- Digital lending ecosystem has gained currency in the recent past. Explaining the concept, enumerate the recent RBI regulations which seek to address concerns related to digital lending. (15 marks)
- Permaculture is not a well developed agricultural practice in India but it comes with many benefits. List these benefits and explain how it can be beneficial for India. (10 marks)
1. Digital lending ecosystem has gained currency in the recent past. Explaining the concept, enumerate the recent RBI regulations which seek to address concerns related to digital lending. (15 marks)
- Digital lending means lending by using technology through online platforms or mobile applications. For customer specific preferences and needs, automation and algorithms are used which enables better authentication, speedy decision making and disbursements.
- Digital lending is facilitated by Lending Service Providers (LSPs) who work with Non-Banking Financial Companies and neo-banks to disburse credit. India is a huge market for financial technologies and has grown nearly 10 times in the last decade.
- It ensures easy credit for those small borrowers who find it difficult to get it from mainstream banking channels. These customers lack any documented credit history and features like this have led to some issues like-
- Lack of regulatory and disclosure norms makes it difficult to assess operational legitimacy of service providers. There are many illegal lending apps available in playstore having less than 1000 crore capital.
- To capture the market and due to lack of options for these users, LSPs are involved in unabated lending practices beyond repayment capacity of borrowers.
- Issues related to mis-selling by use of false information, data privacy, unfair business conduct puts people with lack of digital literacy at disadvantage.
- Huge interest rates and unethical recovery practices makes it a vicious cycle which further exploits the poor already at a disadvantage.
- In this scenario, RBI introduced some new regulations like-
- Dividing digital lenders into 3 groups for targeted regulation and timely corrective actions.
- Allowing lending only by those entities that are regulated by RBI or have legal permission to operate according to the law.
- All loans and repayment proceedings must be done directly between the bank account holder and the loaning entity thus eliminating LSP’s.
- For better feedback mechanism and resolution framework, entities must appoint a grievance redressal officer. In case grievance is not addressed in 30 days, RBI’s Integrated Ombudsman Scheme will come into the picture.
- Lenders must go through due diligence before partnering with an LSP for digital lending. They must also be transparent about fees and charges related to loans.
- Data privacy is also given importance and only ‘need-based‘ must be collected that too with previous consent of the borrower.
- Digital lending is the future considering the rise in internet penetration and use of online medium of payments. For a holistic development, borrowers’ interest is as important as ease of doing business.
2. Permaculture is not a well developed agricultural practice in India but it comes with many benefits. List these benefits and explain how it can be beneficial for India. (10 marks)
- Permaculture is a concept aiming at development of sustainable agricultural ecosystems which integrates land, resources, environment and community. It involves activities like water harvesting, energy generation, forestry, waste management and community development.
- Permaculture integrates human activity with natural surroundings and has positive impacts like-
- Harnessing renewable energy sources thus reducing reliance on fossil fuels and also customized solutions which help improve the yield.
- Food self sufficiency by practices through which each and every input is produced on the farm.
- Enables zero defect zero effect philosophy which helps reduce wastage.
- Slow and organic solutions by using local resources help in sustainable outcomes with minimal side effects.
- Ensures and promotes diversity which reduces vulnerability of natural systems.
- In this context, India is unique because of rich biodiversity and hotspots which can support permaculture. It can be beneficial for India by-
- It can very well work in small farms and considering 67% Indian farmers being small, this is an opportunity to tap in the model and have good results.
- Multi-functional aspects of farming have already been deployed by Indians for decades, like the use of shikakai trees along farm boundaries which protects farms and also provides biomass.
- Medicinal plants like neem can be exploited commercially and trees that provide timber can also be grown along farm boundaries.
- Resource conservation helps ensure water and resource security. Like rainwater harvesting which is further improved by better soil management.
- It helps develop resilient ecosystems by forming combinatorial ecosystems which is very much needed in India especially during droughts, floods, or other climate change patterns.
- A fully developed permaculture garden has potential to produce 35 times food per square metre when compared to a conventional farm, with less than 20 per cent energy used.
- The potential for permaculture in India is huge. It does not stop at mere revival of ancient systems, rather a responsible and thoughtful approach, along with a keen sense of ethics and design, can benefit India to be more sustainable.
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