Banks seek govt help to check chip shortage

SBI, Union Bank, PNB pick up stake in NARCL

Banks have sought the government’s intervention to address the shortage of semiconductor chips that has hit card issuance.

They have also suggested an investigation by the Competition Commission of India (CCI) into the practices of chip suppliers.

Banks collectively through the Indian Banks’ Association (IBA) reached out to the government over the issue last month, people familiar with the development said.

The banking industry has been reeling under chip supply shortage for some time in the wake of Covid-19 shutdowns in China, slowing card issuance.

Banks are finding it difficult to provide cards to the new Pradhan Mantri Jan Dhan Yojana (PMJDY) account holders, which is delaying the insurance coverage of beneficiaries, a bank executive said.

Supply shortages have pushed up prices of chips globally, triggering price increases by local vendors.

A government official said that due to ongoing global uncertainties, the card shortage is expected to remain for some time.

“We are aware of the challenges being faced by the industry and some long-term solutions, including promoting local manufacturing, will be looked at,” he added.

Bank executives say local vendors had raised prices despite existing supply contracts and were colluding with each other to keep prices inflated.

“Local vendors are pushing to increase the prices despite existing supply contracts,” the official said justifying the demand for a CCI review into possible cartelisation.

About 319.7 million RuPay cards have been issued till August 24 this year. In the first four months of this fiscal around 3.5 million cards were issued. Beneficiaries under PMJDY accounts have increased from 430.4 million to 463 million in the last year.

Source: Economic Times

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