Amid chip shortage, Indian banks reach out to govt, seek CCI intervention

Indian banks have sought the government’s intervention to address the issue of semiconductor chips shortage, according to a report by Economic Times.

The chip shortage has impacted the issuance of cards from banks. These banks have also asked for an investigation by the Competition Commission of India (CCI) into the practices of chip suppliers. Banks are struggling to meet the card issuance targets under Pradhan Mantri Jan Dhan Yojana (PMJDY).

Earlier, banks had collectively reached out to the government over the issue through the Indian Banks’ Association (IBA).

Why is there a Semiconductor chip shortage?

The global chip shortage can be traced back to 2020, when demand for cars declined due to the Covid-induced lockdown. Amid signs of fluctuating demand, companies started stockpiling and ordering chips in advance.

This along with rising pressure from 5G aggravated the global chip shortage.The supply shortages eventually, pushed up prices of chips globally. The impact of this was also felt locally as the local vedor too raised the semiconductor price.

Semiconductor chips enables commuting and processing of information and therefore, they are vital across industries.

From cars, smartphones, laptops washing machine, to banking cards these chips are used across industries.

How is India dealing with the shortage?

Semiconductor imports in India in 2021-22 increased 65.2 per cent from 2019-20.

Most of India’s chip imports in 2021-22 came from China. While Singapore, South Korea, Taiwan, USA, and Japan were other suppliers, China’s share comprised more than 50 per cent of the total imports.

Acting on the crisis, the government in December 2021 approved a $10 billion (Rs 76,000 crore) package for the semiconductor industry.

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