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Current Affairs- 12 September 2018


Small loans could turn bad: Rajan

  • Former RBI Governor Raghuram Rajan has cautioned that the next crisis in India’s banking sector could come from loans given to the unorganised micro and small businesses, called MUDRA loans, and credit extended through the Kisan credit card.
  • MUDRA loans are offered under the Prime Minister Mudra Yojana or PMMY, launched in 2015 by the NDA government.
  • A total of ₹6.37 lakh crore has been disbursed under the scheme by public and private sector banks, regional rural banks and micro-finance institutions till date, as per the data from the Micro Units Development and Refinance Agency (MUDRA) website.
  • In a note on bank non-performing assets (NPAs), prepared at the request of Murli Manohar Joshi, Chairman of the Parliament Estimates Committee, Dr. Rajan said the government should refrain from setting ambitious credit targets or waiving loans.
  • “Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk,” Dr. Rajan wrote in his 17-page note.
  • He also flagged the Credit Guarantee Scheme for MSMEs, run by the Small Industries Development Bank of India, calling it “a growing contingent liability” that needs to be examined with urgency.
  • He pointed out that most of the bad loans were created during 2006-08, a period that coincides with the first term of the UPA.
  • Countering the BJP, which cited this reference to attack the UPA regime, the Congress claimed that NPAs of public sector banks were a “controllable” ₹2.83 lakh crore when the UPA demitted office in May 2014 but now it had gone up to ₹12 lakh crore. 
  • The former RBI Governor also revealed that he had shared a list of high-profile fraud cases with the Prime Minister’s Office in order to “coordinate action to bring at least one or two to book” but he did not mention whether it was done during the UPA’s time or the NDA’s.
  • He defended the RBI against accusations that it created the NPA mess. “The RBI is primarily a referee, not a player in the process of commercial lending,” he pointed out.
Damage to Aravallis scary, says SC
  • The Supreme Court ordered the demolition of structures built illegally by a prominent builder in the protected forests of the Aravallis, noting that ecological damage done by colonisers to the ancient hills was irreversible and “quite frightening.”
  • A Bench of Justices Madan B. Lokur and Deepak Gupta ordered that all structures built after August 18, 1992 in the area known as ‘Kant Enclave’ at Anangpur in Faridabad district of Haryana should be demolished  by December 31, 2018, the court said.
  • It held that these illegal structures defy a Haryana government notification of August 18, 1992, issued under the Punjab Land Preservation Act, declaring the area as forest land and fragile.
  • The court, however, ordered not to disturb constructions made between April 17, 1984 and August 18, 1992.  
  • The court ordered, should pay a full refund to investors to whom they had already transferred the land. The builder has to pay interest at 18% per annum from the date of the investment.
  • The court pulled up the State town and country planning department for supporting the illegalities. 
  • The Bench accused the department of having “completely vitiated the efforts of the forest department as well as the orders of the Supreme Court.”
  • “It is not only the future generations that have to pay a heavy price for this environmental degradation, but even the present generation is paying a heavy price for the environmental and ecological degradation inasmuch as there is an acute water shortage in the area as prophesied by the Central Ground Water Board,” Justice Lokur said.
Return home or give up sops: govt. to Brus
  • New Delhi has told the Bru (or Reang) refugees in Tripura to either accept a rehabilitation package and return to their villages in adjoining Mizoram or give up the free rations and other facilities being provided to them on humanitarian grounds.
  • Satyendra Garg, Joint Secretary (Northeast) in the Ministry of Home Affairs, appealing to the refugees to return to Mizoram, he said the names of those who wished to be repatriated would be submitted to the Centre and the Mizoram government, while reminding that the ration and other facilities extended to the refugees would be withdrawn from October 1.
  • The option has not gone down well with a section of the refugees who have threatened to launch an agitation to choke the roads leading to Mizoram. 
  • There are at least three groups representing the refugees. The Centre had in July signed an agreement with one of them – Mizoram Bru Displaced People’s Forum – for repatriation of some 32,000 Brus to Mizoram by September 30.
  • But a number of refugees have refused to budge unless some new demands are met. These include creation of an area development council for the Brus in Mizoram and payment of one-time Central assistance of ₹4 lakh per family before going back.
AAI shelves water aerodrome project in Chilika Lake
  • Susanta Nanda, Chief Executive of the Chilika Development Authority (CDA), told that the AAI has cancelled the seaplane project in the lake which, if implemented, would have negatively impacted the ecosystem and the surrounding human population at the world’s second largest brackish water lake.
  • The AAI has decided to shelve the project following stiff opposition from environmentalists and the CDA, according to Mr. Nanda.
  • The Odisha government has been informed by the aviation body about the decision, the officer said.
  • Earlier, the CDA in its report to the State government had said the water aerodrome project would seriously jeopardise the habitat of Chilika’s nearly one million avian visitors which come from the Arctic and Eurasian regions.
  • “The cost involved in the operation of seaplane seems to outweigh the benefits likely to accrue from it. Besides, legally the project is not feasible,” the CDA Chief Executive had stated in the report.
Floods trigger influx of alien fish species in Kerala
  • The catastrophic floods that caused widespread havoc throughout Kerala last month have released 11 alien species and four alien invasive species, raising a threat to the endemic aquatic ecosystem and biodiversity, scientists have reported.
  • The researchers from the University of Kerala, the Kerala University of Fisheries and Ocean Sciences (KUFOS) and the National Institute of Advanced Studies, Bengaluru, have established that alien species had escaped in large numbers from flooded commercial and ornamental fish farms.
  • According to Rajeev Raghavan of KUFOS and the South Asia Coordinator of the IUCN’s Freshwater Fish Specialist Group, the proliferation of alien species poses a serious threat to the freshwater ecosystems of Kerala, considered a global hotspot for fish diversity.
India’s first missile tracking ship is readying for sea trials
  • Once ready, it will be India’s first, a force multiplier and cruise the country into a global elite club. Hindustan Shipyard Limited (HSL) is gearing up to undertake sea trials of India’s first missile tracking ship by the first week of October.
  • The keel of the ship, which was laid on June 30, 2014, is being built for the National Technical Research Organisation, the technical intelligence agency working directly under the supervision of the Prime Minister’s Office and the National Security Adviser.
  • Considered a “topmost secret project”, a lot of confidentiality is being maintained in executing the project costing about ₹750 crore.
  • This will be the first of its kind ocean surveillance ship being built as part of the efforts under the NDA government to strengthen the country’s strategic weapons programme.
  • The ship was built inside the covered dry dock. It has the capacity to carry 300-strong crew with hi-tech gadgets and communication equipment, powered by two diesel engines, and a large deck capable of helicopter landing.
  • Visakhapatnam is considered a strategic location on the East Coast for the Indian defence forces as it is home for Ship Building Centre to build nuclear powered submarine INS Arihant class, Naval Alternate Operational Base at Rambilli, the second naval base after Eastern Naval Command headquarters, training centre for Marine Commandos and headquarters of the submarine arm.
BIMSTEC embarrassment for India 
  • India is facing an embarrassing situation at the first-ever military exercise of the regional grouping BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) with Nepal and Thailand backing out from sending full contingents. 
  • Nepal also conveyed that its Army Chief would not be able to attend the Chiefs’ conclave at the exercise.
  • Nepal, which had initially confirmed a full contingent, pulled out in the last minute and instead sent three observers.
  • The exercises were proposed by Prime Minister Narendra Modi during his speech at the BIMSTEC summit in Kathmandu last month that brought together leaders of India, Nepal, Bangladesh, Bhutan, Sri Lanka from South Asia and Myanmar, and Thailand.
  • Interestingly, Nepal is scheduled to hold its second military exercise with China next week.
  • Thailand, which was the last to confirm its participation in the exercise, conveyed that it could only send observers.
  • The MILEX 18 exercise, being held from September 10 to 16 at the Aundh Military Station in Pune, is aimed at helping BIMSTEC nations practise “planning and conduct of counter terrorist operations”.
  • Each country was asked to send a contingent of 30 personnel including five officers and 25 soldiers in addition to three observers.

Bankruptcy court should be the final option: Rajan
  • Former RBI Governor Raghuram Rajan is of the view that bankruptcy court should be the final option and loan renegotiation should be done under its shadow, not in it.
  • “Banks and promoters have to strike deals outside of bankruptcy, or if promoters prove uncooperative, bankers should have the ability to proceed without them,” he said in a note prepared for the Parliament Estimates Committee at the request of its chairman Dr. Murli Manohar Joshi.
  • Dr. Rajan’s statement assumes significance in the backdrop of the ongoing resolution of 20 power sector NPA accounts where there’s a tussle on between the RBI and banks.
  • In a different context, the former RBI governor blasted those who were saying that the RBI was responsible for the slowdown in credit and the economy because of its push to recognise NPAs, calling such claims “ludicrous”.
  • “Cleanup was part of the solution, not the problem,” he said, pointing out how public sector banks had started soft-pedalling on loans to industry, agriculture and MSMEs since April 2014, well before the cleanup process began in the second half of fiscal 2015. 
  • This was even as they pushed hard on personal and housing loans, where the NPAs were low.
  • “The slowdown is best attributed to over-burdened public sector bank balance sheets and growing risk aversion in public sector bankers,” he said, pointing out that private banks had not slowed down on their lending to industry. 
  • Dr. Rajan said that with the benefit of hindsight, the RBI should not have agreed to forbearance.
  • Looking ahead, Dr. Rajan said that governance of public sector banks had to be improved by professionalising boards and depoliticising appointments by handing it over to the Banks Board Bureau. He suggested introduction of outside talent into top management of PSBs given the talent deficit they faced.
Google’s ‘Neighbourly’ app in five more cities
  • Google will unveil its ‘Neighbourly’ app, to five more Indian cities. People in Ahmedabad, Coimbatore, Mysore, Vizag, and Kota, will now get access to the app. 
  • The app, which was earlier unveiled in Mumbai and Jaipur, helps users find answers to all types of questions such as shopping, fitness, food and tuition centres. 
  • Google said the launch follows extensive user testing done in the past several months.

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