Govt must treat financial systems as public goods, not private risks

The Government of India’s recent overhaul of India’s financial and legal systems has been promoted as a leap toward efficiency, transparency, and inclusion. In tone and ambition, it signals a State eager to prove that it can keep pace with a rapidly changing economy. But these reforms are more than what meets the eye. The new policies often shift responsibility from the State to citizens, leaving individuals to navigate a financial ecosystem that remains uneven, risky, and largely unregulated.

The most significant of these changes is the reform of the National Pension System (NPS), which took effect on October 1. The government calls it a ‘landmark step’ in personal financial empowerment. The new Multiple Scheme Framework allows non-government subscribers to invest up to 100% of their retirement savings in equity, and manage multiple schemes through a single account. It is a bold move that promises flexibility and potentially higher returns, especially for self-employed workers and small entrepreneurs.

Yet, what is presented as empowerment can easily become exposure. By inviting ordinary citizens to invest their futures in the stock market, the State is quietly withdrawing from its traditional role as a provider of social security. In a country where financial literacy remains low and market volatility high, such a shift risks deepening insecurity rather than alleviating it. The policy assumes that every worker is an informed investor; an assumption that hardly holds in a nation where over 80% of the workforce is informal and lives without pension coverage.

A similar tension runs through the Reserve Bank of India (RBI)’s modernisation of payment systems. The move toward continuous cheque clearing, essentially real-time settlement, is being hailed as a milestone for liquidity, and business efficiency. For millions of small traders, faster payments could indeed ease cash-flow pressures. But speed alone does not equal safety. The RBI’s simultaneous decision to discontinue peer-to-peer UPI collect requests points to a more troubling reality: as India’s digital payments ecosystem expands, so do the risks of fraud, data theft, and financial scams. The reforms acknowledge these dangers but stop short of addressing them structurally.

Technology-driven inclusion, after all, is only as strong as the safeguards that support it. Without robust data protection laws and accessible consumer grievance systems, India’s financial revolution risks leaving behind the very people it aims to empower. The government’s enthusiasm for digital solutions sometimes appears to mistake access for equity, assuming that being online is the same as being secure.

The same pattern can be seen in the government’s approach to online gaming. The new regulations, which seek to curb addiction and protect vulnerable groups, are being presented as a social measure. Yet, they also reveal a growing appetite for control. While the intention to regulate gambling and safeguard young people is commendable, the policy risks being reactive rather than reformative. It tackles the symptom of gaming addiction without addressing the cause: widespread unemployment, rising inequality, and a lack of safe recreational spaces. True protection would require the State to invest in social welfare, not just police the digital sphere.

Elsewhere, smaller reforms in banking and consumer law also carry mixed signals. The revision of bank locker agreements, changes to service charges and stricter road safety penalties are meant to enhance fairness and transparency. But for many citizens, these measures simply translate into more paperwork, higher costs, and little real accountability. Banks, for instance, remain free to increase fees under the guise of compliance, while major corporate defaulters often escape with impunity. The regulatory net seems to tighten around ordinary citizens even as it loosens around the powerful.

What connects these scattered initiatives is a shift in governance. India’s new reform strategy is technocratic rather than participatory, designed through notifications, circulars and executive orders rather than public debate. The focus is on efficiency, not equity; on market logic, not social protection. The State’s role as a welfare guarantor is being reimagined into that of a facilitator, offering tools and platforms while leaving individuals to manage the risks.

This model reflects a broader global trend. Across economies, governments have embraced transparency and compliance reforms that look progressive but often sidestep the redistributive questions that matter most. India’s trajectory mirrors this pattern: a faith in digitalisation and market access as substitutes for social justice. Yet, modernisation without protection can easily turn reform into precarity.

These initiatives are not without merit. Real-time clearing can help small businesses, transparent banking norms can protect customers, and online gaming regulation can check exploitative practices. But reforms cannot succeed in isolation from the social realities they are meant to serve.

A truly forward-looking agenda would treat financial systems as public goods, not private risks.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.

Yadul Krishna is a policy economist and an associate at A&N Legal. X:@yadul_krishna.