Banking News Dated 20th July 2018

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Banking News: July 20, 2018


Rupee Closes at All-Time Low
of 69.05 against US Dollar

The Press Trust of India
Published on July 19, 2018

Traders and speculators saw no signs of intervention by monetary authorities into the foreign exchange market to support the rupee

Mumbai, July 19 (PTI):  The rupee weakened by 43 paise to close at a historic low of 69.05 against the US currency on Thursday. That marked the first time the rupee ended below the 69 level against the greenback. The US dollar strengthened as upbeat comments on the US economy by Federal Reserve Chairman Jerome Powell drove the American currency to a one-year high against global currencies. Thursday also marked the biggest single-day fall in the rupee against the US currency since May 29.


Banking News Dated 13th July 2018

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Banking News: July 13, 2018


Banking News Dated 13th July 2018

Don’t witch hunt bankers

The Times of India
Published on July 12, 2018

Prevention of Corruption Act must be speedily
amended, else decision making will be frozen

A cardinal principle of a justice system is that even if a thousand guilty go scot free, not one innocent should be punished inadvertently. In the current round of arrests of and chargesheetson public sector bankers, this cardinal principle stands violated.

As cases drag on for years, reputations carved with decades of diligent and sincere action stand besmirched. As several cases pertain to retired officers, the officers’ post-retirement reality is now consumed by worries about criminal action in courts and the prospect of having to run from pillar to post to extricate oneself.

The most damaging aspect of these incidents is that the genuinely corrupt and the honest who may have only deviated from procedure are clubbed together. Needless to say, this pooling must surely delight the crooks who are now in august company.

To address the issues that these incidents raise, the amendment to the Prevention of Corruption Act (PCA) needs to be taken up urgently in the forthcoming session of Parliament. To learn from best practices elsewhere, consider the US, which is among the most litigious of countries. Even in civil liability cases, where the burden of proof is weaker than in criminal cases, the “business judgment rule” governs court decisions.

The business judgment rule refers to a common law presumption that directors and officers act in the best interests of the corporation they serve. Therefore, a court will not review the substantive wisdom underlying business decisions, as otherwise decision makers would be “frozen in inaction” if they were to be subject to legal action for decisions which in hindsight were monetarily or otherwise unsuccessful.

The rule generally requires a clear indication of fraud, gross negligence or self-benefit. Courts have also ruled that the burden of proof on fraud and gross negligence also rests on demonstrating self-benefit. Crucially, mistakes or errors in the exercise of honest business judgment do not subject decision makers to liability for negligence in the discharge of their appointed duties.

In criminal cases, the standard of proof required for a conviction is even stronger. The main burden of proof rests on demonstrating self-benefit, monetary or otherwise, which thereby demonstrates that an individual abused his loyalty to his organisation by benefiting himself. Criminal cases against individuals too typically stand or fall in courts based on whether self-benefit is demonstrated.

The PCA needs to be changed so that economic decisions are evaluated using demonstrated self-benefit as the standard for admissible evidence. If there is no evidence of self-benefit, FIRs and chargesheets should not ordinarily be filed. The present process adopted is to scrutinise all loan cases above a threshold limit where there have been defaults and to identify procedural lapses as the basis for vigilance enforcement action, without necessarily obtaining evidence of self-benefit.

Demonstrating self-benefit is imperative because, unlike other professions, banking involves judgment exercised using soft information, which is primarily qualitative and subjective. To illustrate, the character of a borrower, which a lender must invariably assess, involves a subjective assessment that can vary from one individual to another. Similarly, assessing the future growth potential of a borrower involves subjective assumptions of the future that may seem reasonable to one individual but not to another.

As well, such assessments that may have seemed perfectly reasonable at the time when the judgment was exercised may appear unreasonable or irrationally exuberant in hindsight. For instance, renewing a loan where the bank’s exposure is less than 10% of a borrower’s overall obligation seems reasonable at the time the renewal was granted. So, the process and professional standards set by investigating agencies need to be debated if they question that decision now because the borrower turned out to be a fugitive wilful defaulter.

Such instances equate reasonable judgment, let alone bad judgment, to malafide intent. Similar questions need to be asked if the investigative agencies treat as malafide intent those lending decisions that were based on an irrationally exuberant extrapolation of high economic growth in the past into the future. If investigative agencies cannot demonstrate self-benefit, but nevertheless bring accusations of corruption against bank managers, the investigative agencies would need to subject themselves to a higher standard of professional scrutiny.

To be clear, the intention is not to understate the extent of corruption in public sector banks, which is a major public policy concern. However, the intent is to highlight that the instruments for identifying and tackling corruption in lending need to be nuanced, because the burden of evidence needs to be more demanding.

Absent this change, several adverse consequences will follow. First, bank officers become extremely reluctant to handle credit. Second, a perverse belief then develops in banks wherein those who have not ‘soiled their hands with credit’ find the easiest path into top management. Third, the very nature of credit appraisal then becomes mechanistic, driven solely by stipulated processes.

World over, the best credit officers use discretion innovatively and thereby often deviate from established procedures. In the best banks in the world, deviation from procedure does not imply culpability. We need to usher in a similar legal framework for investigation and vigilance enforcement so that the credit culture in the country can be genuinely improved.


No concentration of power under
creditors’ pact: Chairman, SBI

Saloni Shukla
The Economic Times
Published on July 13, 2018

Mumbai, July 13:  Rubbishing allegations that State Bank of India would get an upper hand under the new inter-creditor arrangement for stressed loans, chairman Rajnish Kumar said no power was being concentrated with the lender and each bank would have the right to choose whether it wanted to join the pact.

As many as 56 lenders are set to sign the inter-creditor agreement by next week. It will prohibit creditors who don’t agree to a majority-approved debt resolution plan from making an easy exit.  Some small lenders have raised issues around excessive concentration of decision-making with SBI as it is the lead lender to many companies.

The proposed agreement says if 66% of lenders by value of the outstanding debt agree to a resolution plan, it would be binding on all lenders “Even now the decision-making power is concentrated with lead banks. I don't see any problem with the new arrangement. Inter-creditor agreement is optional; if someone doesn't want to sign, they are free to do that,” Kumar told ET. “We will decide if we want to be part of an unwieldy consortium where there is no uniformity in approach; everybody is pulling in different direction and putting my money at risk.”

The agreement — based on a recommendation by the Sunil Mehta committee that looked into resolution of stressed assets — aims to deal with bad loans that banks must resolve before next month end under a February 12 RBI circular.

Banks will have to refer unresolved loans to the bankruptcy court and they fear if that happens, the asset value may erode if there are no buyers at bankruptcy court.

Kumar also said going forward, SBI would decide if it wanted to be part of multiple-banking arrangements where all lenders had not signed the agreement.

“The way banking is being plagued by delayed decision-making, where every bank is taking independent decisions, it can't work that way anymore,” he said. “So, it’s my choice to choose whether I want to be a part of multiple-banking arrangements where other lenders have not signed the agreement.”

He said a separate inter-creditor agreement for consortium loans was also being worked upon.

Under the inter-creditor agreement, dissenting creditors will have the option to sell their loans to other lenders at a discount of 15% to the liquidation value, or buy the entire portfolio paying 125% of the value agreed under the debt resolution plan by other lenders.

The agreement, also states that each resolution plan would be submitted to an overseeing committee comprising experts from the banking industry. The agreement also has a standstill clause wherein all lenders are barred from enforcing any legal action against the borrower for recovery of dues.


RBI directs banks to put
purchaser’s name on demand drafts

The Times of India
Published on July 13, 2018

Mumbai, July 12: In a bid to curb money laundering using anonymous (DDs), the Reserve Bank of India (RBI) has made it mandatory to incorporate the name of the purchaser on the face of the financial instrument.

In a circular issued to all banks on Thursday, the RBI said that in order to address concerns arising out of possible misuse of anonymous DDs for money laundering, it has been decided that the name of the purchaser be incorporated on the face of DDs, pay orders, banker’s and similar instruments. The order takes effect for such instruments issued on or after September 15, 2018.

Although the government has barred the use of cash in high-value transactions, tax avoiders have managed to work around this by purchasing DDs. Also, these drafts have been used by tax avoiders for purchase of benami property. Bankers say that it is quite likely that there might be restrictions on use of third party-purchased DDs in some transactions. They say that use of banker’s cheques for payments by institutions has come down due to use of electronic fund transfers.

Although cheques are more transparent from a compliance point of view, the government often insists on DDs in tenders to ensure that only serious buyers participate. Such drafts also help in speedy realisation of funds as compared to cheques when issued from out of town. Education institutions also ask for payments by way of DDs to ensure that cheques do not bounce.

According to banking sources, there is a big market for DDs that can be purchased without a PAN Card. These DDs are made out in the name of jewellers and the demand has increased after the government barred use of cash for purchase of jewellery.


Banks mull AMC route for NPAs
with Rs 1,000 to Rs 2,000 crore debt

Shayan Ghosh and Shritama Bose
The Financial Express
Published on July 13, 2018

Bankers warn given RBI deadline of August 28,
move may prove to be counter productive

Mumbai, July 12:  Lenders are planning resolutions of stressed assets with outstanding loans between Rs 1,000 crore and Rs 2,000 crore through the asset management company (AMC) model floated by the government, senior bankers told FE. According to a public-sector banker, since the Reserve Bank of India (RBI) has already specified a resolution timeline for stressed assets above Rs 2,000 crore, the new approach will be more useful for the ones that it does not cover.

The banker added that since the deadline for resolution under RBI’s circular ends on August 28, using the AMC approach for all assets above Rs. 500 crore could be counterproductive. Under the government’s Sashakt plan, stressed loan above Rs 500 crore would be eligible for resolution under the AMC model. Data from Capitalineshowed there are 293 companies with gross debt of around Rs 1,000-2,000 crore. Of these, a few companies such as TransstroyIndia (Rs 1,721 crore of debt), IndBarath Thermal Power (Rs 1,167 crore), Ankit Metal & Power (Rs 1,245 crore), GVK Gautami Power (Rs 1,189 crore) are stressed, according to publicly available information.

The banker quoted earlier that a lot of smaller power projects would qualify for this approach. It is known that the power sector is a significant contributor to the bad-loan pool in the system. The power sector accounts for at least Rs 70,000 crore of system-wide stressed loans. According to a report on stressed/non-performing assets in electricity sector tabled in Parliament by the Standing Committee on Energy on March 7, 34 power projects with a capacity of 40,130 MW are stressed.

“The idea is to take assets below `2,000 crore and move them to the AMC and make cash recoveries in two months,” the banker explained. Another banker at a large public-sector bank said several large loans will have to be sent to the National Company Law Tribunal (NCLT) if there is no resolution by August 28 and the AMC approach will prove beneficial for the remaining companies. “However, we do not believe there would be any overlap between RBI’s timeline and the AMC mechanism,” the banker added.

Meanwhile, in February, RBI had asked banks, either singly or jointly, to initiate a resolution plan as soon as a corporate default is spotted. In other words, banks have several options to revive the defaulting companies but these must be exercised within 180 days.

Through its February 12 circular, the central bank had abolished all existing restructuring schemes like strategic debt restructuring (SDR), scheme for sustainable structuring of stressed assets (S4A) and 5/25.


Tax disputes involving Rs. 5,600 crore
to be withdrawn from various courts

The Business Line
Published on July 13, 2018

Over Rs. 7.60 Lakh Crore are stuck in
Income Tax litigations at various level

New Delhi, July 12: Finance Minister Piyush Goyal has said raising the threshold for filing litigation will lead to withdrawal of cases involving over Rs. 5,600 crore. This will promote the environment of trust between tax departments and tax payers, said Goyal.

The Finance Ministry has decided to increase the threshold monetary limits for filing Departmental Appeals at various levels, be it Appellate Tribunals, High Courts and the Supreme Court. Limit for filing appeal in tribunals has been raised to Rs. 20 lakh from Rs. 10 lakhs.

Similarly, for high courts, new limit will be Rs. 50 lakh as against Rs. 20 lakh and for Supreme Court, the limit has been enhanced to Rs. 1 crore from the present Rs. 25 lakh. Here the limit implies disputed tax amount.

“We expect cases related with direct taxes with Rs. 4,800 crore amount to be withdrawn, while the amount for indirect taxes would be around Rs. 800 crore,” Goyal told reporters here on Thursday. This represents 0.82 per cent in terms of total direct tax disputed amount and 1.45 per cent for indirect tax disputed amount. Over Rs. 7.6-lakh crore are stuck in litigations at various level putting a strain on not just tax authorities’ resources but on tax payers.

The amount related to cases being withdrawn may look small, but number wise it is huge. In case of direct taxes, out of total cases filed by the Department in ITAT, 34 per cent of cases will be withdrawn while it will be 48 per cent for High Courts and 54 per cent for Supreme Court.

The total percentage of reduction of litigation from the Department’s side will get reduced by 41 per cent. Similarly, for indirect taxes, out of total cases filed by the Department in CESTAT, 16 per cent of cases will be withdrawn while 22 per cent in High Court and 21 per cent in Supreme Court to be withdrawn. The total percentage of reduction of litigation from Department’s side will get reduced by 18 per cent.

However, Goyal made it clear that new limits will not be applicable in such cases where substantial point of law is involved. In other words, any matter affecting a large number of people and if decisions in such matter has potential of huge precedent value, there the tax authorities will be free to approach appeal fora without any limit.


Nirav Modi scam fallout: Rupee under stress

The Economic Times
Published on July 13, 2018

Mumbai, July 12:  The repercussions of the Rs 14,000-crore Nirav Modi scam are being felt months after it came to light as it has increased dollar demand, adding to the rupee’s woes.

Companies that used letters of undertaking (LoU) to raise short-term credit abroad have had to wind them down by paying hard cash after the RBI directed banks to stop issuing these instruments in March. “Since these LoUs cannot be rolled over, companies have to pay back the bank in dollars, which is leading to demand for the US currency. This is one of the main reasons for the pressure on the rupee,” said M S Gopikrishnan, head-forex, rates and credit trading India at Standard Chartered.

LoUs were bank guarantees through which a bank allowed its customer to raise money from another Indian bank’s foreign branch in the form of short-term credit. They were of three to six months tenor and were mostly rolled over at maturity.

To be sure, the current bout of rupee weakness is due to a host of factors like global trade uncertainties, flight of dollars out of India, higher oil prices and increase in interest rates in developed economies.

There are also no official numbers of how many LoUs are still outstanding or have to be paid back. A report by State Bank of India (SBI) chief economist Soumya Kanti Ghosh in March estimated that there could be Rs 20,000 crore to Rs 40,000 crore of outstanding LoUs.

Bankers said dollar demand has been steady since March after the ban and it is also possible that some companies move to other instruments like letters of credit (LCs).

“This is one factor but not the major one. Ultimately, lower dollar inflows and the fact that India is going to end with a current account deficit this fiscal is weighing on the rupee,” said Piyush Wadhwa, head of trading at IDFC Bank.

The Indian currency has fallen 7.84 per cent so far in 2018. Only the Russian rouble, Brazilian real, Turkish lira and Argentinian peso have fallen more. Rupee has touched an all-time low of 69.09 per dollar during this bout of weakness and is likely to remain weak during the major part of 2018.


IDBI Bank officers threaten 6-day strike
from Monday – Here is why they are protesting

The Financial Express
Published on July 13, 2018

A section of IDBI Bank officers has threatened
to go on a six-day strike from Monday.

New Delhi, July 12 (PTI): A section of IDBI Bank officers has threatened to go on a six-day strike from Monday in protest against the proposed acquisition of the state-owned lender by insurance behemoth LIC and wage related issues, among others.

“It is advised that the bank has received notice from a section of officers that they propose to go on strike from July 16, 2018 to July 21, 2018,” IDBI Bank said in a regulatory filing. Wage revision for IDBI Bank employees are pending since November, 2012. They had threatened to go on strike last year but later it was called off following assurance from the management.

In a representation to Union Finance Minister Arun Jaitley, the All India IDBI Officers’ Association had opposed the up to 51 per cent sale of the bank’s equity to LIC, saying the move tantamount to privatisation of the bank.

“The subjective move of the Government of India tantamount to reneging on the solemn assurance given by the then Finance Minister of the NDA Government on the floor of Parliament on December 8, 2003 that post conversion, the government shall at all times, maintain not less than 51 per cent of the issued capital of the Company,” said association’s General Secretary Vithal KoteswaraRao. He had cautioned that in the unfortunate eventuality of the government failing to review its stand in the matter, the officers and employees of IDBI Bank will be left with no other option but to take recourse to organisational forms of action.

Meanwhile, source said that after getting a go-ahead from the insurance regulator Irdai, LIC is preparing itself to complete the 51 per cent acquisition of debt-ridden IDBI Bank by the end of September. At present, Life Insurance Corporation (LIC) of India is doing due diligence of IDBI Bank, its assets, debt position and fixed assets.


Bank, Insurance and Finance unions
threaten nationwide stir over govt policies

T E Narasimhan
The Business Standard
Published on July 13, 2018

The Coordination Committee of Bank, Insurance and Finance Unions has decided to organise dharnas in all state capitals on July 14
Chennai, July 12: Unions representing banks and insurance companies have formed a coordination committee, threatening to hold demonstrations and strikes starting August if their demands are not met.

AIBEA General Secretary C H Venkatachalam is the Chairman of this committee. GIEAIA General Secretary K Govindan is the Convener.

Increasing attacks in the banking and insurance sectors were the main trigger to form the Coordination Committee of Bank, Insurance and Finance Unions, Venkatachalam said.

All India Bank Employees Association, All India Bank Officers Association, General Insurance Employees All India Association and All India LIC Employees Federation are part of this committee.

The committee has decided to organise dharnas in all state capitals on July 14.

The unions are protesting against bank privatisation, GIC disinvestment, FDI in banks and insurance and the FRDI Bill. They want recruitments in banks, LIC and GIC, and the end to outsourcing and contractual jobs.

"If the government does not revise its policies on banking and insurance sectors and continues with its existing policies, the CCBIFU will decide to go on a strike during the winter session of Parliament in December 2018," said Venkatachalam.


India now sixth largest economy: What
 does it mean for the average Indian?
Not much, if you drill down numbers

Dinesh Unnikrishnan
The Firstpost Online
Published on July 12, 2018

India is moving up in the coveted list of the world’s largest economies. According to World Bank data, last year, the country became the world’s sixth largest economy beating France. That’s indeed another good talking point for the ruling Bhartiya Janata Party (BJP) led by Narendra Modi as the 2019 poll campaigns approach. But, this muscle growth was bound to happen anyway due to India’s consistent growth pace over the years.

Consider this: Just in the last decade, India has doubled the size of its economy outpacing that of France. While India's GDP has risen by an average 8.3 percent over the decade, that of France's actually declined by 0.01 percent. To add more perspective, in the past 10 years India's GDP grew by 116.3 percent (from $1.201 trillion in 2007 to $2.597 trillion in 2017) while France witnessed a 2.8 percent decline in GDP (from $2.657 trillion in 2007 to $2.583 trillion in 2017). Certainly, this tells us that India is gaining economic size consistently and is emerging as one of the powerhouses.

But what does India’s ascension in the list of world economies mean for Indians looking from within?

Not much, if one looks at the per capita income graph of major economies and where India stands among them. To understand this, just look at the per capita income at PPP (purchasing power parity) in both India and France. Going by the latest available figures on World Bank's website, India has an estimated per capita income of $7,060 while France has $43,720, some six times more than that of India. India ranks at the 123th position when it comes to per capita income at PPP while France ranks at the 25th position. An average Indian is far poorer than the average Frenchman if one uses this yardstick.

Now, why are we talking about per capita income at PPP? Because that’s one important metric in US dollar terms used worldwide to compare the income levels of citizens of different countries. It gives us a picture of the relative performance of different countries.

The size of the economy is linked to the size of geography, its population, and workforce. India has a population of 1.34 billion while France has 67 million. If one talks about the prosperity of the people in an economy, PPP is the right metric to look at. One reason why India has a much lower PPP compared with France is the difference in population (per capita is the total size of the economy divided by the total number of people in that country).

But that isn’t necessarily the dominant factor though. China, which has a population of 1.4 billion has a per capita income of $16,760 (ranked 77th in the world). The obvious inference here is that India should have grown at a much faster pace and in much greater size to level some of the inequality in per capita income levels.

The big evidence lies in the not-so-satisfactory employment scenario in the country. Has gaining economic muscle helped India improve the employment scenario significantly over the years? The ruling BJP and its sympathisers have consistently maintained that the problem is not with a lack of jobs but lack of data.

Almost 80 percent of all Indians rely on the informal sector to make a living -- a large chunk of them are still dependent on farming, the contribution of which to the economy has shrunk from 50 percent at the time of independence to 15-16 percent now.

Output hasn’t increased but farming still constitutes one of the largest areas of employment. That’s one reason why the poor remain poor and live in distress. Even today, India doesn’t have solid payroll data but the unemployment rate is believed to be quite high. China, UK, and Germany have a 3-4 percent unemployment rate while France has close to a nine percent rate.

According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India reached a 71-week high in the week ended 25 February. It is possible that February 2018 will end with the highest unemployment rate in the past 15 or 16 months. The unemployment rate has been rising steadily since July 2017, the CMIE said.

Till recently, India was home to the largest number of poor in the world but it got rid of the dubious title, as cited by a Brookings study, which said, “At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million."

When Narendra Modi took over in 2014, he promised a manufacturing revolution. The share of manufacturing and agriculture as a share of GDP has been shrinking and it is on the back of services that the Indian economy has been managing its growth story.

As a share of GDP, the manufacturing sector contributed 17.4 percent in fiscal year 2012, dropped till fiscal 2015 before showing a mild uptick. In fiscal year 2018, manufacturing as a percentage of GDP stood at 18.1 percent. Remember, as part of the 'Make in India' campaign, the government wanted to increase the share of manufacturing to GDP to 25 percent over a few years, but, after four years, there has not been much progress.

However, a visible improvement is seen in services. From 18.9 percent of the GDP in fiscal year 2012, the contribution of services to GDP has improved to 21.7 percent in fiscal year 2018. In fact, this is the only segment which has lifted the momentum in GDP growth in a big way, whereas, despite multiple campaigns such as 'Make in India', manufacturing has refused to pick up significantly.

There are economists who believe that GDP growth would have been far higher in fiscal years 2015-16 and 2016-17 if demonetisation had not happened in the economy in November, 2016.

The government refutes this argument by saying that the note ban set the stage for greater formalisation in the economy of India and will aid future growth.

The debate is on. But, while debating a course correction, India will have to repair its fault lines even as it gains economic muscle.


Banks fear Mudra loans
sans collateral may become NPAs

The Asian Age
Published on July 12, 2018

According to a March 2018 report of the Small Industries Development Bank of India (SIDBI), the NPA ratio for Pradhan Mantri Mudra Yojana (PMMY) loans of up to Rs 10 lakh is 11.50%

New Delhi, July 12:  Sensing a bigger credit risk on the government’s Mudra loan disbursement to the tune of Rs 6 lakh crore till date, mostly to first-time entrepreneurs, the lender community has expressed concerns in this regard to the finance ministry and sought stricter procedures to prevent the segment from becoming the latest poster boy for bad loans.

The lenders have a genuine concern on Mudra loans as these constitute small sums in the range of Rs 50,000-Rs 10 lakh but are without any collateral. The probability of them turning into non-performing assets (NPAs) is also high. Raising an alarm, the chief of a leading public sector bank, requesting anonymity, told FC that though credit growth is recovering banks may come under a fear cloud.

 “We are happy that Pradhan Mantri Mudra Yojana (PMMY) is an encouraging scheme which generates self-employment and instil confidence among jobless people, but at the same time its recovery from the loan takers is not guaranteed as the tag of no-collateral is attached to it. Therefore, we urge the government to find out a proper mechanism to prevent this small loanee segment from becoming bad loans and protect bankers as well,” he added.

In the last meeting of Parliamentary Standing Committee of Finance, chiefs of state-owned banks, including SBI and PNB, expressed similar concerns on the issue of Mudra loan fallout.

“We are discussing NPAs today. At one stage that credit growth is recovering and at another stage only a few sectors are doing good. What is the percentage of retail lending by the banks? What is sector-wise growth of lending across sectors?

For example, the government is saying that a lot of money has been disbursed under Mudra, to the tune of Rs 6 lakh crore for over 12 crore consumers have been given the Mudra loans in which there is no need to produce collateral from the loanee side. Do you not see that it would pose a big NPA problem in the near future?” asked the CMD of public sector bank quoted earlier.

The PMMY scheme was launched by prime minister Narendra Modi in April 2015 to improve access to micro finance for non-corporate, non-farm small/micro enterprises and stimulate job creation in the country. Any individual can apply to private or public banks for loans of up to Rs 10 lakh without having to provide any collateral. PMMY scheme is mainly divided into three categories — ShishuLoans, Kishor Loans and Tarun Loans.

The government has already disbursed around Rs 5,54,703 till date to almost 12 crore consumers. Out of three categories, Kishor Loans has given out its loans to maximum number of consumers (93,86,837 people) in last three years.

But the bankers have different view on this issue. “The total amount of NPA, including priority sector and non-priority sector, is beyond anybody’s imagination. If you can go through the composition of NPAs of public sector banks since 1995, the total amount of NPAs in 1995 was Rs 38,300 crore. Till 2009 it was hovering between Rs 38,300 crore to Rs 45,000 crore or Rs 50,000 crore and Rs 53,200 crore. After that, in 2010 it has surged to Rs 59,900 crore, while in 2015 it was Rs 2,78,400 crore. But in 2017 it reached to almost Rs 6,84,732 crore,” the banker said.

Traditionally, financial institutions have preferred to lend to larger companies that are able to provide collateral, instead of lending to micro, small and medium enterprises (MSMEs), which are often run by first-time entrepreneurs often believed to represent greater credit risk.

According to a March 2018 report of the Small Industries Development Bank of India (SIDBI), the NPA ratio for PMMY loans of up to Rs 10 lakh, which the government includes under Mudra, was 11.5 per cent in December 2017, “The overall recognised NPA exposure for MSME is Rs 81,000 crore as on March 2018, said a joint study conducted by CIBIL & SIDBI. “The Reserve Bank of India (RBI) on June 6 came out with a special dispensation for encouraging formalisation of MSMEs.

The NPA of the PSBs has increased from 14.3 per cent in March ’17 to 15.0 per cent in March ’18 (11.9 per cent, March ’16) and the NBFCs have also witnessed an increase in NPA rates from March ’16 to March ’18,” the report added.


A weak state problem, not a WhatsApp problem

Editorial: The Mint
Published on July 13, 2018

The Indian state lacks the capacity to maintain a
monopoly on violence and the will to address this

Messaging app WhatsApp has responded to the horrific lynching in Maharastra’s Dhule district with a media blitz and a new feature that marks forwarded messages clearly. The former was inevitable given that the Centre has put it under the pump for the spate of recent lynchings fuelled by rumours spread via the app. The latter was in the works in any case. Doubtless, there are other measures the Facebook-owned app can and will implement. These will not, however, solve the problem. For that, the state will have to address the cause of the lynchings. WhatsApp is not it.

In June 2007, Manoj Banwala and Babli were lynched by the latter’s family for marrying against the wishes of the khap panchayat of Karora village in Haryana. When a Karnal district court convicted the perpetrators and the khap head in 2010, it was the first time khappanchayats had been brought to account for their role in perpetrating honour killings. It would not, unfortunately, prove to be the decisive deterrent that it was hailed as at the time. Such honour killings continue. And the panchayats have continued to function as extra-constitutional authorities—enough so that in February this year, the Supreme Court had to warn them not to be the “conscience keepers of society”.

In June 2017, Prime Minister Narendra Modi declared that “killing people in the name of gau bhakti is unacceptable”. This is so obvious a sentiment that it should scarcely need saying. Yet, it did. The spate of high-profile lynchings associated with cow vigilantes—from the Mohammed Akhlaq murder in 2015 to the Qasim lynching last month—continues.

WhatsApp was not even a glint in eventual founders Jan Koum’s and Brian Acton’s eyes back in 2007. Nor was it a factor in the spate of honour killings that came to light during the United Progressive Alliance’s second term. It has played a role in the cow vigilantelynchings, but mob patrolling and police apathy have done as much. All of which is to say: It would be a mistake to look at the recent lynchings associated with child abduction scares and conclude that India has a WhatsApp problem. What it has is a weak state problem.

For the state to maintain a monopoly on violence, the political elite must show the will to make it happen. They will do so if there are structural incentives for them. There aren’t. As we had noted after Modi’s declaration last year, the elevation of individual notions of justice over the constitutional ideal is a deep-rooted problem in the Indian polity. This creates political incentives to undercut the state’s monopoly on violence.

Thus, khap panchayats had plenty of defenders among politicians in states where they could deliver rural votes. It takes a brazen political appetite to compare them to non-governmental organizations with a straight face, as then Haryana chief minister Bhupinder Singh Hooda did back in 2014, after all. It is the same reason that led Rajasthan home minister Gulab Chand Kataria to blame the victim after the Pehlu Khan lynching last year by saying: “It is illegal to transport cows, but people ignore it and cow protectors are trying to stop such people from trafficking them.”

These perverse incentives, as well as fiscal constraints and simple apathy, have led to the erosion of police effectiveness. Committees and reports recommending police reforms have been routinely ignored, going back at least to 1977’s National Police Commission. Consequently, transparency and accountability in police functioning as well as insulation from political pressure are often absent. India’s poor police-to-population ratio also means that states lack the capacity to keep up with evolving police models. For instance, community policing—forging bonds with local populations, partnerships with community organizations, increased visibility, and communication to boost familiarity—has been adopted in a number of countries. It works, as US Bureau of Justice statistics show. And it is far more effective in countering whisper networks, online or offline, than reactive policing. But such a strategy requires manpower Indian states do not have.

Poor state capacity and inability to enforce law and order—as Dipti Jain has written in Mint, National Crime Records Bureau numbers show a rapid rise in the rate of child abductions nationally—and lack of political will make for a volatile mix. The lynchings should come as no surprise.

Will turning the screws on WhatsApp help? To an extent, perhaps. There is a global debate underway on data localization, the responsibilities of social media platforms and apps, the balance between individual privacy and the state’s security needs, and the appropriate legislative frameworks to deal with evolving technology. It is an important debate, and India is a part of it.

But WhatsApp is, ultimately, just the medium. Stuff it to the gills with fact-checking options and there is still no certainty people won’t fall prey to rumours. Research on the “backfire effect” over the past few years has shown that when individuals with a propensity to believe in a rumour or fake news are presented with contrary facts, their opinions often become even more entrenched in defiance of those facts. Ban WhatsApp and other apps with end-to-end encryption will step in.

The lynching problem runs much deeper. So must the efforts to address it.

Source: Inernet News papers and Anupsen Articles.