India building its own semiconductor facilities to lower import dependence

Question: There have recently been problems pertaining to logistics which are faced globally. Is this having a dampening effect on India’s ambition to set up a semiconductor industry?

ANSWER: The global semiconductor shortage as a result of supply chain disruptions has spurred the government to expedite the setting up of manufacturing facilities in India. The reason is that the semiconductor industry is crucial as the chips are used to power smart phones, computers, automobiles and other critical products which are necessary for the digital economy. Presently, India is the second largest importer of semiconductor chips. Projections suggest that the semiconductor consumption in the country would be more than $80 billion in 2026 and would exceed $110 billion by 2030. Therefore, the Indian Government launched the India Semi Conductor Mission in 2021 with a projected outlay of $10 billion. This mission is meant to promote national security and establish technological sovereignty. Well-known companies have been encouraged to establish chip manufacturing facilities in Gujarat and Assam. Once this is done, India would be able to meet the needs of 10 per cent of the world’s $1.1 trillion semiconductor market. Currently, TSMC of Taiwan is the leading producer of semiconductor chips in the world. The reason for the success in Taiwan is the availability of skilled manpower which exists due to Taiwanese universities offering extensive and comprehensive educational facilities and creating an environment for research and upgradation of skills. The same has to be done in India by investing in innovation through collaboration between industry and the academia. Therefore, the India Semi Conductor Mission is encouraging private-public collaborations for research and training.

Question: My wife who is working in India has taken a personal loan. She has also taken a housing loan from a financial institution. I find that there are some hidden charges which my wife was not aware of at the time of taking the loan. Is this permitted?

ANSWER: Many complaints have been received in the past from borrowers regarding hidden charges, apart from the interest payable. To meet this grievance, the Reserve Bank of India has announced transparency measures applicable to all banks and financial institutions which give loans for any purpose. As per the new regulation which has been introduced to enhance transparency in disclosure of relevant information, the RBI has mandated lenders to furnish to a borrower a Key Fact Statement (KFS) which would contain all essential information, such as the all-inclusive annual percentage rate and other charges like processing fees, documentation charges, etc. The KFS will give information to borrowers about the actual annualised interest rate which they have to pay on the loan. This has also been mandated for all loans given by banks and financial institutions to all businessmen, sole proprietors and partnership firms, as well as micro, small and medium enterprises owned by corporates.

Question: Investors in India are being harassed on a regular basis by banks, financial institutions and others to update the KYC documents despite the fact that there is no change in the factual position. Is anything being done in this regard? Further, loans are being offered to unwary investors through online apps. Is this permissible?

ANSWER: The Financial Stability and Development Council at a recent meeting has decided to implement a seamless Know Your Customer system which will be used across various segments like banks, financial institutions, insurance companies, mutual funds, etc. The regulators and Government have taken a firm decision to simplify the KYC process through digitisation. Once this is done, repeated verification will not be required and the harassment which is currently experienced by investors would hopefully stop. At this Council meeting, steps were also discussed to curb unauthorised lending through online apps. Both the Reserve Bank of India and the Government are keen to put an end to this. RBI has put in place guidelines after receiving complaints of exorbitant rates being charged. It has also been found that unregulated entities belonging to foreign countries have entered this space. The Enforcement Directorate and money laundering authorities are investigating and taking penal action where necessary. Some well known networks have suspended or removed more than 2500 fraudulent loan apps from their platform.

The writer is a practising lawyer, specialising in corporate and tax laws of India.

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