DeJARGONING ::: PAYMENT BANKS ....!!!

What is a PAYMENT BANK and what is the NEED of it  ?

• India has struggled with financial inclusion—just 400 million of the 1.2 billion population have bank accounts—and with getting urban-centric banks to include the urban poor and the rural population.

• But financial inclusion is not just about access to financial products—both savings and borrowings. 

• It is first and foremost about safe, easy and low-cost access to a cash-flow management system, and that includes a payment system that allows you to move money around safely and at a low cost. 

• The pre-paid instruments industry sprang up to bridge this gap of getting cash-in and cash-out access points to people whom banks find economically unviable to service, despite the incentives.  (So what is the Problem ? )

• But the industry has been shackled by the need to have a bank as a partner for the cash-out function. 

• A payment system has two parts—a pay-in and a pay-out. I can load a card and give it to my driver who can go to his village and then decide to cash out his salary. Under the current model, unless he has a bank account, cash-out is difficult.

Where lies the bone of contention ?

• Apart from restricting the system, chaining a payment entity to a bank introduces market inefficiencies. 
• The first is the potential of contagion or one entity’s risk spreading to another. (e.g. ?? )
• As it happened in Kenya where the mobile payment system M-Pesa grew bigger than the banks. The same could happen in India given the lack of banking services for more than 60% people.

What happens in the present scenario ? 

• Today, the mobile wallets and PPIs need to put customers’ money in an escrow account in which it has to partner with bank . 

( Escrow Account :- A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. An escrow account can be used in the sale of a house, for example. If there are conditions to the sale, such as the passing of an inspection, the buyer and seller may agree to use escrow. In this case, the buyer of the property will deposit the payment amount for the house in an escrow account held by a third party. )

• Securities, funds and other assets can be held in escrow. with the partner bank. 
• An escrow account earns the non-bank payment company no income but the bank has access to the float. 
• Suppose there is a run on the bank—not only will the bank customers be at risk, the contagion could spread to the potentially much larger mobile wallet or PPI operator. 

• The payment bank concept solves this problem by allowing the PPIs and mobile wallets to transform into a bank that puts 100% of the customers’ money in government securities and is not allowed to lend money.

• A payment bank will be a bank in every respect except that it cannot lend, thus removing the risk of leverage.

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Why r we discussing about PAYMENT BANKS ?

• A Reserve Bank of India (RBI) panel called the NACHIKET MOR COMMITTEE  has recommended that a special category of banks, called payments banks, be set up to widen the spread of payment services and deposit products to small businesses and low-income households in Asia’s third-largest economy, where about 40% of the population still do not have access to formal financial services

• Such banks will have a minimum entry capital requirement of Rs.50 crore, one-tenth of what a full-service bank requires, since they will have a near-zero risk of default,.

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Peeping into the history of Workers Movement and the May Day !!!

The modern working class is the product of the industrial revolution beginning with mid-18th century. But we can find workers’ activities and organisations even in the pre-industrial phases, when this class was still in the formative period.

Records of workers’ associations, guilds and unions are to be found in the 14th to 18th centuries. In 1345 a wool comber tried to organise a union of wage labourers in Florence (Italy), for which he was condemned to death. Several workers’ uprisings took place in the 14th century Italian principalities. A remarkable struggle for wage rise and political rights took place in Ciompi (Florence) from 1378 onwards.

Some other notable struggles and organi-sations were as follows: 

• Lyons (France) printers in 1501; first long lasting strike in the same city in 1539 for five months (demanding wage increase, better meals, shorter work hours, etc); 
• Lyons (1540-41) and Paris (1570-72); 
• 17th century strikes of workers in England; 
• strikes of clothing and shipyard workers in the Netherlands in 1718-19; 
• strikes, riots and organizations in England in 17th-18th centuries; 
• struggles elsewhere in Europe.

Important Movements

The rise of labour, TU and working class movements was marked by some historical movements which have left their deep imprints on history. Among them were the Levellers’, Diggers’, Poachers’, and the Luddites’ movements.

Most of these movements were a reaction to the new machineries on way to the industrial revolution. For lack of clear scientific consciousness, the workers looked upon the machines as their enemies and destroyed them, as happened in the Levellers’ and Luddites’ movements. They took place in the 17th to 19th centuries.

The Peterloo Massacre of workers in England took place on August 16, 1819. The famous Chartist movement began in England in 1838.

Chartist Movement 

      

• Though this movement began roughly around 1831-32, it really took shape with the formation of London Workingmen’s Association in 1836. The Chartist movement lasted till about 1847, its high point was 1842.

• Chartism was the first sustained political movement of the English working class. 
• It advanced, among others, two basic political demands: universal suffrage and 10-hour workday.
• The political demands around the voting rights contained six important points. 
• The demands and the movement were highly appreciated by Marx and Engels as the political awakening and consolidation of the working class. 
• They underlined the significance of the struggle for voting rights for the workers.

The years of the Chartist movement were marked by great strikes, giant processions, petitions signed by more than a million workers of England, peaceful rebellions and resistance etc. The nationwide forums of the Chartists were the Universal Convention of Industrial Classes and National Charter Association.

The second Charter of 1842 contained more than three million signatures and was partici-pated in by hundreds of thousands of workers. It was the first time in history that a political form was given to workers’ demands, and thus it was a prototype of a workers’ party. There took place a nationwide workers’ general strike in August 1842.

• Chartism helped the development of Marxism in many respects.

Origins of Red Flag

• There is a common misconception that the Red Flag was born during the May Day events in 1886 in Chicago. In reality the history of the Red Flag goes much earlier. 

• The Red Flag was in use before the French Revolution (1789) to mark danger or to alert. Hence the colour red. After the French Revolution the people declared that they were using Red Flags to warn the former rulers of the royal family. An instance is mentioned in history of workers having hoisted the Red Flag in Lyons on Hotel de Ville in 1789. Not much is known. A French General is reported to have hoisted a Red Flag over a prominent building in Paris to warn the people.

The working people of Paris already considered the Red Flag as their own since June 1832, when in a workers’ uprising the Red Flag was hoisted over the barricades in the city. Thereafter the Red Flag became quite common in France and several other countries of Europe.

• The Chartist movement in England also had Red Flag as their banner 1838 onwards. 

The issue of national flag of France became a contentious issue in the course of the European revolutions of 1848-49. While the represen-tatives of the petty bourgeoisie and the bourgeoisie wanted the Tricolour as the Republic’s flag, the workers’ represen-tatives wanted the Red Flag as the flag of France. An appeal to recognise the red banner as the national flag circulated for 36 hours in the areas around the Town Hall. August Blanqui, the leader of the revolutio-nary proletarians, supported the demand most actively.The issue was settled by accepting the Tricolour as the national flag with a red rosette attached to it.

The Social Democratic Party of Germany was established in 1863. Its flag was the red banner with a handshake imprinted on it.

The flag of the First International or the International Workingmen’s Association was also red, as also that of the Second International (1889). The Red Flag was hoisted over Hotel de Ville during the Paris Commune of 1871.

Hammer and sickle was put on the Red Flag during the Russian Revolution of 1905 as the symbol of worker-peasant unity.

Thus the Red Flag originated and spread much before 1886. In fact, in the USA itself the red banners, arm-bands and flags were quite common in the 1860s and 1870s, that is, much before the Chicago May Day events.

Sources of May Day

The origins of May Day are related with mainly two events.

One is the American Revolution of 1776. 

• It is interesting to note that the workers, indentured labour, negroes and other working people played a crucial role in the Revolution which led to the emergence of the ‘United States’, the first of 13 States. The declaration of independence adopted by the USA was considerably influenced by the workers’ conventions held before the Revol-ution. And Thomas Jefferson, prominent leader and American President, prepared the draft of the declaration in the house of a brick-layer. Jefferson was very close to the workers, who in turn considered him their hero.

This declaration of independence was to play a crucial role later on. In fact, many of its points about the independence of the humans were taken from various workers’ conventions and meetings. This idea evolved further into the 19th century American labour movement as one of the basic planks. The point was remembered during the preparations for May Day and its events.

The declaration of independence was a great source for the emergence of workers’ festivals during the 19th century. A tradition emerged in which every first Monday of September was celebrated as the day of workers’ holiday all over America.

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The other event is the struggle of the American working class for eight-hour workday. It was preceded by widespread struggles for 10-hour workday at the begin-ning of 19th century. By mid-century the demand was accepted and even implemented in many parts of the USA. In the second half of the century the US trade union movement was able to put forward the demand of eight hours as the workday, with other 16 hours kept aside for rest and recreation. Economic, technological and political changes played a crucial role in the demand for reduction of work hours.

Powerful American trade unions, such as the Knights of Labour, American Federation of Labour and other national industrial centres, played a central effective organisa-tional role.

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The movement gradually picked up from 1884, and by 1885-86 it was decided to merge the Labour Day with May Day. A countrywide struggle took place in May 1885, followed by a one-day industrial strike and general movement on May 1, 1886. The Hay Market events in Chicago gave rise to the observance of May Day every year. The Second International decided to observe May Day worldwide every year 1890 onwards.

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MAY DAY and INDIA !!!

• The first May Day celebration in India was organised in Madras by the Labour Kisan Party of Hindustan on 1 May 1923.
• This was also the first time the red flag was used in India. 
• The party leader Singaravelu Chettiar made arrangements to celebrate May Day in two places in 1923. 
• One meeting was held at the beach opposite to the Madras High Court; the other meeting was held at the Triplicane beach. 

The Labour Kisan party has introduced May Day celebrations in Madras. Comrade Singaravelar presided over the meeting. A resolution was passed stating that the government should declare May Day as a holiday. The president of the party explained the non-violent principles of the party. There was a request for financial aid. It was emphasized that workers of the world must unite to achieve independence.

May Day is a public holiday in several parts of the country.The holiday is tied to labour movements for communist and socialist political parties. Labour Day is known as "Kamgar Din" in Hindi, "Kamgar Divas" in Marathi and "Uzhaipalar Dinam" in Tamil. On this day, banks and other public organisations in Assam, Bihar, Goa, Karnataka, Kerala, Manipur, Pondicherry, Tamil Nadu, Tripura, West Bengal and Orissa observe a holiday.In North India, Labour Day is mostly not given its previous importance as a holiday now.