In today's Finshots, we talk about pepper imports and RBI's latest diktat for HDFC Bank.

Also, a reminder that you can listen to this story on Spotify and other podcasting sites.


The Pepper Loophole

Most people don’t think a lot about pepper. Sure, it’s a great spice and it’s a staple of the Indian cuisine. But you don’t explicitly think a lot about where all this pepper comes from. And we wouldn’t fault you. Because we don’t either. However, something interesting has been happening of late.

According to a report in the Hindu —

The Indian spice that commanded a price as high as ₹694 per kg in 2016–17 had been hovering in the ₹350–400 range in the last couple of years before it declined further to ₹322 at the start of November.

That’s right. Pepper is becoming more accessible. And while that’s great news for consumers; producers aren’t exactly happy with this development. They believe they are being undercut by foreign importers who can keep shipping peppercorn at ridiculously low prices. Think Vietnam — one of the world’s leading pepper suppliers and a country that loves dumping cheap pepper on other countries. According to some estimates, the country can produce a kilogram of pepper at Rs. 150/kg. Compare that to the Indian state of Kerala and you’ll see that it costs them Rs. 200–225/kg to produce the same quantity.

But here’s the thing. The Indian government imposes additional duties on imports from countries like Vietnam to make sure domestic producers get protection. So by the time Vietnamese pepper makes its way into the Indian market, its prices would have already gone up by as much as 50% owing to the import duty. This should put the Indian farmers at an advantage. But the only problem is — Importers have realized how to bypass this equation altogether by using a different strategy.

According to multiple reports in the Hindu and Quartz India, importers simply ship the Vietnamese pepper to countries like Nepal and Sri Lanka and then use these countries as a conduit to move the “produce” into India. Also, the strategy works because India doesn’t tax imports from Nepal and Sri Lanka as much. So technically, Vietnamese pepper can still continue to make its way into India and keep pushing prices lower.


When Datacenters Fail

In other news, the RBI pulled up HDFC Bank for lapses in its digital ecosystem.

The Reserve Bank of India has mandated the bank to temporarily halt sourcing new credit card customers and freeze the launch of all-new digital initiatives. Almost immediately, the company’s share price tanked and the bank’s Managing Director Sashidhar Jagdishan had to issue a formal apology.

So if you’re wondering what led to this terrible eventuality, may we take a moment to revisit the infamous network outage the bank had to deal with on November 21 — when all transactions through the company’s online digital payment mediums started failing en masse. Think, credit cards, internet banking, UPI, etc.

And while the bank did fix the issue soon enough, the RBI had sought a clarification on the matter, only to then go ahead and issue this latest order.

Now, some people might be inclined to think the punishment was a tad bit excessive. But you have to remember this whole episode was entirely avoidable. The latest outage was attributed to a power failure in its primary data centre. And the thing about a power failure is that it isn’t uncommon. In fact, it’s the leading cause of data centre outages in the world and you can plan for these exigencies. Anyway, the Managing Director promised to resolve this matter soon. However, until the RBI can vet the new processes and ascertain if the systems are fairly failproof, it's unlikely the bank will be allowed to pursue all those new digital initiatives they had in store for all of us.

Until then...

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