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Report on the state of India’s household finances

LiveMint logoLiveMint 29-08-2017 Staff writer

Recommendations of the Tarun Ramadorai Household Finance Committee Report. The research analyses household-level micro-data from India and 6 other countries.Edited excerpts:

Mortgages

> Real-time reset of floating interest rates, common quotation conventions.

> Quoting loans to customers in the form of a market-wide standardised rate + spread as opposed to MCLR + spread, to facilitate cross-product comparison.

> Standardising the reset period across banks, to be immediate.

> Banks should quote the rate for every fixed rate product relative to the repo rate.

Gold

> Propose variant of gold bonds that can be physically redeemed at choice of household.

> Offer tax incentives to investors in inflation-indexed bonds.

> Support creation of a spot gold exchange.

> Propose PAN card requirement for gold transactions from jewellers be extended to all transactions regardless of size.

Pensions

> Ease of switching and choice in annuity plans; segregate annuity investment from insurance investment.

> Increase transparency in annuity market in terms of expenses, commissions, annual fees and surrender charges.

> Investigate whether cap on NPS management fees is internationally comparable.

> Relax mandatory requirement that only point of presence (POP) entities can engage in sales, and allow digital marketing of pensions.

Insurance

> Publish highly granular insurance claims statistics in machine readable format.

> Rationalize distribution incentives, level commissions structures between initial sale and policy renewal, encourage renewal.

> Rationalize discrepancy in commissions between products, incentivise purchase of simple term insurance products.

> Make PoS disclosures simple and comprehensible.

> Continue clamping down on mis-selling.

> Permit redress using delegated representatives, especially in rural areas.

Financial advice

> Uniform and consistently stringent standards across regulators for provision of financial advice. Insurance and mutual fund intermediaries brought under uniform advisory regulations.

> Advisory and distribution functions effectively segregated in a manner that avoids conflicts of interest.

> Unique license number for financial advisors. Information about financial advisors and standards of competence verified and available online.

> Fiduciary model for advice.

Financial technology

> Support e-KYC, and elimination of all paper processes or wet signatures.

> Propose DigiLocker service be extended to brokers, insurance companies, and nationalised banks, and link CERSAI to DigiLocker.

> Seamless switching across financial products at the request of the consumer at low cost, portability of e-KYC across products.

> Further simple financial products to be seeded using PMJDY as a platform.

> More complicated financial products to require explicit “opt-in” by consumers.

> Support new data privacy framework to protect household data, using a rights-based approach.

Regulatory Sandbox

> Propose establishment of a cross-regulator “Regulatory Sandbox”, a safe space in which the regulator can facilitate small-scale tests by temporarily relaxing certain regulations to collect empirical evidence whilst containing risks.

Source: www.tarunramadorai.com/HHFReportHighlights.pdf

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