Amazon Current Affairs - 2019

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RBI imposes fines on PPIs for violating Regulatory Guidelines

Reserve Bank of India (RBI) imposed a monetary penalty on five Pre-Paid Payment Instrument (PPI) issuers which include Vodafone’s m-pesa and Phonepe, for violating its regulatory guidelines under provisions of Payment and Settlement Systems Act, 2007. Other facing Penalty includes, Western Union Financial Services Inc., MoneyGram Payment Systems Inc, (both are US firms) for for compounding of contravention and non-compliance of RBI guidelines and on Mobile Payments and Private and GI Technology.

About Pre-Paid Payment Instrument (PPIs)

  • PPIs are instruments which come with a preloaded value and in even with pre-defined purpose of payment.
  • PPIs facilitates financial services, inter-personal remittance transactions (like sending money to friend or a family member), purchase of goods and services (G&S), etc., against amount stored on such instruments.
  • Examples of PPIs: any smart cards (or chip card), magnetic stripe cards (or swipe card), internet accounts (like PayPal), internet wallets, mobile accounts, mobile wallets, paper vouchers (like travel and food vouchers) and any instruments used to access prepaid amount.
  • Three types of PPIs issued in India are:
  1. Closed System PPIs: are issued by an entity for facilitating purchase of G&S from that entity only and do not permit fund transfer or cash withdrawal. . They can be used only at specific locations. These do not require RBI approval. Ex- a brand specific gift card(Amazon/Pantaloons gift card).
  2. Semi-closed System PPIs: are issued by banks (approved by RBI) and non-banks (authorized by RBI) for purchase of G&S at merchant locations which have specific contract with issuer to accept PPIs as payment instruments. These are not restricted to a single entity and can be used for fund transfer. Ex- e-wallets like Oxigen, Mobikwik, PayTm.
  3. Open System PPIs: are issued only by banks (approved by RBI) and are used at any merchant for purchase of G&S and also for cash withdrawals at ATMs, Points of Sale (PoS) terminals and Business Correspondents (BCs). Ex- Vodafone mPesa.
  • Unlike open system PPI, closed and semi closed PPIs can be issued by NBFC and other entities who avail a license from RBI.
  • PPI issuer is an entity operating in a payment system who issues PPIs to individuals or organisations and uses money so collected to make payment to merchants.
  • PPI Holder is an individual or organisation who purchases PPI from PPI issuer and uses same for purchase of goods and services.

New norms for FDI in e-commerce

The new norms for the foreign direct investment (FDI) in e-commerce, bars e-commerce firms from selling products of entities in which they have an equity stake.

Why the new norms?

The new norms are brought in by the government to plug-in some loopholes like:

  • To bypass the rules which restricted large sellers on platforms such as Flipkart and Amazon from contributing more than a quarter of sales, online retailers had set up structures to get around those loopholes by mandating other sellers to buy from those large sellers and then, in turn, sell those products on e-marketplaces.
  • Large sellers formed multiple entities, which sold their products separately on online marketplaces.
  • The small traders were complaining that deep discounts offered by the likes of Amazon and Flipkart are driving them out of business.
  • The new norms aim to tackle the anti-competitive behaviour by e-commerce entities and to ensure that there is no wrong subsidization and the marketplace remains neutral to all vendors.

How will it affect e-commerce companies?

The impacts of the new norms are:

  • The e-commerce companies like Amazon and Flipkart would be adversely affected because Amazon has several such joint ventures, including Cloudtail and Appario. Even Flipkart has exclusive partnerships with top smartphone brands such as Xiaomi and Oppo. The new norms will adversely impact their business models.
  • The critics blame that the new norms are not in sync with the spirit of competition and free market economy because Only those exclusive arrangements that have an appreciable adverse effect on competition are prohibited under the Competition Act.

The new norms are welcomed by stating that the new norms will enable a level- playing field for all sellers especially MSMEs and help them leverage the reach of e-commerce.