The Policy Wrap: Another penalty looms large for Google as CCI decision on alleged market dominance abuse to be announced soon, RBI launches pilot for Digital Rupee, and more
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Another penalty looms large for Google as CCI decision on alleged market dominance abuse to be announced soon
Sources indicate that the DG (Director General) office of the Indian competition regulator has completed its investigation regarding the alleged abuse of market dominance by Google in the smart TV market and has submitted its findings as well.
The probe conducted by the DG office in June 2021, is based on a complaint filed by lawyers of two trusts. The allegations revolve around denial of market access to any manufacturer who doesn’t enter into a licensing agreement with Google as per a source. The complaint alleges that terms of licensing agreements which television manufacturers sign with Google to use its platform, are prohibitive for equipment manufacturers. It also points towards non-availability of Google Play store services for televisions manufactured by companies who do not have any agreements with Google. Another issue being investigated is the Android Compatibility Commitments (ACC), which prohibit equipment manufacturers from producing, distributing, or selling any other non-Android based smart television.
It remains to be seen how CCI chooses to define ‘relevant markets’ while determining market dominance. While Android might not have leadership in the overall smart TV market, it is the leader in the licensable market segment.
Apart from this, there is at least one more case against Google pertaining to Google’s search engine and advertising policies being investigated by the CCI currently.
RBI launches pilot for Digital Rupee
On the 1st of November, the Reserve Bank of India (RBI) becomes one of the first major central banks in the world to launch a pilot project with its own virtual currency. The wholesale digital rupee is being used on a trial basis for settlement of transactions in government securities for the time being. RBI also mentioned that the pilot project for the retail version of digital rupee is likely to be launched in a month. For the participation in the trial run, the regulator has identified nine banks, which are State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, YES Bank, IDFC First Bank and HSBC.
"Use of e₹-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk," the central bank said.
The RBI expects that the introduction of the digital rupee will boost India's digital economy, expand financial inclusion, and improve the efficiency of the monetary and payment systems. CBDC is intended to provide users with an additional payment option, and not to replace the present payment systems, or existing forms of currency.
Banks speak out for more time on rating rule, show apprehension on capital impact
Banks have urged the Reserve Bank of India (RBI) to postpone the new, controversial credit rating guideline by one year out of concern about a wave of loan downgrades and their impact on capital. The new legislation will go into effect at the end of January 2023 and put an end to the practise of bolstering a corporate borrower's credit rating using tools like a "letter of comfort" or "letter of undertaking" from the company, its promoter, or parent. A lower rating signifies a higher risk weight on a loan, therefore in the last quarter of the financial year, many loans provided by banks may experience a downgrading of at least one notch, necessitating them to set aside additional capital.
While banks do not question the decision of the regulator, they believe that the transition would be less disruptive if more time is allowed for the same. The preferable scenario for them would be that the rating revisions take place over a year when most of the loans come up for renewal.
Why not have higher risk weights for non-competitive borrowers?
Credit rating agencies have a bigger problem at hand, which is about non-cooperative borrowers. Rating agencies are of the opinion that risk weight on bank loans to such borrowers should be increased or doubled. While in some cases agencies rate them based on inadequate information due to the refusal of companies to share data, in many cases banks and companies do not have any major disincentive when ratings are withdrawn.
"In several cases, companies which are reluctant to cooperate with rating agencies belong to the sub-investment grade category with borrowings of ₹100 crore or less. For them as well as for the banks who lend them, an unrated loan is better than a sub-investment grade loan. There are strong grounds for RBI to raise the risk weight on unrated loans to 150% or even 200%. This would also push banks to nudge the borrowers to get a rating and share data with rating companies," said another industry official
Commerce ministry to release monthly trade data
In order to provide a clear picture of the nation's trade, the commerce ministry has opted to resume the practise of releasing exports and imports data once every month. The ministry has been providing the data twice a month since October 2020: the preliminary data in the first week and the revised numbers in the middle of the month.
The decision is noteworthy since the figures for September of this year show a clear discrepancy between the preliminary and final export growth rate numbers.