GS-3 Economy
Move to allow corporates to set up banks attracts flak

Why in News?
The RBI working group’s proposal to allow corporate houses to set up banks is a “bombshell” and at this juncture, it is more important to stick to the tried and tested limits on involvement of business houses in the banking sector.

Context

  • The history of connected lending is invariably disastrous — how can the bank make good loans when it is owned by the borrower? .
  • Even an independent committed regulator, with all the information in the world, finds it difficult to be in every nook and corner of the financial system to stop poor lending.

Recommendations  of Internal Working Group (IWG)

  • An Internal Working Group (IWG) set up by the RBI, had last week made various recommendations, including that a large corporate may be permitted to promote banks after necessary amendments to the Banking Regulation Act.
  • It proposes to allow Indian corporate houses into banking. While the proposal is tempered with many caveats, it raises an important question: Why?.
  • The IWG has suggested significant amendments to the Banking Regulation Act of 1949, aimed at increasing the RBI’s powers, before allowing corporate houses into banking.

Left on The Shelf

  • Yet if sound regulation and supervision were only a matter of legislation, India would not have an NPA problem.
  • It is hard not to see these proposed amendments as a subtle way for the IWG to undercut a recommendation it may have had little power over.
  • In sum, many of the technical rationalisations proposed by the IWG are worth adopting, while its main recommendation — to allow Indian corporate houses into banking — is best left on the shelf.
  • Have we learnt something that allows us to override all the prior cautions on allowing industrial houses into banking? We would argue no.
  • Indeed, to the contrary, it is even more important today to stick to the tried and tested limits on corporate involvement in banking.
  • As in many parts of the world, banks in India are rarely allowed to fail — the recent rescue of Yes Bank and of Lakshmi Vilas Bank are examples.
  • For this reason, depositors in scheduled banks know their money is safe, which then makes it easy for banks to access a large volume of depositor funds.

 

Banking Regulation Act of 1949

  • The banking regulation act 1949 extends to the entire nation.
  • Other acts are used as secondary to this act e.g. Negotiable Instrument Act, Companies Act 1956.
  • The Banking Regulation Act is not pertinent to primary agricultural credit societies, non-agricultural primary credit societies and cooperative land mortgage banks.

 

GS-2 International Relations
Bhutan border village on disputed land

Why in News?
Chinese media claimed that a new border village built by China near Bhutan was on Chinese territory, but released images of the village show its location on territory disputed by the two countries.

Context

  • The village of Pangda had been newly built and residents moved there in September.
  • An image released by the newspaper placed the village in disputed territory, a couple of kilometres inside what Bhutan sees as its territory.

Bhutan’s denial

  • However, Bhutan’s officials denied the village was on their territory.
  • Bhutan’s Ambassador in India Vetsop Namgyel told The Hindu, “There is no Chinese village inside Bhutan.
  • According to open records, authorities in Yadong county of Southwest China’s Tibet Autonomous Region confirmed that 27 households with 124 people voluntarily moved from Shangdui village of Duina prefecture of Yadong county to Pangda village in September 2020.
  • Chinese media reported there were 27 households, and the village was covered by asphalt roads and “has a public square, village committee, health room, police room, kindergarten, supermarket and plastic runway”.
  • China has in the past sought to bolster its territorial claims in disputed areas by building civilian settlements there, as on disputed South China Sea islands.

China’s Claim

  • According to China’s maps, the village is within China’s territory, but China’s border extends further south beyond where India and Bhutan say the border runs.
  • The area is east of the India-Bhutan-China trijunction on the Doklam plateau, which was the site of a 72-day stand-off in 2017 triggered by China’s road-building.
  • India moved in to stop the road, which was built a few hundred metres east of India’s border, saying China had entered Bhutanese territory and was unilaterally pushing the trijunction further south.
  • The new village is located farther east, away from the trijunction.
  • China blamed India for the unsettled China-Bhutan border and stalled negotiations.
  • The border dispute between China and Bhutan is very minor, but it has not been formally demarcated because of India’s obstruction.

 

GS-3 Environment
Govt. to fast-track green nod

Why in News?
The Ministry of Environment and Forests (MoEF) wants to expedite the environment appraisal of industrial projects. These appraisals, as per norms, are conducted by independent panels of experts that have representatives from the government as well as from outside, trained in matters of ecology, wildlife and habitat preservation.

Context

  • The Expert Appraisal Committees (EACs) opine on whether a proposed project beyond a certain size ought to be commissioned and recommend ways to mitigate the potential environmental impact.
  • Their advice is critical to the MoEF’s eventual decision to either clear or red flag a project.
  • However, a November 11 letter from the Ministry’s Environment Impact Assessment division, that coordinates EAC meetings, issued fresh guidelines to accelerate the appraisal process.

Avoid delays

  • During the review meetings held for streamlining the Environmental Clearances (EC) process, it has come to notice that the grant of EC is delayed due to various reasons which could be avoided.
  • Member Secretaries of the various sectors may strictly adhere to the following guidelines to avoid unnecessary delay while granting ECs,” the letter said.
  • The recommendations include ensuring that EAC meetings are held at least once in 15 days.
  • All proposals that were placed for approval 10 days before a meeting ought to be considered (It is 15 days now).
  • The queries or issues, which the division may have, should be raised during the EAC meeting only.
  • Member Secretary (MS) ought to ensure that the relevant queries of the division are also pointed out at the time of EAC meetings itself so as to avoid occasion for such queries before and after examination by Expert Appraisal Committee (EAC).
  • It was legally contentious if an office order could curtail the role of the EAC that requires detailed scrutiny of applications seeking environmental clearance.
  • What is even more concerning is the Environment Ministry’s approach to reading down its own mandate for environment protection.
  • Accelerated approvals definitely don’t allow for good environmental decisions and do not necessitate that projects will be up and running to support an already sluggish economy.
  • The current approval rates are close to 100%, and yet there is an economic slowdown.

Ministry’s Environment Impact Assessment division

  • The environmental impact assessment has been aimed at evaluating the inter-seasonal as well inter-annual variability of environmental parameters in and around the proposed FGM site in the CIOB.
  • The studies on sedimentological, geotechnical, geochemical, microbial and biochemical parameters have shown that environmental conditions vary over different time scales (seasonal and annual) on a wide range and that these variations could probably well encompass the changes in conditions created by other activities such as deep seabed mining.

Objectives

  • To evaluate environmental conditions associated with deep-sea minerals
  • To evaluate the sediment ecosystems and biogeography in abyssal areas
  • To understand the interplay between geo-bio-chemical processes in these areas
  • To develop environmental data to mine deep-sea mineral resources
  • To prepare EMP for first generation mine (FGM) site

 

GS-3 Internal Security
India briefs foreign diplomats on Nagrota terror incident

Why in News?
The suspected terrorists who were killed in an encounter in Nagrota, Jammu and Kashmir, belonged to the Pakistan-based Jaish-e-Mohammad, Foreign Secretary informed a select group of Heads of Missions.

Context

  • The diplomats were informed about the discovery of a cross-border tunnel that was allegedly used by the militants to reach the Indian territory.
  • The incident as it transpired as well as a list of items and munition that were recovered from the terrorists clearly indicating their Pakistani origins.
  • The attackers were clearly planning the biggest terror attack in India since the Pulwama strike on February 14, 2019.
  • The diplomats were told that the attack appeared to be part of efforts to sabotage the DDC elections in Jammu and Kashmir and was designed to “coincide with the anniversary of 26/11 Mumbai terror strikes”.
  • The envoys about the past attacks by the Jaish-e-Mohammad in Jammu and Kashmir.
  • In the year 2020 itself we have seen 200 incidents of terrorist violence and neutralisation of 199 terrorists.

 

GS-2 Polity & Governance
J&K administration publishes list of Roshni Act beneficiaries

Why in News?
The Jammu and Kashmir administration published on its website the list of beneficiaries under the Roshni Act. The beneficiaries include former Ministers, and retired civil servants.

Context

  • Among those who were allotted land under the now scrapped Act are Haseeb Drabu, former Finance Minister and former PDP leader; K.K Amla, businessman and Congress leader; Nighat Pandit, wife of retired IAS officer Shafi Pandit; Syed Akhoon of the National Conference; M.Y. Khan, former Chairman of J&K Bank; and Sujjad Kichloo, former NC Minister.
  • In a related development, the CBI has registered another case in connection with the ₹25,000 crore “Roshni” scam, this time against the then District Collector of Jammu and others for alleged illegal grant of ownership of land parcels.
  • The case was instituted by the then Vigilance Organisation in 2014.
  • It named Deputy Commissioner Hirdesh Kumar Singh and one Bashir Ahmed as accused, apart from unknown officials of the Revenue Department in Jammu.
  • The larger allegation pertained to irregularities in the implementation of the Jammu and Kashmir States Land (vesting of ownership to the occupants) Act, also known as Roshini Act, which has now been declared null and void.

 

GS-2 Polity & Governance
SC takes note of ‘grim’ health in four States

Why in News?

The daily hike in COVID-19 cases in Delhi, Maharashtra, Gujarat and Assam looked ‘grim’ and they should ‘take time to introspect’ and ‘prepare for December’, the Supreme Court observed. “Situation of COVID cases is worsening and likely to do so in December,” a Bench led by Justice Ashok Bhushan noted.

Context

  • “We are of the view that immediate steps are required to be taken by all the States,” the court stated.
  • The Bench directed the States to file status reports in two days on their preparedness and steps taken. It listed the case for urgent hearing on November 27.
  • “Things have worsened in the last two weeks, in November.
  • Our question is what is your present situation? What more steps are you taking? for Delhi.
  • The court hauled up the Gujarat government for unbridled celebrations, weddings and public gatherings despite an exponential rise in cases.

Gujarat pulled up

  • “Gujarat is worst after Delhi and Maharashtra. What is your policy? What is happening? Weddings, parties, celebrations by political parties are happening… What is all this,”.
  • There is a huge spike in cases”observed orally, “This is the time to introspect and prepare for December”.
  • Solicitor General Tushar Mehta expressed his anguish at the situation as a human being.
  • It was painful for him to witness the court passing orders on the handling of the COVID-19 dead.
  • The hearing is based on the suo motu cognisance taken by the court on the treatment meted out to COVID-19 patients and the bodies of those who lost the battle with the virus.
  • The court , in June, referred to several media reports on the lack of infrastructure, patients and their families running from pillar to post to get themselves admitted and, ultimately, videos of COVID-19 dead being thrown into pits.
  • There had been an “upsurge” in the request for ICU beds for patients in private hospitals in Delhi.
  • The government had passed notifications to reserve 80% ICU beds for COVID-19 cases in 115 private hospitals in Delhi.

 

GS-2 International Relations
Taliban rigging drones to drop bombs, says Afghan spy chief

Why in News?

The Taliban have deployed small drones to drop bombs on government forces in some recent attacks, illustrating a new fighting method used by the insurgents.

Context

  • Taliban fighters were using hobby drones and rigging them with explosives.
  • The drones they are using are sold in the market. They are basically camera drones.
  • The National Directorate of Security (NDS) wants to stop the import of the popular devices.
  • In late October, the Taliban reportedly used a drone to bomb the compound of the governor of Kunduz province.
  • Taliban have used drones in Kunduz and Paktia
  • While the technique is new to the Taliban, Islamic State (IS) jihadists operating in Iraq and Syria started using toy planes and hobby drones in 2016 to carry explosives.
  • IS maintain a small but deadly presence in Afghanistan and have resisted years-long efforts by the U.S. and Afghan forces to wipe them out.
  • IS claimed three deadly attacks in recent weeks in Kabul that killed scores of people, including a rocket attack on Saturday.
  • The Taliban and Washington are holding negotiations in Doha.

 

GS-3 Economy
Single window approval for FDI by Mar.

Why in News?
A new, unified single window clearance system for foreign direct investment (FDI) proposals would be in place by March 31, stressing that this would not only make approvals transparent but expeditious.

Context

  • An effective, unified, single window will be made available so that access to regulators, policymakers and facilitators are all available at one point from wherever you are and you will be able to access it digitally.
  • The single window clearance system being developed will be ‘very effective’ and enable the potential investor to interact with all the Ministries whose approvals are required, at the Centre as well as in the States.
  • That will help investors a lot in not just getting information about the status of approvals, but in getting faster approvals.
  • The Centre’s industrial information system for potential investors now includes details of land availability in as many as 14 States.

Large Sovereign Wealth Funds

  • The government had seen fresh interest from large sovereign wealth funds looking to invest in the country and conceded the need to address many compliance issues that worry investors at large.
  • The National Infrastructure Investment Fund has been actively engaging with them through the lockdown to see how best we can facilitate them with the benefits of the tax concessions given and the pipeline of infrastructure projects.
  • These funds now want to tie up with many of these projects and I understand the last one month, we have had at least two new sovereign funds coming and asking ‘Can we also benefit from the tax concessions.

Reforms to continue

  • Stressing that the Centre would continue the momentum of reforms undertaken during the pandemic.
  • The several more active reform-related steps were being taken up and feedback from global investors would be factored in.

 

GS-3 Economy
‘Sceptical about allowing corporates to own banks’

Why in News?

S&P Global Ratings expressed scepticism over allowing corporate ownership in banks given India’s weak corporate governance amid large corporate defaults over the past few years.

Context

  • An RBI panel had proposed that large corporates may be permitted to promote banks, as well as raising the cap on promoters’ stake in private sector banks to 26%, from 15% at present.
  • The sceptical of allowing corporate ownership in banks given India’s weak corporate governance amid large corporate defaults over the past few years.
  • In addition, the RBI would face challenges in supervising non-financial sector entities, and supervisory resources could be further strained at a time when the health of India’s financial sector was weak.
  • The Corporate ownership of banks raises the risk of intergroup lending, diversion of funds, and reputational exposure.
  • Also, the risk of contagion from corporate defaults to the financial sector increases significantly.