Category: Products & Brands

Digital lending space is growing rapidly. The working group on digital lending set up by the RBI has made certain recommendations and suggestions for regulation of this sector. Digital apps collaborate with banks and NBFCs to offer loans, and these apps are not regulated. There could be overleveraging of customers, excessive interest rates, dubious collection methods. Such issues have been addressed by the working group.

There should be a clear distinction between Balance Sheet Lenders (BSLs) and Loan Service Providers (LSPs). BSLs provide loans and take credit risk. They are regulated. LSPs could be digital lenders who provide borrowing options to the customers. They are not regulated. However, they have to partner with BSLs. LSPs manage the front-end. The segregation leads to innovation.

There should not be backdoor entry into regulated activities.

Many Buy Now Pay Later (BNPL) providers do not treat it as a loan. As a consequence, they do not follow KYC procedures while onboarding customers. These should be identified as lending products and there should be necessary checks.

All interest and charges paid should be Annual Percentage Rate (APR) and should be communicated to the customers. Many charges are collected as fees to make interest rates palatable. Short-term credit should be brought under appropriate guidelines to avoid excessive interest rates.

There should be fair treatment of borrowers, especially while doing collections.

Data privacy is to be maintained. Data should not be used for lending decisions without consent. CR reports should not reach unregulated entities.

There should be Self Regulatory Organisation (SRO) to govern this space. Digital Trust of India Agency (DIGITA) can be created. Agency of Financial Regulation (AFSR) can be created to regulate outsourced activities.

Big Tech in financial services must be looked into.

Digital assistant Siri responds by recognising speech. The more it is spoken to, the more competent it becomes. Speech recognition has lesser error rate today. Digital assistants recognise even accents. All this has happened over a period of time. To accelerate this process, one has to feed great amount of data and compute power to the system. There are instances where this has to be done instantly. AI assisted systems do this. In a car braking system of an autonomous car, there should be an instant response.

These days chips are made with AI acceleration. Semiconductor industry is developing such chips. Big Tech too develops such chips. India is in the forefront of designing such chips.

An aircraft in flight generates a lot of data, which is to be analysed in real time to detect if something is failing. In plants, a lot of equipment generates data that is to be analysed. It is humanly impossible to do this in real time. Here some data is processed by edge computing and some at the server. Thus it is a hybrid system. Intel’s new processors with AI acceleration address such kind of applications. In software such analytics is not fast enough. Even GPU are used for graphics processing. They too fall short of the emerging requirements.

Such situations require an ML algorithm running on hardware. A software programme launched on lap top competes for time from the processor (CPU), as there are other programmes running. If the information is hardware-based, the hardware does it immediately. Since that is what it is designed to do.

Different functions require different AI enabled chips. IBM’s Telium processor has on chip acceleration for AI is targeted to financial services. Whether to use a chip designed for a specific AI application or a general purpose chip is taken in the light of the software capabilities of an organisation. A specific chip requires more software capabilities.

RBI is concerned about the financial instability that can be caused by cryptos. Investments in cryptos could be made by over-leveraged individuals and firms. They can go broke.

Former RBI governor Raghuram Rajan observes that there is little danger of Indian currency becoming dollarised, as cryptos are highly volatile, and the rupee will be a preferred option. RBI will not find it difficult to ensure the local currency is not substituted by cryptos. Thus cryptos would not be risky to framing monetory policy.

It is true that regulators around the world are struggling to understand cryptos, and are not sure how these could be regulated. Even if there are few black sheep, it could cause considerable damage.

Despite the ban, it is unlikely that investments in cryptos will be discontinued. The government must ensure that investments must not be made from borrowings — banks, NBFCs and so on. Here vigilance is to be exercised.

There are more than 6000 private cryptos in the world. In India, a few are popular. On what basic, the government can allow certain cryptos?

It is not sufficient to regulate the exchanges, as they are mere intermediaries. The technology is based on distributed ledger. The mining is done by anonymous people, and the structure is opaque. This the USP of private cryptos. Is it possible to regulate such persons or system?

It is still being debated whether cryptos are securities, commodities. currencies or assets. However, in form, they are uniform.

All digital assets such as Bitcoin, an NFT, a utility token or a stablecoin are just a pair of cryptographic keys, irrespective of their value.

The public key is the visible key on the ledger — it serves as a user name of sorts. The private key is the secret key known only to the user which confers ownership of the asset and enables the user to transact in any crypto network.

The whole gamut of crypto operations is conducted by these two humble keys. Any crypto regulation focuses on the management and custody of these keys.

Instead of an outright ban on cryptos, India will adopt a nuanced approach towards cryptos. Though cryptos may not be permitted as currencies to settle transactions, and make payments, they could be treated as assets like shares, gold or bonds.

The government is likely to classify crypto exchanges as e-commerce platforms. They will be subjected to GST. They will be put into three categories. They are facilitators or brokerages or trading platforms. They are expected to collect tax at source (TCS) from those buying and selling cryptos.

They sale, purchase and mining of cryptos are likely to be taxed retrospectively from 2017. Investors will have to pay 18 per cent GST. TCS deducted by these platforms can be set off against the tax liability of investors.

It is likely that active solicitation by companies including exchanges and platforms will be barred. It is likely to make SEBI a regulator, but a final call is to be taken yet.

There is likely to be a bill in the winter session of the parliament. The government is likely to take a middle path on cryptos.

RBI has serious concerns about cryptos and their effects on financial stability.

Blockchain technology is more than 10 year old. It can grow, with or without cryptos.

Application Programming Interfaces called APIS establish connection between computers or computer programmes. They are software interface since they are little pieces of code at the endpoint of a software allowing a connect and communication. In short, we can say they serve as a bridge between different softwares and devices. Here, the term endpoint refers to a simple URL through which you can use an API. API is essentially software intermediary that allows two applications to talk to each other.

As we know, there is a need to share data, and networking facilities such sharing. The system are distributed. There is sharing of resources or even softwares across different applications.

While doing so, there should be no compromise on privacy. It is for this reason, there is a layer of abstraction. It makes these universally understandable and easy to use. High level programming languages have APIs which provide abstraction like Collections in Java and STL in C++. A developer need not implement basic components like Lists, Linked Lists, HashMaps etc. from scratch. Another example is sorting function in JavaScript.

Privacy is ensured by integrating an authentication mechanism, say a secret key or token. API gateways intercept incoming requests and manage authentication.

APIs have revolutionised banking and finance.They could be used in healthcare too.

Either a fee is charged for API use or they are offered free.

In India, we have IndiaStack, a set of public APIs. Aadhar is an illustration of this. Many third party service providers can connect to Aadhar database and do the authentication. Its eSign API allows electronic signing. Its UPI API together with virtual payment ID or address enables bank account holders to transfer money digitally using the smart phones. Even third party service providers can use these APIs, say Google Pay and Phone Pe. API allows to do KYC of an individual in his absence in a trustworthy manner. A customer can be served virtually.

Old banks with legacy systems tie up with fintech companies or neo-banks and using APIs can make available a variety of offerings. Mostly neo-banks do not have banking license, but tie up with a licensed bank.

India has taken in a big way to video game development. Gaming is entertainment. There is availability of gaming designers in India. Investors are interested in gaming. Previously, gaming apps depended on ad revenue but now they have started spending money on in-app purchases. It facilitates faster monetisation of games.

There are about 400 plus gaming studios in India. All kinds of games are being developed — hyper-casual, hyper-social and mid-core. Some games feature hyper-realism and are meant for new consoles. These are costly and complex.

The gaming industry changed from old days of pixelated graphics and restricted audio qualities.

All gaming studios have got excellent traction. There were real money games or fantasy sports to begin with. However, now even core game studios too are flourishing.

India has about 425 million gamers who play across three broad gaming channels.

China too is active in gaming. However, of late, China has cracked down upon gaming firms.

By 2026, Indian gaming market will reach $7 billion.

Indian games are likely to bring Indian mythological characters from the epics Ramayana and Mahabharata as characters. Even Indian celebrities can be introduced as characters. It will not require too much context building.

A non-fungible token, called NFT, is a unique digital certification based on blockchain technology. It is stored on a blockchain to provide certain ownership rights of a digital space. The asset is non-fungible as each one of them is unique and of different value. It contrasts with fungible assets such as rupees or bitcoins.

NFT can represent easily reproducible items such as art work, photos, videos, audio files etc. as unique items.

An NFT is generated or minted using a smart contract which is a computer code stored on a blockchain. As the transactions on blockchain are transparent, anyone can view the underlying information including blockchain address of the owner or minting of NFT. A buyer can purchase an NFT, if he has a digital wallet to receive, access and transfer it.

NFTs attract criticism due to energy consumption in minting and carbon footprint left while validating transactions.