1.Finally, action on bad loans (The Hindu)
2.The magic sieve (The Hindu)
3.Making men equal partner in child care (Mint)
4.Welcome assurance (Judiciary) (The Hindu)
5.Ethnic peace and a fragile peace (The Hindu)
1.Finally, action on bad loans (The Hindu)
Synoptic line: It throws light on the issue restructuring bad loans and thereby enhancing the profitability of banking sector.(GS paper III)
- Banking sector has been ailing from the disease of high NPAs, due to which banking sector as a whole may face an organic failure. Such a situation can be a catastrophic event for Indian economic scenario.
- Hence, certain right actions in the right direction at the right time are needed to tackle the nuisance of notoriously high NPAs.
Extent of Bad Loans
- Bad loans are also called as non-performing assets (NPAs) were alarmingly high at 9% of total loans of all Indian banks in 2016. At public sector banks (PSBs), bad loans were 12% of all advances.
- Moreover, according to several expert analysts, around 4-5% of loans are bad loans that have not been recognised as such. Thus, total stressed assets NPAs, restructured loans and unrecognised bad loans would amount to a staggering 16% of all loans and nearly 20% of loans at PSBs.
Possible reasons for such high NPA
- The failure to resolve the bad loan problem over the past several years has aggravated the problem.
- Genesis of High NPA can be traced to the lending boom that India’s banks boarded on in the period 2004-08, a period that saw economic growth reach the 9-10% range.
- Certain steps that went wrong and aggravated bad loan problem:
- During the boom period and usually as well, banks keep financing projects that are not making repayments in full and would qualify as NPAs. They do so in the hope that, once growth revives, cash flows in the projects will improve.
- Banks tend to grow their loan portfolio at an abrupt rate. Banks hope as the total proportion of new loans will increase, the ratio of bad loans to total loans will automatically diminish in significance.
- This strategy worked in early 2000s and India’s banking sector came out of the bad loan. This time around, however, luck has not favoured the Indian banking system.
Why things went wrong?
- The reason for such a phenomenon is serious policy errors. One of a big policy error was the belief among policymakers that bad governance, bad management and even corruption at PSBs were primarily responsible for the problem.
- Reforms on such a line has been provided by various committees including PJ Nayak committee.
- However, factors extraneous to bank management and governance may be primarily responsible for the problem. Economic Survey also point outs that bad loan problem is “an economic problem, not a morality play”.
- Moreover, the way in which bad loan problem is understood has crucial implications for policy action as if you believe that majority ownership by the government is the primary cause, you would focus on reducing government ownership in banks to below 50%.
Recommendations of the Nayak Committee:
• Scrapping and removal of Bank Nationalisation Acts, SBI Act and SBI(Subsidiary Banks) Act
• Conversion of PSBs into Companies as per the Companies Act
• Formation of a Bank Investment Company/BIC under the Companies Act; transfer of shares by the central government in PSBs to the BIC
• BIC in turn would have over the controlling power to boards of PSBs
• Government will only control earning return on investment
• Fair return on investment to the Central government would be the responsibility of BIC
• Appointments of CEOs, Inside Directors and top Executives of PSBs would be the responsibility of the Bank Boards Bureau constituting three serving or retired bank chairman’s and the government would not be involved in this decision in any way
Nayak committee also recommends proportionate voting rights to all shareholders and reduction of governmental shareholding to 40%
- The government appointed a Bank Board Bureau (BBB) as suggested by the Nayak committee and tasked it with appointing Chairmen and Managing Directors of PSBs. The BBB was also assigned the role of advising banks on restructuring and raising capital.
- The BBB has made little headway. Very few top appointments have happened. The bad loan problem and recapitalisation of PSBs remain unaddressed. Creating the BBB has only added another layer to decision-making and slowed it down.
- Centre must go ahead and establish the Public Sector Asset Rehabilitation Agency (PARA) mooted by the Chief Economic Advisor, but said such an agency should only consider those NPAs where sector specific reforms do not help.
- Apart from recovery proceedings, criminal action must be taken against the big wilful defaulters and their photographs may also be published.
- Banks must be empowered to resolve the relatively small number of bad loans that account for a big chunk of the total in terms of value. Managements at PSBs have been reluctant to do so for fear of inviting action from authorities. Hence, there is a need to put in place an authority that will inspect loan settlement proposals put up to it.
- A larger oversight committee is needed such as, multiple oversight committees to speedily examine loan write-offs. Hence, it is needed to constitute a Loan Resolution Authority by an Act of Parliament.
- Banks must develop the discipline of keeping thorough minutes of the proceedings related to resolution of bad loans. The rationale for particular decisions along with the pros and cons must be properly articulated. This will serve to give bank management a measure of protection.
- The government must provide adequate capital to the banks to cover write-offs and also facilitate fresh loan growth. It must end the delays in appointing Chairmen and Managing Directors of various PSBs. It must also revamp the boards of PSBs by bringing in independent directors of high quality.
Question: The issue of bank health if not addressed immediately will have huge implications for entire economic scenario. What should be govt.’s strategy in this regard?
2.The magic sieve (The Hindu)
Synoptic line: It throws light that how an effective measure to convert seawater into potable water is need of an hour. (GS paper II)
- With rising adversities of climate change, water resource is also reaching to alarming state. The oceans hold about 96.5 % of all Earth’s water. According to UN prediction by 2025, clean drinking water will be incredibly hard in many parts of the world; around 14 percent of the world’s population will encounter water scarcity.
- According to the research published in “Nature Nanotechnology”. Researchers of University of Manchester have achieved a major turning point in the quest for efficient desalination by announcing the invention of a Graphene-oxide membrane that sieves salt right out of seawater.
What’s new with GO membrane filter?
- To filter common salts from seawater while allowing water to pass with the use of GO as a molecular sieve is already known. But GO membranes when immersed in water, have a tendency to slightly swell, due to this there is increased spacing between successive sheets. The increased spacing allows smaller salts to flow through the membrane along with water without being filtered.
- The National Graphene Institute (University of Manchester) has addressed this problem by developing GO membranes that do not swell when immersed in water and are able to sieve common salts.
- The researchers used the membrane to store in high humidity to achieve a certain interlayer spacing, to physically restraining membrane from swelling. This altered the rate at which water permeated through the membranes. They also tried an alternative technique of adding Graphene flakes to GO to prevent the membranes from swelling. (Though there is method of epoxy coating, which gives better control over swelling, large area membrane fabrication but it is difficult and time consuming process).
- This will be an effective measure for waste water treatment even when no energy is supplied.
- Graphene oxide is also a lot easier and cheaper to make in the lab than single-layers of Graphene, which means the technology will be affordable and easy to produce.
- The membrane can be recovered to the original state by a simple washing process. They do not anticipate any significant fouling due to the inertness of Graphene surface.
- There is need to demonstrate the durability of the membranes under prolonged contact with seawater and ensure the membrane was resistant to “fouling” by salts and biological material (which requires existing barriers to be periodically cleaned or replaced). Hence, even more R&D should be initiated in this field.
Question: With rising water scarcity, initiatives such as GO membrane filter hold the wide prospects to mitigate the water crisis. What else should be done in this regard?
3.Making men equal partner in child care(Mint)
Synoptic line: It throws light on the need of recognising paternity leave on the lines of maternity leave.(GS paper I and II)
- The Maternity Benefit (Amendment) Bill, 2016 was passed by the Lok Sabha that makes India third on the list of countries with most maternity leave, after Canada and Norway where it is 50 weeks and 44 weeks respectively.
- However, the issue of paternity leave is not much discussed and thus it leaves a wide gap open.
Brief highlights of Bill
- Bill provides that women working in the organized sector will now be entitled to paid maternity leave of 26 weeks, up from 12 weeks.
- The Bill also provides for maternity leave of 12 weeks to mothers adopting a child below the age of three months as well as to commissioning mothers (defined as a biological mother) who uses her egg to have a surrogate child. In such cases, 12-week period of maternity leave will be calculated from the date the child is handed over to the adoptive or commissioning mother.
- The bill made mandatory for every establishment with (more than 50 employees) to provide creche facilities within a prescribed distance. The woman will be allowed four visits to the creche in a day. This will include her interval for rest.
- The new law will apply to all establishments employing 10 or more people and the entitlement will be for only up to first two children. For third child, the entitlement will be for only 12 weeks.
- The Bill has a provision under which an employer can permit a woman to work from home, if the nature of work assigned permits her to do so. This option can be availed of, after the period of maternity leave, for a duration that is mutually decided by the employer and the woman.
Why paternal leave?
- Parental leave is an evolving concept where child-rearing is seen as a shared responsibility. This ties in with the growing awareness of gender equality. The intent here is to ensure that women and men enjoy the same opportunities, rights and obligations in all areas of life.
- While the amendment rightly recognizes some contemporary social developments and introduces provisions around surrogacy and adoption leave, it fails to address childcare leave for fathers, thus reinforcing the belief that child-rearing is solely a woman’s responsibility.
How paternity leave will will ensure gender equality
One of the compelling reasons for introducing parental leave is linked directly to a major criticism of longer maternity leave: that it can have a negative impact on hiring practices.
- With the increase in maternity leave to almost six months (paid by the employer), there is bound to be an increase in questions around the woman’s marital status and her plans to start a family.
- Many companies will prefer to hire a male candidate instead. But if we have a system where men are equally likely to take childcare leave, we place men and women on an equal pedestal and eliminate this bias.
International models for paternity leave
- Sweden currently offers almost 70 weeks of parental leave. Of this, each parent gets a non-transferable share (of approximately 12 weeks each) and the rest can be shared between them as per their convenience.
- UK has a similar policy, under which women get the option of utilizing a part of their maternity leave as shared parental leave.
- The International Labour Organisation (ILO), as well as the Organisation of Economic Co-operation and Development (OECD), have supported such policies as providing the right amount of incentive and flexibility for parents.
- They encourage men to take leave, helping break gender norms about the role of men and women in child-rearing. They also help spread the career break between the parents, thereby ensuring that the career aspirations of neither parent are compromised.
Challenges for paternity leave in India
- Economic feasibility of the model is a question. In countries with expansive childcare benefits, the government often shoulders the financial responsibility. However, in India, a completely government-funded initiative may not be possible at present.
- India may not be ready to embrace leave for fathers and that most men would treat it as a holiday.
- There are deep-rooted prejudices that are still prevalent in society. The idea of childcare is invariably linked with mothers and idea may not be acceptable
- The question of economic feasibility can be solved as there is scope to create a model along the lines of the provident fund or the employees’ state insurance fund where the employer can make contributions on behalf of every employee, man or woman, and the funds so collected can be used to pay the employees availing childcare leave.
- Law may play an active role for creating the right atmosphere for bringing about a positive change in the cultural mind-set of society.
Question: How paternity leave can fulfil the goal of SDG(s) related to gender equality? Discuss.
4.Welcome assurance (Judiciary)(The Hindu)
Synoptic line: It throws light on the issue of the backlog of cases with judiciary and need to improve executive-judiciary relations.(GS paper II)
- An impasse over judicial appointments between the two branches of the state (the executive and the judiciary) has been seen mainly after the Supreme Court struck down legislation to establish a National Judicial Appointments Commission, which has resulted into more number of pending cases.
- Official figures show there are as many as 437 vacancies in the High Courts alone as of March 1, 2017. Speaking at a function to mark the 150th anniversary of the Allahabad High Court, PM said that his government would contribute its share in reducing the judiciary’s burden, after observing that the number of backlog of cases is increasing.
- A positive gesture that will surely represent a new beginning in the executive-judiciary relationship.
- JUDICIAL BACKLOG AND ACCESSIBILITY TO JUSTICE FOR A COMMON MAN
- The rural penetration of courts in India is extremely low, which significantly limits access to justice for the many citizens living far beyond the district courts of city centers. An extremely low judge to population ratio in India only contributes further to the already high incidence of pending cases, making delays in justice a regular occurrence.
- Online case-filing services due lack of awareness, erect further barriers to justice for individuals who traditionally remained outside of the sphere of access.
- LACK OF JUDICIAL INFRASTRUCTURE
- There is lack of district courts, lack of staff, which further leads to delay in proceedings.
- ARCHAIC LAWS AND SECTIONS IN THE CRPC AND IPC
- There are so many laws that need to be amended permanently. Moreover judicial practices that are time consuming should be given up.
- Corruption is rampant in India’s courts. According to ‘Transparency International’, judicial corruption in India is attributable to factors such as “delays in the disposal of cases, shortage of judges and complex procedures, all of which are exacerbated by a preponderance of new laws”. Some analysts feel a bigger reason for corruption is opaque Judicial appointments through a collegium system.
- With the chronic shortage of judicial hands in the superior and subordinate judiciary the backlog of cases are on rise, a new Memorandum of Procedure for judicial appointments will be effective measure for tackling backlog.
- The use of technology and digitalization in the judicial system is undoubted relevant, when one considers the magnitude of the task of reducing the backlog. Both in liquidating arrears and expediting processes such as filing of documents and serving of notices procedures can be ensured with use of technology.
- Improved relations between the government and judiciary will be very effective.
Question: Efficient Judiciary is instrumental to realise the ideals of welfare democratic state. On what lines judicial reforms should be initiated in India?
5.Ethnic peace and a fragile peace (The Hindu)
Synoptic line: It throws light on the Issue of ongoing crisis in Manipur and challenges ahead.(GS paper II)
The Issue has been discussed earlier in March editions. Please refer to 16 march Analysis