RBI to designated six bas as Systemically Important Banks (SIBs)
The Reserve Bank of India will designate at least six banks as Systemically Important Banks (SIBs), for the domestic financial market which will need to have higher capital than other banks to prevent the financial system from collapsing in the event of a crisis. The central bank would now work on identifying these banks which are too big to fail and would release a list of names in August 2015.
As per experts, the list may include State Bank of India, Punjab National Bank,Citibank, Standard Chartered Bank, ICICI Bank and HDFC Bank. Banks classified under SIB category will have to set aside more capital per loan than their peers. Size, interconnectedness, lack of readily available substitutes or financial institution infrastructure and complexity will determine the systemic importance of banks as determined by Basel global standards. But, as per RBI, in India, size would be given higher weightage than other factors.
Based on the category it is relegated, a bank will have has to set aside 0.2% to 0.8% of the loan as capital buffer. In simpler terms, if a bank was setting aside Rs 1 earlier, it would now have to set aside between Rs 1.20 and Rs 1.80. As per RBI, banks having a size beyond 2% of GDP will be selected in the sample. However banks whose size is less than 2% of GDP may also face rigorous norms. After the 2008 credit crisis, banking regulators across the globe are tightening capital norms for banks and other key financial institutions.
The Reserve Bank of India will designate at least six banks as Systemically Important Banks (SIBs), for the domestic financial market which will need to have higher capital than other banks to prevent the financial system from collapsing in the event of a crisis. The central bank would now work on identifying these banks which are too big to fail and would release a list of names in August 2015.
As per experts, the list may include State Bank of India, Punjab National Bank,Citibank, Standard Chartered Bank, ICICI Bank and HDFC Bank. Banks classified under SIB category will have to set aside more capital per loan than their peers. Size, interconnectedness, lack of readily available substitutes or financial institution infrastructure and complexity will determine the systemic importance of banks as determined by Basel global standards. But, as per RBI, in India, size would be given higher weightage than other factors.
Based on the category it is relegated, a bank will have has to set aside 0.2% to 0.8% of the loan as capital buffer. In simpler terms, if a bank was setting aside Rs 1 earlier, it would now have to set aside between Rs 1.20 and Rs 1.80. As per RBI, banks having a size beyond 2% of GDP will be selected in the sample. However banks whose size is less than 2% of GDP may also face rigorous norms. After the 2008 credit crisis, banking regulators across the globe are tightening capital norms for banks and other key financial institutions.
Narendra Modi uses idea of ‘zero hour’ at Cabinet meetings
Prime Minister Narendra Modi has introduced the concept of “zero hour” at Cabinet meetings.
The “zero hour” will be the free-wheeling discussions where ministers can bring up any issue they feel relevant for the Cabinet’s informal consideration.
The practice come from Gujarat when Modi was state’s chief minister, the difference being that then the zero hour happened at the start of cabinet meetings and Modi absented himself during the deliberations to let ministers speak up without feeling hesitant due to his presence.
The concept is almost same with a change that now Modi also attends the discussions to listen to ministerial colleagues though he does not speaks too often. The objective behind is to bring issues to the PM’s notice and getting a sense of the cabinet on how a particular situation or development is evolving in terms of its public perception or political ramifications. The Modi cabinet holds its discussions without officials barring the cabinet secretary and national security advisor who are permanent invitees to ministerial discussions.
Prime Minister Narendra Modi has introduced the concept of “zero hour” at Cabinet meetings.
The “zero hour” will be the free-wheeling discussions where ministers can bring up any issue they feel relevant for the Cabinet’s informal consideration.
The practice come from Gujarat when Modi was state’s chief minister, the difference being that then the zero hour happened at the start of cabinet meetings and Modi absented himself during the deliberations to let ministers speak up without feeling hesitant due to his presence.
The concept is almost same with a change that now Modi also attends the discussions to listen to ministerial colleagues though he does not speaks too often. The objective behind is to bring issues to the PM’s notice and getting a sense of the cabinet on how a particular situation or development is evolving in terms of its public perception or political ramifications. The Modi cabinet holds its discussions without officials barring the cabinet secretary and national security advisor who are permanent invitees to ministerial discussions.
Government has no proposal to integrate Aadhaar project & NPR
Government has informed that it is not considering any proposal to integrate theUID (Aadhaar) project with National Population Register (NPR). In December 2010, the National Identification Authority of India Bill 2010 was introduced in theRajya Sabha and was thereafter referred to the Standing Committee on Finance. The UPA government had to freeze Aadhaar-based direct benefit transfers in the wake of reservations over certain issues.
The new government is likely to continue Aadhaar registrations as Rs 2,039.64 crore has been provided in the budget 2014-15 for the Aadhaar for the current fiscal, as against Rs 1,550 crore allocated in 2013-14. Around 73.71 crore Aadhaar enrolments have been done till mid-July, with 8.45 crore rejections by the Unique Identification Authority of India implementing the project.
Since its beginning, UIDAI has generated 64.05 crore Aadhaars and incurred an expenditure of Rs 4,620.61 crore so far. The Aadhaar enrolments are being conducted in all districts of 22 states and union territories allocated to the project. The authority was tasked with collecting biometrics of 60 crore residents and remaining India’s population was to be covered under the NPR project.
During UPA rule, it was decided by the Cabinet Committee on UIDAI that all residents would be provided National Multi-purpose Identity Cards under NPR, and UIDAI would generate Unique identification number for entire population. Both UIDAI and NPR were to share the biometric data gathered by them for issuing NMIC and generating unique identification number.
The NPR is a comprehensive identity database preserved by the Registrar General and Census Commissioner of India under the Home Ministry.
Government has informed that it is not considering any proposal to integrate theUID (Aadhaar) project with National Population Register (NPR). In December 2010, the National Identification Authority of India Bill 2010 was introduced in theRajya Sabha and was thereafter referred to the Standing Committee on Finance. The UPA government had to freeze Aadhaar-based direct benefit transfers in the wake of reservations over certain issues.
The new government is likely to continue Aadhaar registrations as Rs 2,039.64 crore has been provided in the budget 2014-15 for the Aadhaar for the current fiscal, as against Rs 1,550 crore allocated in 2013-14. Around 73.71 crore Aadhaar enrolments have been done till mid-July, with 8.45 crore rejections by the Unique Identification Authority of India implementing the project.
Since its beginning, UIDAI has generated 64.05 crore Aadhaars and incurred an expenditure of Rs 4,620.61 crore so far. The Aadhaar enrolments are being conducted in all districts of 22 states and union territories allocated to the project. The authority was tasked with collecting biometrics of 60 crore residents and remaining India’s population was to be covered under the NPR project.
During UPA rule, it was decided by the Cabinet Committee on UIDAI that all residents would be provided National Multi-purpose Identity Cards under NPR, and UIDAI would generate Unique identification number for entire population. Both UIDAI and NPR were to share the biometric data gathered by them for issuing NMIC and generating unique identification number.
The NPR is a comprehensive identity database preserved by the Registrar General and Census Commissioner of India under the Home Ministry.
‘Van Bandhu Kalyan Yojna’: Scheme for holistic development of tribals launched
A new scheme named ‘Van Bandhu Kalyan Yojna’ for holistic development of tribals has been launched by the government. The Ministry of Tribal Affairslaunched the scheme for holistic development of tribal people and Rs 100 crore has been allocated for the scheme during the year 2014-14. The Ministry has also started several other schemes which include hostels for ST girls and boys, scheme for establishment of ashram school in Tribal Sub Plan areas, post-matric scholarships and others.
Besides these schemes, the ministry administers two special area programmes namely grant under Article 275 (1) of Constitution and the Special Central Assistance to Tribal Sub Plan for upliftment of tribal population including North Eastern states.
As per census 2011, 94.4% of the total population in Mizoram comprises Scheduled Tribes (STs) while the percentage of STs in Meghalaya and Nagalandis 86.1% and 86.5% respectively. As per figures, a total of Rs 2449.63 lakhs has been released in various states under the scheme of hostels for ST boys and girls in 2014-15 (as on 23.7.2014). In 2014-15 (as on July 14, 2014), Rs 82,10,620 has been released to state societies and NGOs under the scheme of strengtheningeducation among ST girls in Low Literacy districts. The governments has also released Rs 25525.26 lakhs in 2014-15 under SCA to TSP.
The central sector scheme Grant In Aid to Tribal Research Institutes (TRIs)implemented by the Ministry focuses on promoting tribal culture, customs and art. The scheme provides financial assistance to TRIs for documentation and preservation of tribal heritage, organizing tribal exhibitions, dance-painting sportsevents and others. Rs 273.69 lakhs was released to TRIs across the country in 2013-14.
A new scheme named ‘Van Bandhu Kalyan Yojna’ for holistic development of tribals has been launched by the government. The Ministry of Tribal Affairslaunched the scheme for holistic development of tribal people and Rs 100 crore has been allocated for the scheme during the year 2014-14. The Ministry has also started several other schemes which include hostels for ST girls and boys, scheme for establishment of ashram school in Tribal Sub Plan areas, post-matric scholarships and others.
Besides these schemes, the ministry administers two special area programmes namely grant under Article 275 (1) of Constitution and the Special Central Assistance to Tribal Sub Plan for upliftment of tribal population including North Eastern states.
As per census 2011, 94.4% of the total population in Mizoram comprises Scheduled Tribes (STs) while the percentage of STs in Meghalaya and Nagalandis 86.1% and 86.5% respectively. As per figures, a total of Rs 2449.63 lakhs has been released in various states under the scheme of hostels for ST boys and girls in 2014-15 (as on 23.7.2014). In 2014-15 (as on July 14, 2014), Rs 82,10,620 has been released to state societies and NGOs under the scheme of strengtheningeducation among ST girls in Low Literacy districts. The governments has also released Rs 25525.26 lakhs in 2014-15 under SCA to TSP.
The central sector scheme Grant In Aid to Tribal Research Institutes (TRIs)implemented by the Ministry focuses on promoting tribal culture, customs and art. The scheme provides financial assistance to TRIs for documentation and preservation of tribal heritage, organizing tribal exhibitions, dance-painting sportsevents and others. Rs 273.69 lakhs was released to TRIs across the country in 2013-14.
India-US Malabar naval drill not aimed at containing China: US
The US has clarified that the annual India-US bilateral “Malabar” naval exercise which started in the Asia Pacific region is not aimed at containingChina and that the exercise would strengthen the US naval presence in the Pacific Ocean region and maritime partnership with its allies.
The exercise this year has Japan as a special invitee. China had in the past raised objections over Japan’s taking part in the war-games held mainly between US and India. The last drill involving Japan was held in 2009. As per the US, the participating nations are working with specific training drills such as communication, search and rescue, helicopter cross deck evolutions and anti-submarine welfare.
Over 7,000 American defence personnel are participating in the exercise. The US battleships participating in the drill includes nuclear-powered aircraft carrier USS George Washington, Ticonderoga-class destroyer USS Shiloh, Arleigh Burke-class destroyer John S McCain and nuclear submarine USS Columbus. P-3 Orion aircraft and MH-60R helicopters will also be part of this exercise.
India is participating with its three warships—INS Ranvijay and Shivalik along with fleet support tanker ship INS Shakti.
Banks barred from trading in bonds for infrastructure lending: RBI
According to the Reserve Bank of India, banks will not be permitted to trade bonds issued by other lenders for infrastructure lending that would be exempted from mandatory reserve requirements under the new guidelines issued by the RBI.
The RBI recently allowed banks to issue bonds for infrastructure lending, butforbade them from holding each other’s bonds. Now the central bank has clarified that the restrictions on cross holding also applies to trading. The RBI wants these bonds for infrastructure lending attract investors from outside thebanking sector. The idea is funds to come from outside the banking system.
20th edition of Commonwealth Games begin at Celtic Park in Glasgow, Scotland
The 2014 Commonwealth Games kicked off with a spectacular opening ceremony that witnessed some enchanting performances by singers Rod Stewart, Susan Boyle and violinist Nicola Benedetti at the Celtic Park, Glasgow (Scotland). The British Queen Elizabeth II declared the Games open after the enthralling opening ceremony that was participated by some 2,000 cast members and 4,500 athletes from 71 countries and territories. Albeit there are 53 members of the Commonwealth of Nations, 71 teams participate in the Commonwealth Games, as a number of dependent territories compete under their own flag.
The players’ parade was led by India, by the virtue of being the previous hosts. London Olympics silver medallist Vijay Kumar led the Indian contingent as he proudly carried the tri-colour.
The Commonwealth Games (known as the British Empire Games from 1930–1950, the British Empire and Commonwealth Games from 1954–1966, andBritish Commonwealth Games from 1970–1974) is an international, multi-sport event involving athletes from the Commonwealth of Nations. Only six teams have attended every Commonwealth Games: Australia, Canada, England, New Zealand, Scotland, and Wales.
India will not support trade facilitation agreement at the WTO
Upholding its earlier stance, India will not support a pact on Trade Facilitation Agreement (TFA) at the World Trade Organisation (WTO) till its concerns related to subsidies given for food procurement and food aid is suitably addressed. WTO members are expected to sign the protocol for an agreement on trade facilitation by July 31, 2014 as per the consensus reached by WTO trade ministers in a meeting in Bali in December 2013.
What is the Trade Facilitation Agreement (TFA)?
The Trade Facilitation Agreement (TFA) targets to steadfast any drive of goods amongst nations by cutting down administrative compulsions. The Trade Facilitation Agreement (TFA), being pushed by several developed nations, will place commitments on all WTO members to modify their border infrastructure and procedures to facilitate movement of goods.
What is the problem with Trade Facilitation Agreement (TFA)?
The difficulty with Trade Facilitation Agreement (TFA) runs in a clause that says farm subsidies cannot be more than 10% of the value of agricultural production. If the limit is violated, other participants can contest it and also go on to levy trade sanctions on the nation. The developing nations would have a difficulty with the solutions offered by the developed nations as without the subsidies the food security of the developing nations could be genuinely damaged.
Why is India opposed to Trade Facilitation Agreement (TFA)?
India’s Food Security Act, by law is now obligatory on the government and provides that the government will deliver food to the weaker sections of the society at very low prices. Apart from offering subsidies to the consumers, via the PDS (Public Distribution System), it also offers subsidies to the producers of food grains. Thus, Government purchases food grains from farmers at a MSP (Minimum Support Price), and subsidizes inputs like Electricity, Fertiliser, etc.
- Problem-1: The 10% cap on subsidies will not be feasible for India to accomplish. Also, the 10% cap is computed based on 1986-88 prices when the prices of food grains were much lower. Thus, the cap has to be revised on the basis of present prices of food-grains.
- Problem-2: For offering subsidized food, India will have to open up its own stock stores to international supervision. Also, India will be unable to add protein/ heavy grains viz. say, lentils, etc. even if it wishes to, owing to riders in the peace clause.
- Problem-3: It appears biased as US offers farm subsidies to its farmers to the tune of more than $20 billion per year. While the WTO is binding the developing nations to protocols, the issue of subsidies by developed nations like US appears to be kept off the table.
What does India want?
India now wants a permanent solution to the issue of public stock holding of food-grains. G33 members including China have supported India’s stand on the ability to subsidize agricultural production and distribute it to the poor at low cost. India settled to the TFA in Bali only under the condition that interim relief would be offered to the developing countries. India held that till 2017 no legal action/ sanction(s) would be imposed on the developing countries, by which time a solution would be chalked out amongst the nations.
Nevertheless, this interim relief would not be applicable if such subsidies would lead to trade distortions i.e. the prices of imports and exports cannot be affected by this. Recently, India clarified in a WTO meeting on trade facilitation that it may not be able to support Trade Facilitation Agreement (TFA) at present as there was not much progress on the issue of addressing concerns related to subsidies given for public procurement of food-grains and food aid.
The Bali Ministerial declaration had provided just a short-term relief to developing nations against action by other countries in case it surpassed the current cap on agriculture subsidies (10% of total production). It is worth recalling that in 2013 India decided not to agree to the ‘Peace Clause’ for agriculture subsidies that the World Trade Organization (WTO) Director-General Roberto Azevedo had proposed for Bali talks. India will not agree to any deal until it is clear that the proposed interim solution will be available till a permanent solution to the issue of India’s Minimum Support Prices (MSP) transgressing the WTO norms has been found and agreed to. India fears that fears that the temporary solution might be difficult to implement as it is riddled with numerous conditions including submission of various data related to production and subsidies.
What was the ‘Peace Clause’ offered by the WTO?
India wants to implement its Food Security Scheme by providing food entitlements at subsidized rates to 2/3rd of its population. To realize this, the government will have to procure a huge quantity of grains from farmers. The government procures grains at certain MSPs. However, WTO norms under theAgreement on Agriculture may hamper the plan as the rules set a subsidy cap of 10% of the value of production for developing countries. India is already inching closer to that limit. If India breaches that limit it would create dispute and may be dragged to the WTO Disputes Settlement Body. The ‘Peace Clause’ proposed by the WTO general-secretary offers an interim solution by allowing the developing countries to offer subsidies to farmers that are currently prohibited under WTO norms. The clause will restrict other WTO members from seeking penalties and facilitating the government to procure grains at MSPs and sell them at subsidized rates through Public Distribution System (PDS).
What is the problem with the “Peace Clause”?
There is catch in this ‘Peace Clause’: While developing countries can provide WTO-prohibited subsidies to farmers without inviting any dispute under the Agreement on Agriculture, developed countries will have the right to drag these countries to the WTO Disputes Settlement Body, under the Agreement on Subsidies and Countervailing Measures. This would render the peace clause null-and-void. There is also lack of clarity on when the proposed Peace Clause will expire and in case there arrives no solution or agreement at the eleventh Ministerial conference, the protection from the Peace Clause will end and its extension will be have to be renegotiated — a contingency India doesn’t want.
Why WTO has a problem with high subsidies offered by developing nations?
WTO contends that:-
- If developing nations continue giving prices which are higher than the market prices, to their farmers, it might damage the poor farmers in other parts of the world.
- The deal could add $1 trillion to global GDP (Gross Domestic Product) and 21 million jobs, by removing the red tapes.
- The developed world wants the issue of food security to be dis-associated from the TFA.
What is Minimum Support Price?
The Minimum Support Price (MSP) Scheme is a scheme of the Government of India (GOI) to safeguard the interests of the farmers. Under this Scheme the GOI declares the minimum support Prices of various agricultural produces and assures the farmers that their agricultural produce will be purchased at the MSP, thereby preventing its distress sale. The Food Corporation of India (FCI) acts as the Nodal Agency of the GOI.
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