We live in extremely uncertain times, as epidemiologists and scientists grapple to understand the virus that has caught the world in its grip. The global economy has been shattered with supply chains and movement of people paralysed like never before. In such times, conventional measures of growth break down. The IMF has drastically revised India’s growth within two months - from its April estimate of 1.9% to a contraction of 4.5% this year. There are a few green shoots as the lockdown was eased in June – the Markit Purchasing Managers Index moved up for both manufacturing and services, though stayed in the contraction zone under 50; E-way bill generation is moving towards the March levels, as are CMIE tracked unemployment rates. The challenge that we face today is of uncertain demand – only 21% of the Rs. 3 lakh crore allocated under the Emergency Credit Guarantee Line Scheme has been sanctioned so far, most MSMEs are reportedly not in favour of more debt when the future demand is uncertain.

It is now that the most vulnerable segments have come at the forefront of public attention –– the rural poor, migrant workers, micro businesses – all those who are still not completely covered by the financial inclusion mission. The Indian governance systems have been going through severe testing these past three months. While the Direct Benefits Transfers processes put in place over the past few years have worked well , there has been significant stress on business correspondents – the last mile agents for banking.

We, at the Indicus Centre for Financial Inclusion, are restarting our monthly newsletter, to highlight the most important news and analysis and keep regulation and policy focused on meaningful inclusion. Working in this field since 2011, our aim has been to spur discussion and debate on different models for achieving universal financial inclusion. While India has achieved so much over the past decade, the current crisis has shown the warts, the many gaps that remain to be filled. We look forward to your feedback as we begin our dialogue with all stakeholders for a common roadmap. -Sumita Kale

With the Parliament closed for the lockdown, the Central Government has been promulgating ordinances to keep governance going. On 27th June, the President notified the Ordinance amending the Banking Regulation Act (1949) to bring cooperative banks under the supervision of the Reserve Bank of India. This has been long overdue for financial stability and particularly for inclusion, with these banks playing a critical role in last mile delivery of financial services. The funds of 8.6 crore depositors will now be relatively safe from frauds and lax governance. However, there are still two caveats – one, the RBI’s supervisory capacity and capability will need to be significantly enhanced, there have already been lapses in monitoring SCBs, and two, the amendment covers only cooperative banks numbering 1, 540 and does not apply to the 96,248 Primary Agricultural Credit Societies (PACS) in rural areas. As payments get more integrated nationally, we need a different playbook in monitoring and supervision. In this digital world, on-site supervision can be replaced by tech-based real-time monitoring, it is time for an RBI upgrade!

This month the RBI moved from monthly to a daily release of data on select payments systems. This is an important step ahead in real-time monitoring of economic activity. While the growth forecasts have been suspended, high-frequency credible data on payments can provide a good snapshot into the state of the economy. From ICFI, we have been recommending the use of granular data on payments and banking to align financial inclusion targets with reality ( Monitoring the Progress of Financial Inclusion in India; ICFI Policy Brief).

• Sai Krishna Kumaraswamy and Daniel Waldron write on Financial Services for Health, June 24, 2020
• From three billion transactions in a month, India is targeting a billion digital transactions daily, says Amitabh Kant, CEO, Niti Aayog, June 13, 2020
•  Guy Standing & Renana Jhabvala make the case for a Universal Basic Income for India, June 27, 2020
• The Reserve Bank of India released a Discussion paper on Governance in Commercial Banks in India June 11, 2020
• Karthik Muralidharan writes on a post-Covid-19 social protection architecture for India, June 11, 2020