DAILY MAINS NEWSLETTER FOR UPSC | 23 MAR 2021 | RaghukulCS

Daily Mains Newsletter For UPSC
| RaghukulCS

23 MARCH 2021

Index

Mains Value Addition

Mains Analysis

Topic No

Topic Name

Source

1

Junk inefficiency

 The Hindu

2

Rising poverty

The Hindu

3

Doubling down on a resilient India

The Hindu

4

Delhi Bill will sow the seeds of absolutism

Indian Express

Mains Value Addition

Rajasthan brings private medical colleges within RTI Act’s purview

Syllabus – 

GS 2: Important aspects of governance, transparency and accountability; citizens charters, transparency & accountability and institutional and other measure

Analysis: –

  • The private medical colleges in Rajasthan have been brought within the purview of the Right to Information (RTI) Act, 2005, following an order of the State Information Commission, which has imposed a fine of ?25,000 on the principal of Geetanjali Medical College in Udaipur for flouting the transparency law and refusing to provide information.
  • Allowing an appeal against the medical college, the Information Commission held in its recent order that the State government had allotted land to the institution at concessional rates and the college was established under a law passed by the State Legislature.
  • Based on these facts, the college falls within the purview of the RTI Act.
  • The college is governed by the rules and regulations framed by the State government,” Information Commissioner said.

U.P., M.P. sign agreement on Ken-Betwa interlinking work

Syllabus 

GS 2: Important aspects of governance, transparency and accountability

Analysis: –

  • The governments of Uttar Pradesh and Madhya Pradesh have signed an agreement that nudges forward a long-stalled multi-crore, controversial project to link the Ken and the Betwa rivers and irrigate the water-deficient Bundelkhand region, spread over both States, and provide electricity.
  • Several obstacles have dogged the project.
  • For one, the project will partly submerge the Panna Tiger Reserve in M.P. and affect the habitat of vultures and jackals.
  • After years of protests, however, it was finally cleared by the apex wildlife regulator, the National Board for Wildlife, in 2016.
  • The project involves transferring surplus water from the Ken river in Madhya Pradesh to the Betwa in Uttar Pradesh and irrigating 3.64 lakh hectares in the Bundelkhand region of both States.
  • The project involves building a 77-metre-tall and a 2-km-wide Dhaudhan dam and a 230-km canal.

Why stop at quota, asks SC judge

Syllabus 

– GS 2: Important aspects of governance, transparency and accountability

Analysis: –

  • Justice Ravindra Bhat, one of the judges on the Constitution Bench hearing the question of 50% ceiling limit on reservation, asked why welfare should be dependent on caste quota benefits alone.
  • “Why stop at reservation? Why can’t other things also be done? Why not promote education, establish more institutes?
  • Somewhere this matrix has to move beyond reservation. Affirmative action is not just reservation. There has to be something more.
  • The court was hearing submissions by senior advocate Kapil Sibal, appearing for Jharkhand, on the circumstances which led to the 50% limit in the Indira Sawhney judgment of 1992.
  • Sibal said the 1992 judgment was “a balancing act” done during a tumultuous time in the nation.
  • On March 8, the Bench had framed several questions of law, including whether the Indira Sawhney verdict needed to be re-looked by a larger Bench of more than nine judges.

India, Pakistan set to return to dialogue table with Indus water meet today

Syllabus –

 GS 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

Analysis: –

  • The two-day annual meeting of the Indus Commissioners of India and Pakistan starts soon.
  • The meeting is being held after a gap of more than two-and-a-half years – a period that witnessed Pulwama attack (February 14, 2019), Balakot air strike (February 26, 2019) and abrogation of special provisions under Article 370 that gave special status to J&K.
  • According to sources, during the latest round of PIC meetings, a discussion on Pakistan’s objections about two Indian projects — PakalDul and Lower Kalnai – is expected to be held.
  • India is building PakalDul Hydro Electric Project (1,000 MW) on river Marusudar, a tributary of the Chenab. The project is located in Kishtwar district of J&K.
  • The second project – Lower Kalnai – is being developed on the Chenab.

Mains Analysis

Free and open: on U.S. Defence Secretary's visit to India.

Why in News: –

The timing of U.S. Secretary of Defence Lloyd Austin’s visit to New Delhi over the weekend (March 19-21) was significant for many reasons.

Syllabus: 

GS-2: Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora.
  • Austin’s trip preceded an unannounced stop in Kabul where the U.S. is undertaking a major review of its troop’s pull-out schedule and peace plan.
  • As a result, all three areas: bilateral ties, the Indo-Pacific and Afghanistan came up for discussion during talks with Defence Minister, and meetings with Prime Minister and External Affairs Minister.

Why the visit is important?

  • On the bilateral front, the two sides agreed to boost their defence relationship through the use of three foundational agreements (LEMOA, COMCASA, and BECA),
  • As well as increase cooperation in the areas of information sharing and logistics, artificial intelligence, space and build more linkages with the U.S. Commands.
  • On Indo-Pacific strategy, Mr. Singh affirmed India’s resolve to maintain a free, open, and inclusive Indo-Pacific region with the U.S., as part of the Quad.
  • On Afghanistan, the discussions are understood to have been consultative, as Mr. Austin is part of the decision-making process over whether the U.S. will stick to its May 1 deadline to pull out all remaining troops, and how to proceed forward in the Intra-Afghan dialogue.
  • The U.S. does not thus far appear to have heeded India’s concerns on talks with the Taliban, making any talks conditional on a ceasefire, including India in all regional talks where Pakistan is also involved, and prioritising the needs of the government in Kabul.
  • it is important that India expresses its sense of the situation in Afghanistan, given its important role there.

What is Austin’s India Scheme?

  • During his three-day India trip starting March 19, Austin will hold talks with Union Defence Minister and other senior government officials.
  • Austin will “discuss deepening the US-India Major Defence Partnership and advancing cooperation between our countries for a free, prosperous,
  • The open Indo-Pacific and Western Indian Ocean Region,” according to a release issued in Washington.
  • The two sides will focus on ways to strengthen military-to-military engagement and bilateral defence trade, and will also discuss the evolving situation in Afghanistan.

 The real issues between India and USA:

  • Indo-US defence trade has grown manifold in recent years with the US becoming one of India’s top suppliers of arms and ammunition.
  • Reports suggest that a deal for 30 armed drones, 10 each for the army, air force, and navy, pegged at over $3 billion, is close to being approved by the Indian Ministry of Defence.
  • In Noember 2020, the Indian Navy acquired two Sea Guardian unarmed drones from the US on a one-year lease.
  • India has plans also to buy six additional P-8I long-range maritime patrol aircraft in addition to the 12 already contracted.
  • One thorny issue expected to come up between the two sides is India’s planned purchase of Russian S-400 air defence systems, which under US law can attract sanctions. Washington has imposed sanctions on Turkey for buying that system.
  • While Mr. Austin made it clear the Biden Administration is committed to CAATSA sanctions against all countries procuring high-value Russian military hardware, he said that the determination on India would only come after New Delhi takes delivery of the S-400 missile system.

What can India expect?

  • Indian envoy to Washington Sandhu hailed the bilateral ties between India and the US, saying the relationship is much deeper, which was reflected in the equation between PM Modi and President Biden during the Quad summit.
  • He also spoke about the relationship that Modi and Biden have shared in the past years. “You will recall in 2014 and 2016, the equation between PM Modi and the then Vice-President Biden was extremely good.
  • India-USA, discussed India’s challenge from China, Mr. Austin was careful not to make any direct reference to Beijing or about the LAC dispute, which New Delhi considers a bilateral issue.
  • The omission, in contrast to his comments in Tokyo and Seoul, signalled both that New Delhi desired discretion on the issue, and that the U.S. Defence Secretary was sensitive to his host’s wish.

Way Forward: –

  • The U.S.-India relationship does face challenges, from trade disagreements to partnerships that each side has with the other’s rivals.
  • Defense ties have long been the sweet spot for the two countries, underscoring the importance of tackling any security obstacles. Austin’s India visit can help move that needle forward.
  • India and USA Foreign Policy hosts a virtual dialogue on how the Afghan peace process will shape the U.S.
  • The U.S. special envoy for Afghan reconciliation has launched a diplomatic offensive in Afghanistan and beyond to encourage the Biden administration’s new plan for an accelerated peace process.

Question: –

‘India’s relations with USA have, acquired a depth and diversity, which cannot be rolled back.” Discuss.

Delhi’s administration as the tail wagging the dog.

Why in News: –

The bill, Government of National Capital Territory of Delhi (Amendment) Act, 2021, the “government” in Delhi would mean Lt Governor in context of all legislations to be passed by the state assembly.

Syllabus: 

GS-2: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
  • Between 1991- 2020, there have been various instances when the Delhi Assembly has been won by a party other than the ruling party at the Centre.
  • In an era of mixed but slim mandates, the Delhi government and the Union Government have differed, but more often than not found a modus Vivendi.
  • The provision intends to provide for the Capital a directly elected Legislative Assembly which shall have legislative powers over matters falling within the State List and the Concurrent List, barring those excepted, and a mandate upon the Lieutenant Governor to act on the aid and advice of the Council of Ministers except when he decides to refer the matter to the President for final decision.
  • The remaining issues of governance, especially in the matter of control over Delhi government servants, were remitted to two judges of the Court for further adjudication.
  • In 2019, there was a difference of opinion recorded in separate judgments by the two judges and the matter awaits hearing before a larger Bench.

The Indian Parliamentary democracy:

  • When the Constitution came into force, there were four kinds of States, called Parts A, B, C and D States, with the last two being administered by centrally appointed Chief Commissioners and Lieutenant Governors, with no locally elected Assemblies to aid and advise them.
  • India seeded the system of the cabinet form of government, which eventually flowered in England and left its imprimatur over constitutional structures throughout the world.
  • India has no monarchs but a President and Governors, in whose name, the government is run.
  • They can do almost nothing by themselves, without the aid and advice of their cabinet of Ministers. However, the Lieutenant Governor (LG) of Delhi will likely be an exception soon.

The Governing Delhi:

  • Delhi as the National Capital, belonged to the nation as a whole.
  • It was felt that if Delhi became a part of any constituent State of the Union, that State would sooner or later acquire a predominant position in relation to other States.
  • The need for keeping the National Capital under the control of the Union Government was deemed to be vital in the national interest.
  • It was felt that if Delhi became a full State, the administration of the National Capital would be divided into rigid compartments of the State field and Union field.
  • Conflicts would lkely arise in vital matters, particularly if the two governments were run by different political parties.

The Delhi became a Union Territory:

  • Delhi was initially made a Part C State. Its population then was around 14 lakh people.
  • In 1951, a Legislative Assembly was created with an elected Chief Minister. Chaudhary Brahm Prakash became the first Chief Minister in 1952.
  • In 1956, when the Constitution of India was amended to implement the provisions of the States Reorganisation Act, only two categories, namely, States and Union Territories remained in the Indian Union.
  • Delhi then became a Union Territory to be administered by an Administrator appointed by the President.
  • The Legislative Assembly of Delhi and the Council stood abolished, despite loud protests in Parliament.
  • Ten years later, the Delhi Administration Act, 1966 provided for a limited representative Government in Delhi through a Metropolitan Council comprising 56 elected Members and five nominated Members.
  • In 1987, the Balakrishnan Committee was set up to submit its recommendations with regard to the status to be conferred on Delhi.
  • In 1989, the Committee recommended that Delhi should continue to be a Union Territory but that there must be a Legislative Assembly and Council of Ministers responsible to the said Assembly with appropriate powers; and to ensure stability, appropriate constitutional measures should be taken to confer the National Capital a special status.
  • Based on this report, the Constitution (69th) Amendment Act and the Government of National Capital Territory of Delhi (GNCT) Act, 1991 were passed.

 Delhi Governance:

  • Delhi holds a unique position in India’s administrative framework.
  • As a Union territory, it is governed by the 1991 Government of National Capital Territory of Delhi Act.
  • Act provides for both an elected assembly and an L-G appointed by the Union home ministry.
  • The 69th Constitutional Amendment Act of 1991 provided a special status to the Union Territory of Delhi, and redesignated it the National Capital Territory of Delhi and designated the administrator of Delhi as the lieutenant governor.
  • It created a legislative assembly and a council of ministers for Delhi. Previously, Delhi had a metropolitan council and an executive council.
  • But unlike full states, many important departments such as land, police and personnel appointments don’t come under the purview of the city government and report directly to the L-G.

Supreme court’s verdict:

  • The Constitution Bench verdict of July 4, 2018, said: “The Lieutenant Governor has not been entrusted with any independent decision-making power.
  • He has to either act on the ‘aid and advice’ of the Council of Ministers, or he is bound to implement the decision taken by the President on a reference being made by him.
  • The ‘aid and advice’ clause pertains only to matters on which the elected Assembly has powers under the State and Concurrent Lists, but with the exception of public order, police and land, and, wherever there are differences between the L-G and the elected government, the former should refer the question to the President.
  • The Court was at pains to clarify that the power to refer “any matter” to the President did not mean that “every matter” should be referred.
  • The guiding principle was that the elected government should not be undermined by the unelected administrator.

The impact of the bill: –

  • In order to give effect to the interpretation made by Hon’ble Supreme Court in the aforesaid judgments, a Bill, namely, the Government of National Capital Territory of Delhi (Amendment) Bill, 2021 seeks, inter alia, to clarify the expression ‘Government’, consistent with the status of Delhi as a Union territory to address the ambiguities in the interpretation of the legislative provisions.
  • The Bill effectively reduces the elected government to a mere vestigial organ and elevates the centrally appointed LG, to the position of a Viceroy with plenipotentiary powers. Simply put, the elected government in Delhi can do nothing, if the LG does not permit them to so do.
  • It provides that, “The expression ‘Government’ referred to in any law to be made by the Legislative Assembly shall mean the Lieutenant Governor”.
  • It further provides that “the opinion of Lieutenant Governor shall be obtained on all such matters as may be specified, by a general or special order, by Lieutenant Governor.”
  • The Supreme Court “Interpretation cannot ignore the conscience of the Constitution.
  • That apart, when we take a broader view, we are also alive to the consequence of such an interpretation.
  • If the expressions in case of difference and on any matter are construed to mean that the Lieutenant Governor can differ on any proposal, the expectation of the people which has its legitimacy in a democratic set-up, although different from States as understood under the Constitution, will lose its purpose in simple semantics.

Way Forward: –

  • The Constitution has mandated a federal balance wherein independence of a certain required degree is assured to the State Governments.
  • As opposed to centralism, a balanced federal structure mandates that the Union does not usurp all powers and the States enjoy freedom without any unsolicited interference from the Central Government with respect to matters which exclusively fall within their domain.

Question: –

The ‘Union Territory’ concept is one of the many ways in which India regulates relations between the Centre and its units. Discuss

Of judges, closed probes and the Bar’s omerta

Why in News: –

On April 24, 2021, Justice N. V. Ramana is to assume office as the 48th Chief Justice of India (CJI).

As Master of the Roster, Justice Ramana would have the sole prerogative to constitute benches of the Supreme Court and allocate matters to be heard by these benches. As a matter of law, he would exercise this power even in cases that concern allegations made against him.

Syllabus:

GS 2: Judiciary

Appointment of Judges:

  • The judges of the Supreme Court are appointed by the president.
  • The chief justice is appointed by the president after consultation with such judges of the Supreme Court and high courts as he deems necessary.
  • The other judges are appointed by president after consultation with the chief justice and such other judges of the Supreme Court and the high courts as he deems necessary.
  • The consultation with the chief justice is obligatory in the case of appointment of a judge other than Chief justice.

Conditions for Removal:

  • Retirement on completion of 65 years.
  • Resignation
  • Impeachment

Grounds for removal: proven misbehaviour, incapacity

Appointment of Chief Justice:

  • From 1950 to 1973, the practice has been to appoint the senior most judge of the Supreme Court as the chief justice of India.
  • This established convention was violated in 1973 when A N Ray was appointed as the Chief Justice of India by superseding three senior judges.
  • Again in 1977, M U Beg was appointed as the chief justice of India by superseding the then senior-most judge.
  • This discretion of the government was curtailed by the Supreme Court in the Second Judges Case (1993), in which the Supreme Court ruled that the senior most judge of the Supreme Court should alone be appointed to the office of the chief justice of India.

 Qualifications of Judges:

  • A person to be appointed as a judge of the Supreme Court should have the following qualifications:
  • He should be a citizen of India.
  • He should have been a judge of a High Court (or high courts in succession) for five years
  • He should have been an advocate of a High Court (or High Courts in succession) for ten years
  • He should be a distinguished jurist in the opinion of the president.
  • From the above, it is clear that the Constitution has not prescribed a minimum age for appointment as a judge of the Supreme Court.

The allegations

  • On October 6, 2020, Andhra Pradesh Chief Minister addressed a letter to CJI S.A. Bobde alleging that Justice Ramana was interfering with the constitution of benches and assignment of matters at the Andhra Pradesh High Court in order to ensure that cases concerning the opposition party in the State were assigned to favourable benches.
  • There were also specific allegations against certain judges of the Andhra Pradesh High Court, including the then Chief Justice of the High Court.
  • Consent was declined on the grounds that the CJI was “seized of the matter”.
  • It would, however, be improper to dismiss the accusations of a sitting Chief Minister against the future CJI as the insinuations of a disgruntled litigant.
  • Given the high constitutional offices embroiled in the controversy, the allegations at a minimum deserve a thorough, expeditious and transparent inquiry.
  • The Supreme Court, though, has turned institutional inscrutability into high art. On December 14, 2020, the Supreme Court collegium that included Justice Ramana recommended the transfer of Chief Justice Maheshwari from the Andhra Pradesh High Court to the Sikkim High Court.
  • The collegium’s tendency to resort to transfers in order to avoid the uncomfortable exercise of inquiring into allegations of alleged judicial misconduct is so common that one would be forgiven for mistaking it for a constitutional prescription.
  • There is no information as to the reasons for the transfer of Justice Maheshwari to a much smaller High Court in the wake of Mr. Reddy’s allegations.

 The in-house procedure

  • The ‘in-house’ procedure devised by the higher judiciary in 1997 is riddled with shortcomings, including its absolute insulation from external gaze, its lack of prescriptions as to timelines for completion of the inquiry, and the absence of any requirement to disclose the pendency or results of the inquiry (including to the complainant).
  • The procedure confers wide discretionary powers on the CJI. Interestingly, it also does not contemplate a situation in which allegations may be leveled against the CJI.
  • Sheltered by this in-house procedure, the Supreme Court has avoided having to officially respond to the allegations against Justice Ramana, or share information regarding the existence or status of an inquiry into them.
  • Given Justice Maheshwari’s hasty transfer, and the fact that there is just a month before Justice Ramana is to assume office, the irresistible conclusion is that the court would rather not apply its judicial mind to this task.
  • There is legitimate reason for concern that the allegations may receive a quiet burial.

Solutions: –

  • There are two possible conclusions to an inquiry into CM’s letter: that he has falsely accused several members of the higher judiciary, including the second-most senior judge of the Supreme Court, of misconduct; or that the future CJI and other High Court judges have abused their positions.
  • Either outcome requires firm institutional responses. Should the allegations against Justice Ramana and other senior members of the higher judiciary be found to be credible, the in-house procedure requires that the CJI evaluate whether the misconduct warrants the removal of the judge from office or not. In the former event, the judge(s) may be asked to resign.
  • Only in the event of a judge refusing to resign would steps be taken to withdraw judicial work and communicate the finding of misconduct to other constitutional functionaries (the Prime Minister and President) for appropriate action (and a possible impeachment).
  • If the CJI considers that the misconduct does not warrant the removal of the judge, the CJI may “…advise [the judge] accordingly”, and the report of the committee that conducted the inquiry may be “placed on record.”
  • It is unclear what “placed on record” means. But what is certain is that this report is not available to the public.
  • Indian citizens, as a matter of right, ought to be informed of the outcome of such an inquiry given the institutions and authorities involved, well before Justice Ramana takes office as CJI.
  • Yet, the Supreme Court – that repeatedly proclaims its commitment to preserving public trust in the judiciary – appears to be moving at a glacial pace in response to Mr. Reddy’s letter, and also deems it unnecessary for the public to be informed of the status or outcome of an inquiry.

Way Forward: –

  • The Bar stands implicated in the omerta over allegations of judicial misconduct, not just for its muteness in respect of the inquiry into the Chief Minister’s allegations, but its historic failure to demand transparency from the higher judiciary.
  • The mantle falls upon the public to declare to constitutional authorities that citizens of democracies deserve better than a self-serving, non-transparent in-house procedure that is founded on the presumption that the CJI is above suspicion.

Question: –

Critically evaluate the Collegium system of the Supreme court in India.

Bad bank, good move.

Why in News: –

In the early days of pandemic, banks expected of an exponential jump in non-performing assets. This worry continued well into the third quarter of the year.

Syllabus: 

GS 3: Monetary Policy/ Banking Sector & NBFCs/ Capital Market

  • Indian banks were written off in the early days of the pandemic when there were expectations of an exponential jump in non-performing assets.
  • This worry continued well into the third quarter of the year. It was, however, only after the banks, in their forward guidance, consistently talked about the lower number of restructuring requests, and the higher provision coverage ratios that the markets began to get convinced.

What is a bad bank?

  • A ‘bad bank’ is a bank that buys the bad loans of other lenders and financial institutions to help clear their balance sheets.
  • The bad bank then resolves these bad assets over a period of time.
  • When the banks are freed of the NPA burden, they can take a more positive look at the new loans.
  • Ideally, such a bank should be owned by the banks which have the most of NPAs.

Positive impact on the banking system?

  1. First, banks in India and globally were much better capitalised prior to the pandemic.
  2. Second, Indian banks had built up a sizeable buffer to provide for bad assets negating any surprise on balance sheets during and even after the pandemic.
  3. Third, independent research shows that as the size of the middle class grows to about two-thirds of Asian households, on the back of a steady rise in disposable income, personal financial assets in Asia will reach about $69 trillion by 2025 — approximately three-quarters of the global total.
  4. This trend will be the main driver of demand for financial services in Asia, specifically in India. Banks in Asia, including in India, have begun to adjust for this steady growth in the size of pie by experimenting with new business models, rationalising costs and providing faster and superior customer digital experience, as was clear during pandemic.
  5. Fourth, Indian banks and the RBI brought about financial discipline much before the pandemic to make borrowers realise that timely payments of interest and instalments were necessary and that any breach would affect their ratings and the pricing of loans.

Asset Reconstruction Company (ARC) and Bad Banks: –

  • The creation of a bad bank under an Asset Reconstruction Company (ARC)-Asset Management Company (AMC) structure, wherein the ARC will aggregate the debt, while the AMC will act as a resolution manager.
  • The proposed structure envisages setting up of a National Asset Reconstruction Company (NARC) to acquire stressed assets in an aggregated manner from lenders, which will be resolved by the National Asset Management Company (NAMC).
  • A skilled and professional set-up dedicated for Stressed Asset Resolution will be ably supported by attracting institutional funding in stressed assets through strategic investors, AIFs, special situation funds, stressed asset funds, etc for participation in the resolution process.
  • The net effect of this approach would be to build an open architecture and a vibrant market for stressed assets.

Benefits: –

  • The benefits of this process include the recovered value, and significant lending leverage because of three factors:
  • One, capital being freed up from less than fully provisioned bad assets;
  • two, capital freed up from security receipts because of a sovereign guarantee, and three, cash receipts that come back to the banks and can be leveraged for lending, also freeing up provisions from the balance sheet.

What Steps are needed?

  • There have been no quantifiable estimates in the public domain of the supposed benefits of setting up such a structure.
  • As we understand currently from several news reports, banks may first transfer those assets to the proposed bad bank with a 100 per cent provision on its book and then based on the experience they will decide on transferring assets with less than 100 per cent provisioning at a later date.
  • It is also being speculated that of the total amounts recovered, a specified percentage say 85 per cent will be in the form of security receipts that will reside in the bank balance sheets, but will carry a zero-risk weight, with full government guarantees for a specified period of time.

Assumptions put Forward: –

  • For the sake of simplicity, assume Rs 400 of bad assets are transferred to the bad bank of which Rs 100 undertaken in the first tranche is fully provisioned for.
  • In the remaining three tranches, we assume that provisions progressively decline to 90, 80, and 70 per cent (the average provision coverage ratio in September 2020 was close to 80 per cent).
  • The recovery rate is pegged at a minimal 20 per cent. Standard rules of such recovery are 15 per cent in cash and 85 per cent in sovereign guaranteed security receipts.

Value-addition: –

What do the RBI governors say on bad bank Shaktikanta Das

“Bad banks have been under discussion for a long time, we are open to looking up any proposal on bad banks. It is for the government to come up with such a proposal, and if any, we will examine the proposal.”

Former governor Raghuram Rajan

Former RBI governor Raghuram Rajan has also suggested the government to privatise select public sector banks (PSBs) and set up a bad bank to deal with NPAs and dilute the role of department of financial services.

 Way Forward: –

  • The current Indian approach will drive consolidation of stressed assets under the AMC for better and faster decision making. This will free up management bandwidth of banks enabling them to focus on credit growth, leading to an enhancement in their valuations. Given that the governance of the AMC and its independence is central to its successful functioning, there are multiple suggestions to make. These include keeping majority ownership in the private sector, putting together a strong and independent board, a professional team, and linking AMC compensation to returns delivered to investors.

Question: –

What are the bad banks? Discuss how the Asset Reconstruction Company (ARC) and Bad Banks will contribute in solving the problem of NPA’s in India?

Started From 14 Mar 2021

RaghukulCS Test Series

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