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Wednesday, April 18, 2018


The National Institute of Public Finance and Policy (NIPFP) is looking to hire researcher(s) on a full-time basis. Our work is inter-disciplinary, bringing together knowledge of public economics, public administration, law, and quantitative research.

Researchers in technology policy

There is a great collision taking place between the development of science and technology, and the public policy process. In the Technology Policy group at NIPFP, we aspire to understand cutting edge issues in the field, develop novel ideas and insights, and contribute to the policy process. While our aspirations extend to a broad array of issues in the overall landscape of technology policy, at present, our work is primarily in telecom policy, privacy, Aadhaar, open data, open APIs, open source, RegTech, distributed ledger and crypto-currencies, and competition policy.

Some examples of our work in this field include:

  1. Suyash Rai, Dhiraj Muttreja, Sudipto Banerjee and Mayank Mishra The Economics of Releasing the V-band and and E-band Spectrum in India, April 2018.
  2. Smriti Parsheera, CCI's order against Google: infant steps or a coming-of-age moment?, Ajay Shah's blog, February 22, 2018.
  3. Submissions to the Justice Srikrishna Committee's White Paper on Data Protection.
  4. Ashim Kapoor, Smriti Parsheera, Faiza Rahman and Rachna Sharma supported the Telecom Regulatory Authority of India in the preparation of the White paper on measurement of wireless data speeds, February 5, 2018.
  5. Vinod Kotwal, Smriti Parsheera, Amba Kak, Open data and digital identity: Lessons for Aadhaar, ITU Kaleidoscope: Challenges for a Data-Driven Society, Conference held in Nanjing, China, November 27-29, 2017.
  6. Ajay Shah, Predatory pricing and the telecom sector, April 3, 2017 and Smriti Parsheera, Building blocks of Jio's predatory pricing analysis, April 27, 2017 on Ajay Shah's blog.
  7. Smriti Parsheera, Ajay Shah and Avirup Bose, Competition Issues in India's Online Economy, NIPFP Working Paper No. 194, April, 2017.
  8. Amba Kak, Mayank Mishra and Smriti Parsheera, TRAI's consultation towards a net neutrality framework in India, January 23, 2017.

NIPFP is an exciting workplace where you will be surrounded by interesting people.

The remuneration will be commensurate with the candidate's experience and will be comparable with what is found in other research institutions.

Requirements: You must have a Masters degree, two years of work experience, very strong written and spoken English. You must have a background in science/engineering/technology, public economics or public policy. Keen and demonstrated knowledge in areas relating to the frontiers of science and technology is a must.

Interested candidates may send in their CV to:

Tuesday, April 17, 2018

Interesting readings

The great bank fiddle by Manish Sabharwal in The Indian Express, April 16, 2018.

A Guide to Getting Along in Putin's Russia by Maxim Trudolyubov in The New York Times, April 16, 2018.

The wrinkles beneath the RBI's cheery disposition by Rajrishi Singhal in Mint, April 16, 2018.

Indian currency manipulation by Ajay Shah in Business Standard, April 16, 2018.

RBI's powers over PSBs: What's the truth? - II by Debashis Basu in Business Standard, April 16, 2018.

Michael Cohen and the End Stage of the Trump Presidency by Adam Davidson in The New Yorker, April 14, 2018.

Can RBI press for open currency? by Devangshu Datta in Business Standard, April 13, 2018.

Is SEBI being a nanny to investors? by Aarati Krishnan in Business Line, April 12, 2018.

Not fair: Finance Commission's terms of reference stray from propriety in Business Standard, April 11, 2018.

Walking the digital financial tightrope by Gangesh Varma & Rajat Kathuria in Business Standard, April 11, 2018.

Further liberalise derivatives market in The Economic Times, April 10, 2018.

Fear of virtual currencies by Vaibhav Parikh & Arvind Ravindranath in Business Standard, April 9, 2018.

The Four Challenges Before NCLT And Why Losers Must Not Become Winners by R Jagannathan in Swarajya, April 9, 2018.

When the supervisor slept by Ila Patnaik in The Indian Express, April 9, 2018.

Unicorns of the Intellectual Right by Paul Krugman in The New York Times, April 8, 2018.

Addressing the insolvency code's many dilemmas in Mint, April 8, 2018.

Can someone ask India's central banker some tough questions please? by Sriram Iyer in Quartz, April 6, 2018. Also see: The undersupply of criticism by Ajay Shah in Ajay Shah's Blog, May 21, 2010.

The monetary policy committee report by Raghuvir Srinivasan in Business Line, April 5, 2018.

Confidence in the House by M.R. Madhavan in The Hindu, April 5, 2018.

Failing the law by Kapil Sibal in The Indian Express, April 5, 2018.

Sebi is at it again. NSE, BSE investors can't ignore regulatory risks by Mobis Philipose in Mint, April 5, 2018.

RBI's move to allow banks to downplay treasury losses can hurt investors in Business Line, April 4, 2018.

Thursday, April 05, 2018


Research programmers at NIPFP, New Delhi

We at NIPFP are looking to hire Research Programmers on a full-time basis.

We have many large datasets which require management. We design and build APIs that govern data access. We engage in high performance computation to statistically analyse these datasets. The tools involved here are Linux, MySQL, R, time-series analysis, longitudinal data analysis and geo-spatial analysis [example], machine learning. We are at the frontiers of R programming including releasing open source R packages [fxregime, eventstudies].

Research programmers are expected to choose the appropriate tools through research and small proof-of-concept, implement tools including API design, engage in devops for live systems, build applications that utilise the tools, communicate tools to researchers who have an economics/statistics background, and support the optimal use of tools by these researchers. This covers the full pipeline of the data science process: Choice of tools -> establish infrastructure -> manage data -> build analytical tools -> presentation.

Research programmers will work on building devices for measurement of weather, air quality, mosquitoes, etc [example].

NIPFP has a work program on technology policy and research programmers will get involved in work on issues such as net neutrality, privacy, drones, etc.

NIPFP is an exciting workplace where you will be surrounded by interesting people. The remuneration will be commensurate with the candidate's experience and will be comparable with what is found in other research institutions.

Interested candidates may send in their CV to:

Wednesday, April 04, 2018

Interesting readings

Legal challenges could undermine IBC, by Bahram N. Vakil and Kaushik Krishnan, in the Business Standard, April 3, 2018.

A radical proposal to keep your personal data safe by Richard Stallman, in The Guardian, 3 April, 2018.

Dangers of the `lynch mob' mentality by Sarim Naved, in the Hindu Business Line, April 3, 2018.

ICICI Bank-Videocon 'sweet deal': RBI must tell us what’s going on by Suyash Rai in The Indian Express, April 2, 2018.

RBI's powers over PSBs: What's the truth? - I by Debashis Basu in Business Standard, April 2, 2018.

Public sector style anti-corruption is not appropriate for private firms by Ajay Shah in Business Standard, April 2, 2018.

Too Many Unnatural Deaths: The Gir’s Asiatic Lion Needs a 2nd Home by Rahul Nair and Aishwarya S. Iyer, TheQuint, 31 March 2018.

How Iran Used the Hezbollah Model to Dominate Iraq and Syria by Ranj Alaaldin in The New York Times, March 30, 2018.

It's Time for an RSS Revival by Brian Barrett in Wired, March 30, 2018. Also see: Some suggestions for the guys building RSS feeds and feedreaders in Ajay Shah's Blog, October 1, 2006.

IBBI's draft framework sets new standards of regulatory governance in India by Bhargavi Zaveri in Business Standard, March 29, 2018.vAlso see: Regulatory responsiveness in India: A normative and empirical framework for assessment by Anirudh Burman, Bhargavi Zaveri in IGIDR Working Paper, July 2016.

How Chromebooks became the go-to laptops for security experts by Alfred Ng in Cnet, March 28, 2018.

A Math Whiz Has Become a Crucial Political Figure in France by Helene Fouquet and Marie Mawad in Bloomberg, March 28, 2018.

Why everyone loves Israel now by Shai Feldman and Tamara Cofman Wittes in Brookings, March 26, 2018.

How Calls for Privacy May Upend Business for Facebook and Google by By David Streitfeld, Natasha Singer and Steven Erlanger in The New York Times, March 24, 2018.

Shining a Cleansing Light on China's Dark Secrets by Jane Perlez in The New York Times, March 23, 2018.

PSU bank privatization is not a panacea for the ills of the banking sector by Rajeswari Sengupta and Shubho Roy in Mint, March 22, 2018.

Liberal World Order, R.I.P. by Richard N. Haass in Project Syndicate, March 21, 2018.

Urjit Patel Is Half Right: Accountability Is The Real Fugitive by Shankkar Aiyar in Bloomberg, March 17, 2018.

The Double Helix of Chinese History by Denise Y. Ho in Project Syndicate, March 15, 2018.

When ideology overcame sense: RTE imposes a bureaucratic, grotesquely inefficient regime starving our children of good education by Geeta Kingdon in The Times of India, March 13, 2018.

Sunday, March 25, 2018

Concerns about the Indian bankruptcy reform

by Ajay Shah.

The key idea of the IBC

The centrepiece of the bankruptcy process is the Insolvency Resolution Process (IRP). Because a firm after default is like a melting ice-cube, every day of delay destroys value. So the IBC provides for a limited time of 180 days for the IRP to work out. It is within this time limit that multiple external persons come up with proposals on resolution plans for the defaulted firm. These are evaluated by the Committee of Creditors and the best one is chosen. The chosen one takes control of the company and walks away into the sunset, and all others forever hold their peace.

This machinery must be understood and trusted by all. When there is certainty that this process will work as defined, all parties -- bidders, committee of creditors -- are incentivised to invest resources, and work within the defined procedures.

We need to be nuanced about the phrase "the best bid". The decision before the Committee of Creditors is more subtle than a simple auction of a commodity. There are many factors in the picture. Do we trust the promises of the bidder? If cash will come out to the creditors at a future date, then the creditors need to weigh the possibility of the new person becoming their borrower. In complex cases, each bidder may show a different restructuring strategy as his preferred one; the comparison between different bids is then not apples to apples. There is a great deal of judgment about the thought process of the Committee of Creditors. Sometimes, it's a simple question of the person who offers the highest number, but in most complex transactions, it's more complicated than that.

Recent events

The bankruptcy process for Binani Cements has raised concerns about these concepts being disrupted. On February 27, the Committee of Creditors chose one bid (Dalmia) at Rs.6,700 crore. This was a near-100% recovery rate as the total liabilities were Rs.7,000 crore. A binding agreement was signed and sent to NCLT for ratification. In any reasonable bankrutpcy process, this should be a done deal that cannot be reopened.

A month later, Ultratech announced a deal with Binani's holding company to purchase the firm for Rs 7,300 crore, and petitioned the NCLT that it should not approve the Dalmia deal because Ultratech is really the highest bidder.

In a previous case of a similar nature, Liberty House failed to get a bid in time into the IRP for Bhushan Power. In the IRP, the Committee of Creditors chose Tata Steel. After the terms offered by Tata Steel were revealed, Liberty House has tried to go to the NCLT, saying that they had a better offer.


Consider an auction for some listed shares. The market price is Rs.100 and the auction outcome is near Rs.100. Now half the time, the price of the shares on the public market goes up. Suppose we have a situation where a month later, they are worth Rs.110. Can a person now ask to reopen the auction because she is bidding Rs.105? This would be a ridiculous position to take, one that completely undermines the sanctity of the auction process. The auction is your opportunity to make a bid, and once it's over, you must forever hold your peace.

Agreeing with Ultratech or Liberty House would undermine the IBC-defined machinery of the Committee of Creditors. There is a trivial sense in which they are now claiming they have a superior bid. But going with their claims would disrupt the resolution timelines of 180/270 days. It would undermine all future IBC outcomes, setting a precedent of someone coming along, late, and reopening the matter. The lack of finality would, in turn, disrupt the trust of bidders in the process. Bidders who mistrust the IBC would tend to put in less resources in thinking about each case, and they would tend to put in lower bids because the outcome is not certain.

In the case of Binani, Ultratech was one of the participants in the IRP. They were not chosen there. This offers a natural response: Why did you not make a more attractive offer while the IRP was in process?. If they were not part of the IRP, a natural response would be: The forum where bids are analysed by the Commmittee of Creditors is the IRP; it is transparent and widely announced to enable a fair playing ground for everyone who is interested in resolving the firm. Why was your proposal not presented there?

I thank Josh Felman and Susan Thomas for useful discussions.

Wednesday, March 21, 2018

Financial regulation for the fintech world

by Ajay Shah.

In India, there is a confusing term `non-bank financial company' (NBFC). This is an unfortunate phrase as the term, when taken literally, includes insurance companies, etc. In India, it denotes a $10 \times 2 \times 2$ classification of business models which are regulated by the RBI.

There is a lot of confusion in the present regulatory treatment of these classes of firms. The existing levers of regulation are inappropriate, and it is not clear why RBI -- which should be about sound money and sound banking -- is doing all this work. These concerns are becoming particularly important in the context of the fintech revolution, where all kinds of new firms are being shoe-horned into NBFC regulation.

It's hence useful to take one step back and think about  financial regulation from first principles. Where and why is financial regulation required? Financial regulation is based on exactly four motivations:

  1. Consumer protection. Financial firms generally require a layer of restrictions, that impact upon their dealings with customers, that improve fair play. These problems are heightened when the financial firm directly deals with unsophisticated individuals.
  2. Micro-prudential regulation. When a financial firm makes a high intensity promise to a consumer, generally there is a need for restrictions upon the risk-taking by the firm, to curtail the probability of firm failure. Such micro-prudential regulation is  (in turn) motivated by consumer protection: we wish to improve how consumers are treated in their dealings with the financial firm. When a firm takes a deposit from a household, that requires micro-prudential regulation, but when the firm lends to a household, the household is quite comfortable with the prospect of firm default, and no micro-prudential regulation is required.
  3. Resolution. When a financial firm makes promises to consumers, or when a financial firm is systemically important, the conventional bankruptcy process (of IBC) is inadequate. A specialised bankruptcy process is required, which is run by the Resolution Corporation. 
  4. Systemic risk regulation. The behaviour of firms needs to be restricted from the viewpoint of systemic risk. This is mostly about system thinking, and not looking at individual firms ("the woods and not the trees"). But one ("trees") element of this tends to be a reduced target failure probability for a few firms which are termed `systemically important'.

FSLRC drafted the Indian Financial Code (version 1.1, 2015). The four components of financial regulation show up there as:

  1. Part VII which does consumer protection (S.105 to S.151)
  2. Part VIII does micro prudential regulation (S.152 to S.184)
  3. Part XII does resolution (S.286 to S.310). This has morphed into the FRDI Bill.
  4. Part XIII does systemic risk regulation (S.311 to S.341).

This treatment is non-sectoral. There is no special law which defines consumer protection for banks vs. consumer protection for mutual funds. All kinds of financial business is treated identically, within these four components. The advantage of  non-sectoral law is that the law does not have to be modified when new business models are invented, or when multiple kinds of activities are undertaken under one roof.

Now let's apply this thought process to what, in today's India, would be called an NBFC. To keep things simple, consider a company which finances itself using the bond market, has no unsophisticated consumers, and gives out loans to companies. How would we think about regulating this?

  1. Consumer protection: As this firm has no unsophisticated customers, this simplifies the problem of consumer protection. See Table 5.5 in FSLRC Volume 1. The protections that would have to be enforced are: professional diligence, unfair contract terms, unfair conduct, privacy, fair disclosure and redress.
  2. Micro prudential regulation: As this firm makes no promises to unsophisticated individuals, there is no need for micro-prudential regulation. The bond market is what will discipline the risk taking of this firm. This is similar to how the bond market shapes the leverage and access to debt capital of an ordinary non-financial firm.
  3. Resolution: Ordinary IBC processes will suffice to deal with failure. The bond market will reward more resolvable businesses with a lower cost of capital.
  4. Systemic risk regulation: Until the balance sheet becomes 1 per  cent of GDP, i.e. $20 billion, the firm is not systemically important.

By this logic, for most NBFCs, there is a need for a little bit of consumer protection and nothing else. Most of the existing edifice of NBFC regulation, which seems to be inspired by the regulation of banks, is not required.

Enacting the Indian Financial Code addresses this situation at two levels. First, as described above, it gives a clear conceptual framework on how to think about financial regulation, without encoding business models into the law. Second, the FSLRC regulation-making process encourages the institutionalised application of mind. When mistaken ideas start out in the regulation-making process, there will be greater push back. The staff of financial agencies will rise to higher quality thinking when placed into the FSLRC regulation-making process.

In a previous article, Renuka Sane and I wrote about the barriers faced for the Fintech Regulatory Sandbox. The question discussed here -- the problems associated with shoe-horning fintech into the NBFC framework -- connects integrally to that. Once a project is proven in the sandbox, it will come out into the regulation making process. If the concepts and principles of the regulation-making process have basic defects, this will hamper the working of the regulation-making process, and yield poor outcomes.

Tuesday, March 20, 2018

Interesting readings

Dealing with this air pocket by Ajay Shah in Business Standard, March 19, 2018.

Public sector banks: Buck passing between RBI and Ministry of Finance by Debashis Basu in Business Standard, March 18, 2018.

How a Bengal Town is Embracing Its Danish Past by Soumitra Das in The Wire, March 18, 2018.

India is Ignoring the Jurisprudence of Arrest At Its Peril by Bishwajit Bhattacharyya in The Wire, March 15, 2018.

Can Donald Trump Be Impeached? by Andrew Sullivan in The New York Times, March 12, 2018.

Fewer heart attack patients die when top cardiologists are away at conferences, study finds by Sarah Knapton in The Telegraph, March 9, 2018.

The Grim Conclusions of the Largest-Ever Study of Fake News by Robinson Meyer in The Atlantic, March 8, 2018.

'Elite' is now a meaningless insult that's used to silence criticism by Nesrine Malik in The Guardian, March 7, 2018.

Do you check your privilege? We have, and found potentially huge future problems with CBI raiding Nirav Modi docs from CAM by Kian Ganz in Legally India, March 7, 2018.

AI, Society, and Politics of the Future by Anupam Guha in NIPFP YouTube Channel, March 7, 2018.

Behold Vladimir V. Potemkin by Antony J. Blinken in The New York Times, March 5, 2018.

David Remnick Talks to Masha Gessen About Putin, Russia, and Trump in The New Yorker, February 27, 2018.

15th Finance Commission: Mandate sans Mission by Haseeb Drabu in Mint, February 27, 2018.

Has Anyone Seen the President? by Michael Lewis in Bloomberg, February 22, 2018.

Will LTCG+STT hollow out India's equity markets? by Mobis Philipose in Mint, Februry 9, 2018.

Questioning The Latest National Family Health Survey by Swati Kamal in Swarajya, January 30, 2018.

Cut loans to firms, focus on retail: Govt to smaller banks by Sunny Verma in The Indian Express, January 27, 2018.

This Country's Democracy Has Fallen Apart And It Played Out To Millions On Facebook by Megha Rajagopalan in BuzzFeed, January 21, 2018.

Global Mission Partners: India track is open to any open source or free software project that is undertaking an activity which significantly furthers Mozilla's mission, and for which the applicant(s) are in India.