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RBI’s Positive Pay To Make Cheques Safer


This week we’ll talk about RBI’s positive pay; understand Transparent Taxation Platform; discuss about Spectrum in India and the boom of EdTech startups. For the new members of the Summachar Family, get yourself featured in the next newsletter by trying your luck at the quiz section.

1. Cheques to be safer with RBI’s Positive Pay

RBI has introduced a mechanism called Positive Pay to increase the security of cheques, giving banks the burden to verify the details of cheques. It would be valid for cheques worth above ₹50,000. This move comes amidst the ongoing debate on whether the Indian government should decriminalize cheque dishonoring

So how does the mechanism work?

  • Let’s say Mr A, having a bank account with SBI issues a cheque of ₹1 lakh to Mr B having a bank account in Yes Bank. Earlier, Mr B could do fraud by changing the amount, duplicating the cheque, etc.
  • But, with Positive Pay Mechanism, Mr A will notify SBI the cheque number, date, payee name, payee account number, amount, image of the front and back of the cheque before issuing it to Mr B.
  • So whenever Mr B deposits cheque into Yes bank, SBI will verify the details of the cheque sent by Mr A. Cheque is honoured if the details match, and referred back to the issuer if not.

Why should Cheque Bounce be decriminalized?

  • In the month of June this year, the Union Finance Ministry had proposed to decriminalize cheque bounce cases and proposed to count it as a civil offense rather than a criminal offense.
  • The government believes that by doing so, ease in doing business will increase and reduce the burden on courts as currently ~40 lakh cheque bounce cases are pending as per 213th Law Commission Report.
  • Currently, the punishment for bounced cheques is jail imprisonment of up to 2 years and/or fine double the amount of cheque.

Why shouldn’t it be decriminalized?

  • Business unions say it will cause great instability in the trade cycle & worsen the trust in the market. Cheques have value because of the strict laws and business people may stop taking cheques because of fear of being unpaid, leaving them in a financial turmoil.
  • Some corporate lawyers also believe that it may prove to be counterproductive for foreign investors.

Did you know? The Academy Award-nominated feature film, Catch Me If You Can, starring Leonardo DiCaprio is inspired by Frank Abagnale Jr.’s life. Abagnale is an American security consultant known for his career as a con man,
check forger, and impostor.

2. Understanding The Transparent Taxation Platform

PM Modi announced the ‘Transparent Taxation Platform – Honouring the Honest’ on August 13. Currently, there are only ~1.5 crore people out of India’s 130 crores population that are paying income tax. This platform is aimed at bringing inclusivity and transparency.

Now 3 things have been introduced in the new reforms:

  • Faceless assessment :

Assessment orders are issued by the Income Tax department to make sure the taxpayer has not understated income or inflated expenses. From now on, such orders will be generated in city A, a review will be done in city B and accessed appeal will be finalized in city C, i.e. territorial jurisdiction would be removed as cities would be selected at random.

Moreover, human interference will also be minimized as assessments will be carried out through systems using data analytics and AI. Though there will be exceptions if the case involves serious frauds, major tax evasion, international tax issue, Black Money Act & Bemani property.

  • Faceless appeal :

In India, taxpayers generally assessed tax amounts to be paid to the government on their own. In case of a discrepancy in tax declared, the Income Tax department would issue an appeal or an order to that taxpayer. Such appeals were required to be solved by visiting the Income Tax office. Now due to faceless appeals, there is no need to visit the office or the officer. Moreover, appeals would be allocated to a random officer in the country and the identity of that officer will be kept anonymous.

  • Taxpayers’ charter :

The charter clearly lists out the income tax department lists out commitments to the income taxpayer as well as what the department expects from the taxpayers. Taxpayers can now approach the Taxpayers’ Charter Cell under the Principal Chief Commissioner of Income tax in each zone, for compliance to this charter

  • Reducing Tax Evasions :

The Government has introduced a threshold on certain transactions, i.e specified transactions above a certain limit will be visible in Form 26AS, which displays any income on which tax has been deducted and and taxes paid on a taxpayer’s behalf (could be by a bank, employer, etc). The entity on the receiving end will report such transactions to the government, bringing tax defaulters and evasions under the scanner.

Did you know? At the end of 2019, ~4.8 lakh income tax appeals were pending in India. Thus the Vivad Se Vishwas Act, 2020 was launched wherein a resolution process was formed for quick settlement of tax disputes.

3. What is up with Spectrum in India?

AGR dues case is becoming complex as the Supreme Court (SC) seems to be halted over the matter of ownership of spectrum. Due to the lack of clarity on the definition of its ownership, it is hard to determine how will the insolvent telecoms like RCom pay the dues.

But what’s a Spectrum?

  • It is a range of electromagnetic waves used for communication. A frequency range in spectrum of EM waves is called a band.
  • The government allocates fixed bands for usage to avoid clashes and standardize antenna requirements to access bands. Eg: 800MHz, is one such band for cellular communication.

How Telecoms use it?

  • Telecom companies bid to acquire a license of the spectrum that is held by the Central Government under a trust. If the company wins the bid, the government would allow it to operate on specified frequencies for a fixed number of years. Till 2011, the telecom operator’s license and spectrum were linked with each other.

Then what happened?

  • After 2011, telecoms were required to bid separately for license and to pay for spectrum usage fees to the government. Reliance Jio and Vodafone 4G Spectrum’s use 1800 MHz band whereas Airtel’s use 2300 MHz.
  • To operate in any circle, a company needs spectrum and if it does not have any, it will use other companies to offer service at another band to their customers.
  • The 2G scam is an infamous telecom scam in India that cost the govt ₹1.76 lakh crore as per CAG.

What does the SC have to say?

Should Jio Be Liable For RCom?

  • Jio is currently using 38% of RCom’s total spectrum and both the companies entered a sharing agreement in 2016. However, Jio has informed the court that it is not liable to pay AGR dues for using RCom’s Spectrum via ‘Spectrum Sharing guidelines’.

On 21 August, the SC said that the companies using spectrum of insolvent companies will be liable to pay AGR dues.

Did you know? Airband is the name for a group of frequencies in the VHF radio spectrum allocated to radio communication in civil aviation. In most countries, a license to operate airband equipment is required and the operator is tested on competency in procedures, language, and the use of the phonetic alphabet.

4. Rise of Indian EdTech startups in the new normal

When most of the startups in the world are facing financial crunch due to COVID-19 and struggling to survive, startups in the EdTech sector are blooming. How is that happening?

  • Sudden closure of the school and colleges: The free online courses and live classes by these startups have given them an upper edge in expanding their reach among students.
  • In the last 5 years more than 4,450 EdTech startups have been launched in India. Now such platforms are likely to create at least 3,000 new jobs by 2021. Experts say that the education sector may spend $6 bn annually on AR and VR technologies by 2023.

Let’s see some of such startups which have emerged in the new normal:

  • BYJU’s: In 2019, it won the sponsorship rights for the Indian cricket team jersey, replacing Oppo. During lockdown it introduced live classes and added 7.5 million new users. It is now the world’s most valued EdTech startup with a valuation of ~$10.5 billion, and India’s second most valued startup after Paytm. In 2019, it won the sponsorship rights for the Indian cricket team jersey, replacing Oppo
  • Whitehat Jr.: It started 1 to 1 online teaching platform for children (age 6 to 18). 700,000 students have registered themselves on the portal till date. Recently BYJU’s acquired it for $300 mn.
  • Unacademy: In 2019 the startup has $36 million ARR (Annual Recurring Revenue = Total amount of yearly subscription + Total amount gained from expansion – Total amount due to cancellation of subscriptions). During lockdown, in March 1.4 bn watch minutes recorded were recorded on the platform & ARR grew to $100 mn.
  • Vedantu: The Bengaluru based startup offers personalised teaching models, which are refined using AI, ML and big data. It raised $6.8 mn from South Korea-based KB Global Platform Firm and $12.56 mn from the Chinabased Legend Capital.

Did you know? In the last 5 years more than 4,450 EdTech startups have been launched in India.

Featured Face #7

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