subject to a minimum period. 
• A stock exchange may choose to offer the T+1 settlement cycle on any of the scrips, after giving at least one month’s advance notice to all stakeholders, including the public at large.

SEBI’s intention behind

• According to a Sebi, a shortened cycle not only reduces settlement time but also reduces and frees up the capital required to collateralise that risk. 
• T+1 also reduces the number of outstanding unsettled trades at any instant, and thus decreases the unsettled exposure to Clearing Corporation by 50%. 
• The narrower the settlement cycle, the narrower the time window for a counterparty insolvency/bankruptcy to impact the settlement of a trade. 
• Further, the capital blocked in the system to cover the risk of trades will get proportionately reduced with the number of outstanding unsettled trades at any point of time.
• Systemic risk depends on the number of outstanding trades and concentration of risk at critical institutions such as clearing corporations, and becomes critical when the magnitude of outstanding transactions increases. 
  • Thus, a shortened settlement cycle will help in reducing systemic risk.

Syllabus: General Studies Paper 2

Context:

The Freedom in the World 2021 report has downgraded India’s status from ‘Free’ to ‘Partly Free’.

• Earlier, Sweden-based V-Dem Institute was harsher in its latest report on democracy. It said India had become an “electoral autocracy”. 
• India was also described as a “flawed democracy”, slipped two places to 53rd position in the latest Democracy Index published by The Economist Intelligence Unit.
• The report sparked outrage in the Indian government, which sought to challenge the rating. 
• Indian officials had sought details on the sample size; the other aspects of the methodology; the details of agencies/authors or contributor; and consultations with government agencies, if any.
• EIU informed Indian government officials that the scoring for the index was done on the basis of political opposition to certain new laws.

Reasons for India are downgrading:

• Increased pressure being put on human rights organisations and press freedom:
  • EIU has reportedly asserted that incidents like the shutdown of Kashmir in 2019 and the Citizenship Amendment Act have brought about this demotion. 
  • The Reporters without Borders’ Press Freedom Report has placed India 167th out of 183 countries. 
  • Freedom House has also given India a score of 2 out of 4 in terms of press freedom, and has stated that the Indian press is “partially free”. 
• Hate and polarisation are rampant. The most worrying trend has been the government’s crackdown on freedom of speech, with statistics showing a 165 per cent increase in sedition cases between 2016 and 2019.
• The rejection of global democratic indexes is a pathetic move to hide the country’s downslide on most parameters.

Syllabus: General Studies Paper 3

Context:

Recently, the Reserve Bank of India launched the Account Aggregator Framework aimed at making financial data more easily accessible.

Under it, a number of fin-tech entities have been granted the licence to operate as account aggregators.

Eight large banks have also agreed to share various financial data about their customers with account aggregators.

What is an Account Aggregator?

• According to the Reserve Bank of India, an Account Aggregator is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information pertaining to its customer.
• It is also engaged in consolidating, organising and presenting such information to the customer or any other financial information user as may be specified by the bank.
• The Account Aggregator framework was created through an inter-regulatory decision by RBI and other regulators including Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority (PFRDA) through and initiative of the Financial Stability and Development Council (FSDC).
• The licence for Account Aggregator is issued by the RBI, and the financial sector will have many AAs.
• The Account Aggregator framework allows customers to avail various financial services from a host of providers on a single portal based on a consent method, under which the consumers can choose what financial data to share and with which entity.

How will an account aggregator work?

• The framework will allow financial data to be exchanged between the holders of data and its users.
• The RBI has allowed a number of companies like PhonePe to act as account aggregators to facilitate this process.
• Account aggregators will act as intermediaries who will collect data from one financial entity and exchange it with another.
  1. For example, a bank which is processing a loan application from a potential borrower may want to access a variety of financial data about the borrower.
  2. The lending bank can access details of the borrower’s savings, past loan repayment record, mutual fund holdings and insurance holdings through an account aggregator.
• The borrower, however, will have to grant consent for the sharing of his data with the lending bank.

What purpose does it serve?

• According to iSpirt, a think tank for the Indian software products industry, an Account Aggregator framework creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction.
• It reduces the fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.
• These capabilities in turn open up many possibilities. For instance, whereas physical collateral is usually required for an MSME loan, with secure data sharing via AA, ‘information collateral’ (or data on future MSME income) can be used to access a small formal loan.

Benefits of having Account Aggregator Framework:

• At the moment, the various financial data of an individual is scattered across the databases of several financial institutions.
  1. So, a person’s savings and loans data may be with a bank, his investments data maybe with a mutual fund, while his insurance data may be with another financial entity.
• Under the account aggregator framework, all this data can be easily collated and shared through account aggregators with the consent of the individual.
• Proponents of the framework believe that the easier availability of data will have significant benefits for the economy.
• They believe the framework will help financial institutions make a better assessment of the creditworthiness of individuals, and thus make better loan decisions.
• Even though mechanisms such as CIBIL already exist to assess the creditworthiness of individual borrowers, their scope is limited.
• An individual’s PAN number, for instance, captures only a limited number of transactions that are of value higher than a certain minimum threshold amount.
• It is said the framework will offer a wider array of data to financial firms, making them more willing to serve creditworthy populations that they earlier ignored.
• Account aggregators can also make life easier for creditworthy customers by allowing them to share their financial data digitally with ease, it is believed.
• The availability of wider financial data may also help financial institutions offer better products tailored to the needs of individual customers.

Syllabus: General Studies Paper 3

Context:

Recently, the Reserve Bank of India launched the Account Aggregator Framework aimed at making financial data more easily accessible.

Under it, a number of fin-tech entities have been granted the licence to operate as account aggregators.

Eight large banks have also agreed to share various financial data about their customers with account aggregators.

What is an Account Aggregator?

• According to the Reserve Bank of India, an Account Aggregator is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information pertaining to its customer.
• It is also engaged in consolidating, organising and presenting such information to the customer or any other financial information user as may be specified by the bank.
• The Account Aggregator framework was created through an inter-regulatory decision by RBI and other regulators including Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority (PFRDA) through and initiative of the Financial Stability and Development Council (FSDC).
• The licence for Account Aggregator is issued by the RBI, and the financial sector will have many AAs.
• The Account Aggregator framework allows customers to avail various financial services from a host of providers on a single portal based on a consent method, under which the consumers can choose what financial data to share and with which entity.

How will an account aggregator work?

• The framework will allow financial data to be exchanged between the holders of data and its users.
• The RBI has allowed a number of companies like PhonePe to act as account aggregators to facilitate this process.
• Account aggregators will act as intermediaries who will collect data from one financial entity and exchange it with another.
  1. For example, a bank that is processing a loan application from a potential borrower may want to access a variety of financial data about the borrower.
  2. The lending bank can access details of the borrower’s savings, past loan repayment record, mutual fund holdings and insurance holdings through an account aggregator.
• The borrower, however, will have to grant consent for the sharing of his data with the lending bank.

What purpose does it serve?

• According to iSpirt, a think tank for the Indian software products industry, an Account Aggregator framework creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction.
• It reduces the fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.
• These capabilities in turn open up many possibilities. For instance, whereas physical collateral is usually required for an MSME loan, with secure data sharing via AA, ‘information collateral’ (or data on future MSME income) can be used to access a small formal loan.

Benefits of having Account Aggregator Framework:

• At the moment, the various financial data of an individual is scattered across the databases of several financial institutions.
  1. So, a person’s savings and loans data may be with a bank, his investments data may be with a mutual fund, while his insurance data may be with another financial entity.
• Under the account aggregator framework, all this data can be easily collated and shared through account aggregators with the consent of the individual.
• Proponents of the framework believe that the easier availability of data will have significant benefits for the economy.
• They believe the framework will help financial institutions make better assessment of the creditworthiness of individuals, and thus make better loan decisions.
• Even though mechanisms such as CIBIL already exist to assess the creditworthiness of individual borrowers, their scope is limited.
• An individual’s PAN number, for instance, captures only a limited number of transactions that are of value higher than a certain minimum threshold amount.
• It is said the framework will offer a wider array of data to financial firms, making them more willing to serve creditworthy populations that they earlier ignored.
• Account aggregators can also make life easier for creditworthy customers by allowing them to share their financial data digitally with ease, it is believed.
• The availability of wider financial data may also help financial institutions offer better products tailored to the needs of individual customers.