A Memorable Train Journey

Sometime in early 1990s, I was posted in Patna, had gone to Ranchi on some official work and was returning by the overnight train connecting the two cities. Traveling by train has its own pleasures, one of them is meeting and exchanging views and ideas with totally unknown people. Train travellers have both the time and inclination to indulge in such exchanges, something which air travellers sorely lack.

Luckily there were only three of us in the AC II compartment meant for 4 persons. After the train started and we had settled down in our berths, we introduced ourselves. One was a businessman who kept more or less to himself after that. The other person was a mature, distinguished, and friendly looking person wearing a khadi kurta-pyjama. I told him that I worked in a bank to which he replied that he was in the legal profession. I assumed he was a well-to-do lawyer.

This gentleman regaled me with his various life experiences traveling by train between Patna and Delhi, initially as a student and later when he started working. His also mentioned about his stints working in Delhi and Bangalore etc. A remarkable aspect of his personality was that he spoke excellent Hindi, English, and Bhojpuri and was very well informed about various things.

A little later, as dinner time approached, and as I was about to order dinner, he invited me to eat with him. He seemed to be carrying quite a lot of food, and when I mentioned this to him, he remarked that he disliked the idea of eating alone and so while travelling by train he always carried extra food so that he would be in a position to share it with fellow travellers. He also added that he had a lot of experience traveling by this particular train, which invariably gets delayed in reaching Patna. Therefore, apart from dinner he also carried breakfast for the next morning.

It was a rich and substantial dinner, which was to my complete satisfaction. Unluckily, the train was on time and I could not benefit in sharing in this gentleman’s breakfast.

As we disembarked, I noticed that there were two or three people at the station to receive him,  of whom at least one wore a liveried uniform, which suggested that he was a staff at the High Court. I was in a hurry to reach home and did not think much about it.

Sometime later I saw a photograph of this gentleman in some magazine and came to know that my fellow traveller had been no other than a prominent judge of the Patna High Court, who had earlier been a judge at the Karnataka High Court. In fact, he had a long judicial pedigree with his father having been a Judge in the Patna High Court and his grandfather having been the Chief Justice of India!

But what a down-to-earth person he was! 

Invaders or Migrants

Our formal history books as well as WhatsApp University frequently mention about “Muslim” invaders and “Muslim” rule in India. A little reflection suggests a certain absurdity if not down-right bias in any such classification. 

First, the so called “Muslim” invaders such as the Arabs, Persian, Turks, Mughals etc, were of different ethnicities, had different languages, and culture. Clubbing all of them under a monolithic “Muslim” identity is strange, considering that none of the other migrant groups, and there have been many - Greeks, Scythians, Huns, Europeans, Chinese etc. – are labelled (even remotely) by their religious identities.

Second, the bilateral exchange of people and ideas between India and other peoples, especially from Arab and Persian countries, started much before any of these people adopted the Islamic religion and has been in place for at least 3000 years. Such interaction, largely due to trade, naturally included elements of social, cultural, and intellectual exchanges. Archaeological excavations in Bahrain from their ancient Dilmun civilization have revealed that weights & measures found there are identical to those found in Indus Valley civilization sites. Time and again we have reports of caches of Roman gold coins found in various part of India including our sacred temples. There is no way that they could have come on their own. They accumulated through trade which was intermediated largely by the Arabs.

There is much evidence of exchange of ideas and concepts in the region of mathematics, science, medicine, and literature. For example, elements of trigonometry are thought to have been first developed by the Greeks, refined to its present form by the Indians, then borrowed by the Arabs, before reaching Europe, and in the process the Sanskrit jaya and cojaya got converted to the Latin sine and cosine! The Arabs still call their number systems as Indian numerals. We also know that games such as chess and snakes and ladders, stories from Indian languages, medical practices etc. enriched both the migrating populations and culture. The exchange of peoples and ideas was never one way – into India – but there was emigration too.

Incidentally, there is a direct and strong Indian connection with the Arabic words Muhannad (Sword) and Muhanndis (Engineer). Both words are derived from the exact same Arabic root letters: M-H-N-D, which historically trace back to the word for India (Al-Hind), or rather from the phrase min-al-Hind meaning "from India".  As is well known, in ancient times, India was world-renowned for its exceptionally high-quality steel and superior sword-making craftsmanship. The literal meaning of the word Muhannad is "Made of Indian steel" or "An Indian sword." It is also a popular Arabic male given to boys. Since these “Indian swords” (Saif Hindi) were so prized, Arab poets used the word Muhannad in classical poetry to symbolize ultimate sharpness, strength, valor, and cutting-edge reliability.

The word Muhandis literally means "One who works with geometry, measurements, or precise design." It is the modern Arabic word for Engineer or Architect. Because Indian sword-making and architecture required highly precise calculations, geometry, and craftsmanship, the Persian language borrowed the root to describe a geometrician or builder which was later Arabized as Muhandis. Today, in Arabic it applies to all fields of engineering.

Therefore, while Muhannad refers specifically to the legendary sharp sword made from Indian steel, Muhandis refers to the person who uses precise calculations and engineering. They are linguistic cousins born from the ancient Arab admiration for Indian craftsmanship.

Third, these migrants had their distinct ethnic identities and also came from geographically dispersed place and adopted Islam at different times. Their Islamic religious practices also differ in various crucial aspects (think celebration of Basant in Pakistan).  Even more so, there is little love lost between most of these ethnic groups, especially the Arabs, Persians, and Turks, who have been in virtual continuous violent interaction with each other for centuries – both before they adopted Islam and after.

Fourth, what explains the pre-ponderance of Muslim artisans in many of our traditional industries – think Banarasi sarees, Dhaka muslins, Mirzapur carpets, Moradabad & Bidar metal work, Saharanpur carpentry, Ferozabad glass bangles, or Hyderabad lac bangles. Move around India, many of our modern-day skilled technicians - car, motor, AC, or tailors – are from the Muslim community.  In fact, the common Indian word for tailor, darzi, is pure Arabic. I have not been able to find an Indian equivalent. Did the so called “invaders” come to loot or to find employment in industries where there were gaps in technical skills in the Indian sub-continent which they came to plug as economic migrants? Similar to the way, Indian software developers and engineers are preponderant in present day Western nations? Which in turn has prompted political calls of “Indian” invasion, with the growing incidence of temples, community participation in festivals, Indian stores etc. Considering this, would development of a full-fledged mythology of “Indian” armed invasion of the US and Europe be far behind!

Fifth, there is little reason for invaders coming to loot to get coins struck with local motifs. We have evidence of silver coins minted by the Mughals depicting Ram-Sita. Even the much-reviled Mahmud Ghazni (infamous for his repeated attacks and destruction of the great temple at Somnath in AD 1024) had got bilingual coins (in Arabic and Sanskrit) struck in 419 AH (AD 1028) at Lahore (which was then known as Mahmudpur). An interesting aspect of this coin is that the Sanskrit translation is the declaration that the Prophet Muhammad is a manifestation (avatar) of God – not a messenger, which from an orthodox Islamic viewpoint, is a heretical statement!

Migration which involves moving away from all that is familiar is always a difficult decision and the initial cohort are primarily males. This leads to the problem by such migrants of finding women to set up families and naturally turn to local women. This aspect is widely indicated in our mythology where many of our mythological characters had local wives. Arjun’s wives included the Naga Ulupi, and the Manipuri Chitrangada. Bhima had Hidimbi, a Rakshah woman as wife. One of Krishna’s principal wives was Rukmini from Vidarbha and not from his native Vrindavan. The Mughals were famous for their local Hindu wives. Incidentally, recent advances in genetics supports the view that our Indian Muslim population largely consists of progeny of foreign men marrying Indian women and their descendants. This aspect is most prominent in our Moplah population, the community with the longest and oldest continual association with the Arabs. Would this have happened if the migrants were principally invaders rather than economic migrants?

It would, therefore be fair to assume that there was slow and steady migration into India due to economic circumstances and the fight started only after the migrant population had got fairly well established in India – politically, economically, and culturally. Just like the British came to rule India, and not because of invasion.

Research in this area is what modern day Indian historians may consider focussing on. 

Concentration Risks

Recently there was a news article that LIC has invested in Bajaj Finance non-convertible debentures totalling Rs.5000 crores which gave the impression that the entire issue had been subscribed by LIC.

This flies in the face of basic canons of Risk Management, whereby banks and other financial intermediaries such as insurance companies spread their risks by having risk concentration limits based on borrower, group, portion of issue, industry size, proportion of their net worth, geographical area etc. Risk policy stipulates that none of the parameters should be breached, even individually. 

Such risk limits are stipulated not only in the investor company's internal risk guidelines but are also mandated as part of regulation and supervision rules of financial sector regulators such as RBI and SEBI.       

I am sure LIC with decades of investment management experience would have regulator mandated, Board approved risk-management policies. The big question is would these risk policies permit LIC to be the sole subscriber or even the sole underwriter (same risk) of this issue?

LIC seems to have made it a habit of not following such risk mitigation policies. 

In June 2025 there were news reports that LIC had fully subscribed to a Rs.4,883 crore 15 year non-convertible debentures issued by Adani Ports and Special Economic Zone Ltd.

Again, in October 2025 there was a news report that LIC had invested around Rs.33,000/- in Adani group companies, reportedly under government pressure though naturally vehemently denied by LIC.

These kinds of investments by LIC goes on to confirm that systematic loot of public funds for private gains is merrily going on and that there is systemic failure in prudent governance not only by financial intermediaries (such as LIC) and its regulators, but as well as the controlling ministries.  

Adventures in Banking - Milking the Regulations

B was a joint venture undertaking between a State Government and a large and respected industrial group. It had been set up to produce Caustic Soda for captive consumption of a group company. The technology involved is not complex. Common Salt (NaCl) is dissolved in water and electricity is passed through this solution which results in production of Caustic Soda (NaOH) and Chlorine. The main raw material, in terms of cost, is electricity. Some of such plants are set up for production of Caustic Soda with Chlorine being considered a by-product while others are set up for the production of Chlorine with Caustic Soda being considered a by-product. Naturally, financial viability is substantially enhanced if there are nearby customers for both Caustic Soda and Chlorine, since transportation of both the products is difficult and expensive.

B had made substantial losses and were approved a revival-cum-restructuring package, which envisaged all possible kinds of reliefs and concessions, not just from the financial institutions (deferral in repayment of principal, waiver and reduction in interest rates etc.), but also State Government (deferral of Sales Tax) and Electricity Board (concessionary power rates) etc. There was minimal sacrifice by the promoters. After all it was a matter of industrial development and generation of gainful employment for the country.

Visits to the company’s plant however did not remotely suggest that the company was sick. Sick companies have a typical odour.

All was well till implementation of the relief package came up. To effectuate which a joint plant inspection by the bank and financial institution-cum Operating Agency (OA) was arranged. This is where things started to unravel. The OA team consisted of a very young and smart CA and a much older Manager.  They started asking some seemingly innocuous questions and then we realized that suddenly there was a chill in the atmosphere. Anyway, the inspection was completed and we returned to our respective offices. Incidentally, reaching the plant involved an overnight train journey from Patna. The OA team would have come from Bombay to Patna and then by overnight train to the plant. 

The fireworks started at the next hearing at the rehabilitation team, where status of implementation of the package was to be reviewed. The Operating Agency in its report submitted detailed particulars which showed that the “sickness” was essentially due to under-invoicing sales to its group company, who were the sole buyer. Consequently all the approved reliefs and concessions were withdrawn.

This was a major shock to the group’s top management and I understand heads of the many of company’s managers rolled for not being able to handle a bunch of bankers.

Soon after, since I had completed more than two years in this particular assignment, I was given a fresh assignment and got transferred. Much later, I came to know that on an appeal by the company, a similar rehabilitation package was approved and implemented!

Credit Lesson 104: Handling government regulations for the benefit of the borrowing entity is something of an art which many of our business groups have perfected, and getting classified as "sick" is the ultimate perfection of that art. It starts from producing attractive project reports, getting financial and regulatory approvals, syphoning out the borrowed funds, declaring the project sick and getting all kinds of reliefs and concessions from the government and lending banks.

They cannot really be blamed. We have built up a lending eco-system where it would be irrational not to game the system. 

The situation is well summed up in the preamble of the Omkar Goswami Report (Report of The Committee on Industrial Sickness and Corporate Restructuring – July 1993) that, “There are sick companies, sick banks, ailing financial institutions, and unpaid workers. But there are hardly any sick promoters”.

Adventures in Banking - Recovery in Small Agricultural Loans

Around the year 1988, ie nearly 40 years ago, soon after completion of probation two of us (colleagues and batch mates) were sent on a three weak assignment to a bank branch specializing in making agricultural loans. Our mandate was to prepare insurance claim forms for loans which had gone bad for submission to DICGC (ie Deposit Insurance and Credit Guarantee Corporation, a subsidiary of RBI which provides insurance both to small bank deposits as well as certain classes of bank loans). The branch had a huge back-log of such claims to be submitted and the work was to be completed in mission mode.The received wisdom was that making small agricultural loans was a sheer waste of resources – and at best a kind of charity - and the only way to make any recovery was through such submitting claims on the underlying insurance (which was also limited as to the amount of loan).  

Under manual accounting systems, details of each loan (name of the borrower, address, amount disbursed, interest charged, repayments etc.) was maintained in physical ledgers. When loans went bad the details were transferred to another ledger which are designated as PB&RD (Protested Bills & Recalled Debts) ledgers, which was designed to have some additional details. Since there were hardly any repayments, instead of transferring individual account details to the PB&RD ledgers the original ledgers were classified as PB&RD ledgers. Logical and fine.

While preparing the DICGC claims we came across instances in some of the ledgers where there had been repayments in nearly all loan accounts, albeit small amounts, over the same time frame.

Being young and curious, even though it was much outside the purview of our mandate to prepare the DICGC claim forms, we tried to find out what had triggered these repayments. The explanation turned out to be quite simple. All that the concerned Field Officer or most likely his assistant had done was to send out reminder notices by way of pre-printed Post Cards to all the loanees whose details were available in a particular ledger. Cost of each PC was I think Rs.0.15 at that point of time. The recovery in each of the account was in the order of Rs.20 to Rs.50.

Credit Lesson 103: No security enforcement, no legal hassles, no convoluted lengthy recovery measures. Just plain and simple follow-up with minimal exertion. Not even a physical follow up was done in getting these recoveries.

PS: Over a 3-week period we ended up preparing over 3,000 claim forms, each of us averaging 80-90 forms a day. Initially, we are advised by the branch officials (Field Officer and Rural Development Officers), who were primarily responsible to make the claim forms, that filling up the forms accurately was a fiendishly complex exercise and we would be lucky if we could fill up 3-5 forms in a day. This advise was initially taken at face value, but in a couple of days, once we got a hang of the job, our output increased substantially. Then the same guys came and advised that in case of mistakes, the entire lot would be rejected by DICGC and all our effort and the bank’s expense would go waste - and so there was no need for us to be proud of our output since it would surely end up as a waste of time and effort.

The proof of the pudding is in eating it. After we had completed the exercise, the data from the physical forms were digitized by the local computer center (Purnea).  Thereafter, my colleague who was involved in preparing the forms along with me, got an opportunity to carry the computer tapes for submission forms to the DICGC office in Bombay. He not only submitted the data but hung around for a couple of days, got the insurance claims processed by, and collected the cheque for the full claim amount. I still remember the triumphant smile on his face when he returned with the claim amount. 

The feeling of satisfaction of a difficult assignment well-completed was immense. 

Adventures in Banking - Complete Recovery in a Defunct Relationship

After completing my probationary period of 2 years, I was posted to the back of beyond of Bihar to do my rural and semi-urban assignments (3 years). On coming out from the cold, I got lucky and got an extremely plum posting at the Credit Appraisal Department at the bank’s Head Office. One of the corporate accounts which I was assigned was “B”, which was the first major credit relationship that I handled in my professional banking career and was a major learning experience.

At the time I was assigned this relationship (early 1990s), the banking system had an exposure of some Rs.60-70 crores to B through an informal consortium of 6-8 banks, with the bank I then worked for having the largest exposure. 

B happened to be the primary agency for distributing fertilisers to small and marginal farmers in the State but due to mismanagement, its management had been taken over by the State Government. Since they were bankrupt, a group of banks were coaxed (with RBI acting as midwife) to lend a sum of Rs.52 crores to purchase fertilisers for onwards sales to farmer, in the interest of these poor farmers. The money was borrowed, used to purchase fertilisers, and there the story took a completely different turn. Very little of the borrowed money in the form of sale proceeds came back to the lending banks and B's financial position was back to square one.

The same group of banks were again coaxed to lend another Rs.12-15 crores and the whole story was exactly repeated.

In classic credit terms it was an absolute Loss Asset. There was no collateral security of any kind, tangible or intangible, say as guarantees or even a fig leaf by way of letter of comfort. There were no financial statements to be analysed (historical or pro-rata future). As B’s books had neither been prepared or audited for over 10 years, there was no way to evaluate its financial condition or prospects and there were no stock statements or any other kind of data to support what happened to the primary security or the sale proceeds. In fact, there were virtually no officials / management personnel of the borrowing entity with whom we could have any kind of meaningful dialogue on this matter.

In this dilemma we started writing very polite letters to the State Govt at the highest levels (Chief Secretary, Finance Secretary etc) requesting for their very kind intervention for recovering our dues. Copies of all letters were marked to RBI. A minimum of one to two letters used to go every quarter with minor variations in language and emphasis. It was more of an exercise in creative writing in English for me, the lowest rung in the hierarchy. This was supported by way of meetings by the Bank’s top officials with top bureaucrats in the Government and RBI. For quite some time nothing happened, and the consensus was that this was an exercise in futility. But we kept persisting with the same strategy of supplicating the State Government and RBI in the absence of any other solution.  

Slowly wheels moved and after more than a year, the State Government agreed for RBI to directly debit their account (with RBI) in installments and repay the banks. In the process we got back our entire principal along with a fairly decent amount of interest. Though the entire process took another 2-3 years.  

Credit Lesson 102: There is life beyond obtaining and analyzing financial statements, depending on security, writing detailed appraisal memos, or seeking legal action in managing credit exposures! Sustained and regular follow-up also leads to progress – it may be slow and painful. But it is effective. Maybe we were plain lucky. But it has worked for me in many other sticky accounts too!

PS: Handling Government banking business in Indian banks used to be given very low priority. This is strange, considering the size and potentiality of this kind of business. Incidentally, one of the main functions of indigenous bankers in India was to collect land revenue and transfer it to the ruler for which they were entitled to a commission on quantum of revenue collected. That is very similar to present day government banking business. Because of which, these bankers had a very good estimate of the revenue yielding capacity of the areas for which they collected revenue and used this information for what was effectively corporate takeovers. From among the examples I am aware of, Gulab Singh borrowed Rs. 75 lakhs from Sheikh Saudagar to purchase Kashmir from the British, the Jagat Seth's of Murshidabad financed Robert Clive (reportedly 1 million pounds in gold) for overthrowing Siraj ud Doulah and taking over the rich province of Bengal, and a group of Banaras bankers financed a small time zamindar from Jaunpur to purchase the kingdom of Banaras again from the British.      

Adventures in Banking - I

In December 2001 I moved job and city. In my new assignment, I inherited a few credit relationships (ie where the bank had given loans or advances) which were not particularly in the pink of health. Some because they were undergoing financial stress, others because of liquidity strain since they had over-borrowed. One such exposure was to “N” the flagship company of a large well-respected corporate group. It was a large well-known profitable company with sound financials. Naturally it attracted corporate bankers keen on making safe lending the way honey attracts flies.

N had a borrowing arrangement through a consortium for its working capital requirements and with all India DFIs for term debt. In addition, it had borrowed (rather it was lent) clean “corporate loans” with no clear end-use from a number of banks trying to edge into its regular banking relationship.  These loans were largely structured by way of periodical payment of interest with bullet repayment of principal. In view of the size of operations of the company or exposure, each of these corporate loans was of relatively small size and could be easily repaid out of its cash flows – provided there was no bunching of repayments.

In this way the company had raised about Rs.100 crores and had invested it in an unrelated diversification project which had some major teething problems and the expected cash generation did not happen.

Since the company’s liquidity position was very tight and there was ample evidence of diversion of funds, the working capital consortium had put in place a system whereby all sale proceeds were credited in a single account with the lead bank. Each payment from that account was monitored by the lead bank, with payments only being permitted for normal operations such as payment to suppliers, employees, taxes etc. There was little scope for paying to other financial creditors which the working capital consortium did not approve of.

Given the size of their operations and stability of cash flows servicing of these corporate loans had not been considered a major risk factor by the lending banks. I had just joined a new assignment and the branch had one such Rs.20 crores corporate loan exposure. Interest was being serviced regularly but at the time of bullet principal repayment the company requested and was given time for 30 days to repay the amount. The 30 days turned to 60 and then to 90, but the principal repayment did not materialize. Interest payment also started getting delayed and then stopped. In effect the exposure became an NPA.

Given the size and prestige of the company, taking legal recourse was temporarily deffered for two reasons. First, it would have been costly and time consuming. Second, and more importantly, this was a well-known corporate and filing suit for recovery may have brought adverse publicity to the bank in the corporate lending market. The only option left to effect recovery was to supplicate the company’s top management. Towards this I started visiting the Company’s corporate office on a regular basis to meet and request the top managers for repayment of the loan. In this course I met the CEO who directed me to the Director Finance. We had a couple of very cordial meetings where the DF explained the liquidity problems being faced by them and assured me it was a temporary issue. But the proof of the pudding is in eating it, and there were no further repayments was forthcoming.

Thereafter, the DF started avoiding meeting me and I ended up sitting long hours in his ante-chamber trying to meet him without any actual meeting. This was upsetting my other work schedules and therefore I decided to try and meet him in the evening after finishing my day’s work. This tactic was also unsuccessful and I could not get to meet him even though I sat quite late in the evening in this company’s office over several days.

Meanwhile the pressure on me to get the account regularized had become quite intense.

Now this company had a culture / practice of serving tea with a substantial snack for all employees and visitors sitting in office after 7 pm. The first day I also partook of the tea and snacks, but later felt uncomfortable of having taken it. From the next day, I politely refused it under some pretext or other. After a few days, the DF’s secretary came and requested me to take the tea and snacks. I thanked him and very politely told him that I have been coming to meet the DF and not eat. He went and informed this to the DF, who came out of his cabin and escorted me to his cabin. He then told me that my refusing the snack was embarrassing for him. I just reiterated my request for repayment of our loan.

The next day we got a cheque for the full principal dues paid out of an account which the consortium leader was not aware! We appropriated it and advised them the remaining interest dues (a very nominal amount). Within a few days the balance interest payment was also received.

Lesson 101 – There is more to loan documents, security, financial analysis, legal recourse, registration of charges etc etc for effecting recovery in NPA accounts.

Charging For UPI Transactions

As per newspaper reports, the Standing Committee on Finance has informed the Parliament that the current UPI (Unified Payments Interface) setup is financially unsustainable and threatens critical investments in cyber security, fraud prevention, and network infrastructure. To address these issues the government is planning to make changes in the way users pay for this service and two modalities are being explored. The first is to charge certain high value transactions and high turnover merchants. The second is to have a tiered incentive structure so that the government can phase out its current scheme under which it compensates payment ecosystem players for a portion of the cost of processing low value UPI Transactions conducted at small merchant establishments.

It is true that banks & NPCI have invested large amounts of capital, both on hardware and software, to operationalize UPI and there are large continuing operational expenses which is partly funded through subsidies from the government. For continued stable operations of UPI clear sources of regular income needs to be identified to fund not only the operational expenses but also investments to make it better.

But we need to look at the other aspects of the picture too.  

First, one of the biggest contributions to growth is the financial system providing a cost effective, easy to use medium of exchange, which in turn enables trade on which ultimately all economic investment and growth depend. In this regard, UPI has turned out to be a real game changer and any tinkering in its functioning should be clearly and deeply thought through.

Second, handling physical money, especially small denomination notes and coins, apart from being a major expense due to its labour-intensive nature, is also prone to fraud. Using electronic means of payment, such as UPI, helps in virtually eliminating this in the operations of banks and businesses. In all discussions on the operations of UPI, there is no mention of the large tangible savings it has engendered. 

Third, the hard fact is that over 90% of UPI transactions are carried out by non-bank apps, of which only two – Google Pay and Phone Pe have roughly 40% each. Look at the irony of the situation – money moves from one bank account to another, either in the same bank or another but using third-party apps. Now since the transaction moves through a third-party app, all the information embedded in it is lost to the banks!

Are these third-party service providers doing charity, or are they being unduly subsidised by the government, or do they lack business sense. Actually, none of the three. The information embedded in the transactions is pure gold. It can be and is being used for designing marketing programs, profiling customers and targeting them. There is no way that the operational mismatch between what the government pays (Rs.2,000 crores) for keeping the UPI structure functional and the operational costs of running UPI (Rs. 20,700 crores) is sustainable without the players thinking out how to make the system pay for itself.

Fourth, the trails of cash flows created by UPI can be utilised for building credit products by banks, especially for the MSME and retail sectors. Something the banking industry has miserably failed to do, but fintecs are attempting. Failure by our banks to evaluate and build such credit products for this large and lucrative segment will very soon find them out of that market totally. Just as they find themselves out of the payment apps market. The security provided by clear, sustainable, and identifiable cash flows is much more tangible and immediate than the ephemeral collateral security banks keep running after.

Finally and most importantly, UPI is a public good which has unwittingly resulted in myriad benefits to the bottom third of society. From demonstrating the benefits of having a bank account to making it operational at little cost and effort – no need to visit a bank branch and waste time and money in doing so. Something all these years and efforts have miserably failed to do.

It would be very short-sighted and counter-productive for the economy if the Government now blindly starts charging for UPI transactions without taking into account the myriad benefits. It would be akin to killing the goose that lays golden eggs.  

The funding for keeping and improving the infrastructure should come from those large players who can immeasurably benefit from it – in sheer financial terms. The banks and the fintecs who can and are profitably using the information generated by UPI. After all, information is the new oil.  

I sincerely hope that better sense prevails.