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DAILY CURRENT EVENTS CIVILS360

AUGUST 24, 2017

SC: liquor sale ban does not extend to municipal areas

  • The Supreme Court has clarified that its nationwide ban on sale of liquor within a distance of 500 metres along National and State Highways does not extend to municipal areas.
  • The court, in an order dated July 11 which was uploaded on the Supreme Court website on Wednesday, clarified that the 500-metre ban does not prohibit licensed establishments within municipal areas.
  • The court explained that the December 15, 2016 ban on liquor sale only extends along and in proximity to highways which provide connectivity between cities, towns and villages.

Litigation infructuous

  • This clarification from the court has effectively made infructuous any pending litigation in High Courts on declassification of State or National Highways to district roads by State governments or local authorities. In short, stretches of highways running within city limits are now, by default, exempt from the liquor ban.

Fear of losing land unites tribals

  • The fear of being uprooted from their lands has come to haunt the peace loving aboriginal tribes in Adilabad, Kumram Bheem Asifabad, Mancherial and Nirmal districts. The scare, among other things, has resulted in uniting the different tribes of the region and resulted in a protest movement ‘Jago Adivasi’ in which activists are creating awareness among the tribes about their rights.
  • A circular issued by KB Asifabad Collector M. Champalal directing issue of land records in favour of non-tribals cultivating government lands in Agency villages, in violation of land laws governing tribal areas, has triggered the scare.
  • The controversial circular to Tahsildars in the district directed them to issue manual pahanis, as against electronic ones, by showing the names of cultivators in Bhoodan Poramboke or government lands so that they can avail crop loans. The trend of issuing manual pahanis was suspended in 2012 in order to prevent malpractices in land ownership in the Agency areas.

‘Violates 1/70’

  • “Crop loan is just the pretext based on which the non-tribals will claim rights on tribal lands,” opined Kanaka Ambaji Rao of Haimendorf Youth. “The circular also contravenes the Telangana Ordinance No. 1 of 1970 which clearly states that banks shall grant loans on the basis of Record of Rights in 1B, which is maintained electronically,” he pointed out.
  • The Raj Gonds, Kolams, Thotties and other tribes are now voicing their anger over the ‘stepmotherly’ treatment they have been getting since the Telangana Rashtra Samiti came to power. The government now stands accused of favouring non-tribals at the cost of the aboriginal tribes.
  • “We had voted for this government only in the hope that our problems would be solved. These developments indicate to the contrary,” observed Athram Bojju, headman of Marlavai village in Jainoor mandal.
  • Jainoor was home to legendary Anthropologist Christoph von Furer Haimendorf, when he conducted studies on Raj Gonds of Adilabad way back in the 1940s.

 

‘RBI not for NBFCs taking deposits’

  • The Reserve Bank of India (RBI) is not in favour of allowing non-banking finance companies (NBFCs) to accept deposits, Deputy Governor N.S. Vishwanathan said.
  • “Taking deposits will bring with it the treasury function, which would make business tougher for NBFCs,” Mr. Vishwanathan said
  • The Deputy Governor said that NBFCs were one of the bright spots of the Indian economy, with advances growing by 14-15%, which was higher than at banks, Mr. Vishwanathan noted.
  • The RBI regulates NBFCs for three reasons, he said. The reasons include depositor protection, the fact that many NBFCs rely on banks to finance their liabilities and also to regulate the interface between customers and NBFCs.

 

‘Banks must tighten bankruptcy norm’

  • To expedite stress resolution in the banking system, Reserve Bank of India (RBI) Deputy Governor Viral Acharya said banks must initiate bankruptcy proceedings against loan defaulters if the lenders are unable to resolve bad loans in three months.
  • “I think we should give banks three months to rectify the account. You can’t rectify the account, it is a NPA, you’ve to file this case in bankruptcy. Chapter closed,” he said referring to the recent decision by the markets regulator, Securities and Exchange Board of India, directing companies to disclose any loan default within a day.
  • “RBI should not be in the business of creating restructuring schemes for banks to resolve a company,” Mr. Acharya said.
  • The Deputy Governor said the recovery of bad debts in India was low compared with other countries.
  • “Our loan recoveries are in the order of 15-25 paise to a rupee. In other parts of the world, where bankruptcy system is working well, and these things are being done in a timely manner, the recovery is to the order of 85-90 cents to a dollar,” he said.

Counter-cyclical buffer

  • The central bank also stressed on the need for counter-cyclical buffers — in terms of setting aside higher capital — during periods of higher growth.
  • “Right now, when banks make loans, entire provisions that the banks do, which is to save for a rainy day, which is am I preparing for the losses that are going to take place, is entirely pro-cyclical. I think we don’t talk about any adequate reserves being kept aside to bear a loss until a loan actually defaults,” Mr. Acharya said.
  • Most banks in the country do not make adequate provisioning — above the regulatory mandate — which could be used when non-performing assets are increasing.
  • The Indian banking sector has been battling a surge in bad loans over the last three years with gross NPAs climbing to about Rs. 8 lakh crore.
  • In percentage terms, gross NPA (GNPA) ratio of the banking system is at 9.6% and the stressed advances ratio at 12% as of March 31, 2017.
  • Recently, RBI Governor Urjit Patel had said that it was a matter of concern that 86.5% of the GNPAs were accounted for by large borrowers, that is borrowers with aggregate exposure of Rs. 5 crore and above.

 

New mechanism to spur PSB mergers

  • Paving the way for quicker consolidation among public sector banks, the Cabinet approved ‘in-principle’ the constitution of an alternative mechanism, likely to be a ministerial group, that will oversee the proposals for mergers among banks
  • Stressing that the decision to create ‘strong and competitive banks will be solely based on commercial considerations and such decisions must start from the boards of the banks,’ the Minister said the proposals received from banks will be reviewed by the members of the alternative mechanism, enabling ‘quick decisions.’

‘First step’

  • Rating agency Crisil termed the Cabinet decision as an important first step towards kick starting the consolidation process and said such mergers would improve NPA resolution following swifter decision making and an unified strategy. “This is structurally positive for public sector banks as they will benefit from operational and functional synergies resulting in better efficiencies,” said Krishnan Sitaraman, senior director, CRISIL Ratings. “Merger amongst similar performing banks can also result in effective implementation of NPA resolution strategies across PSBs,” he said.
  • An official statement said that stronger public sector banks will help meet the credit needs of a growing economy, absorb shocks and give them the capacity to raise resources without depending unduly on the state exchequer.
  • This year’s Budget provided Rs. 10,000 crore for bank recapitalisation, which, most bankers said, was inadequate. Mr. Jaitley had, however, held out the possibility of allocating more funds for banks if the requirement arose. The Centre said though suggestions to have fewer but stronger banks had been around since 1991, it was in May 2016 that effective action to consolidate them began. The merger of six banks into SBI was completed in ‘record time unlike earlier mergers of State Banks of Indore and Saurashtra,’ it stressed.

 

Slicing the OBC quota pie: who gains and who loses

What will be the remit of the commission?

  • The Cabinet has approved the setting up of the commission to report on the extent of inequalities within castes listed as OBCs on the Central list and find out scientific ways of sub-categorising the most backward among them. This will pave the way for the provision of sub-quotas for the most backward castes within the OBCs. This means that the most backward OBC groups will compete among themselves for government jobs, educational seats, fellowships and so on rather than with the better-off OBC castes.

 

How are OBC reservations offered at present?

  • At present, there is a single Central OBC list, with entries from each State. People belonging to all these castes can seek reservation from within the single 27% OBC reservation pie for Central government jobs and Central educational institutions. Nine States, however, have already sub-categorised OBCs. These are Andhra Pradesh, Telangana, Puducherry, Karnataka, Haryana, Jharkhand, West Bengal, Bihar, Maharashtra and Tamil Nadu. OBC reservation became a reality after the implementation of the Mandal Commission report, which categorised many castes as constituting the backward classes and deserving of quotas. New castes have been added to the list over the years.

 

What are the political and social implications of the move?

  • Politically, this can be seen as an attempt by the government to reach out to the most backward castes among the OBCs. At present, many feel that the more advanced OBC castes corner the lion’s share of the benefits and have become influential. Not only will such a move offer more opportunities to the most backward castes among the OBCs but also give the government and the ruling party an opportunity to carve out a new political constituency. In Uttar Pradesh recently, the BJP had reached out to smaller and less significant OBC castes such as Maurya, Lodh and Rajbhar, in what was seen as a successful bid to break a possible Yadav-led OBC consolidation.

 

Can it affect any castes or groups adversely?

  • Yes, it may adversely affect the more advanced castes among the OBCs, such as the Yadavs. Since the Supreme Court had imposed a cap of 50% on reservation, OBC quotas at the Centre cannot exceed the present 27%. So, whatever will be carved out as a sub-category can come only from within this 27% quota pie, thus reducing the number of seats available for the better-off OBCs. The Scheduled Castes already have a 15% quota and the Scheduled Tribes 7.5%.