Daily Prelims Newsletter for upsc 31 May 2022

Daily Prelims Newsletter For UPSC
| RaghukulCS

31 May 2022-Tuesday

Table Of Contents

Table of Contents

Bank privatization

Why in the news?

  • The government is taking “advanced action” to speed up the privatisation of public sector banks.
  • The administration is preparing to take additional efforts to reduce inflation while maintaining economic stability and growth.

What exactly is privatisation?

  • Privatisation refers to the transfer of ownership, property, or company from the government to the private sector. The government no longer owns the company or firm.
  • Privatization is thought to increase the company’s efficiency and objectivity, something a government company is not concerned with.
  • In the historic reforms budget of 1991, often known as the ‘New Economic Policy or LPG policy,’ India went for privatisation.

What is the context?

  • In 1969, the government intended to nationalise the 14 largest private banks. The plan was to connect the banking industry with the then-socialist government’s approach.
  • The State Bank of India (SBI) was nationalised in 1955, and the insurance industry in 1956.
  • Various administrations have supported and opposed privatisation of Public Sector Undertaking (PSU) banks during the previous 20 years. The government proposed privatisation in 2015, but the then-Governor of the Reserve Bank of India (RBI) was opposed.
  • The present privatisation processes, as well as the establishment of an Asset Reconstruction Company (Bad Bank) completely owned by banks, highlight an approach to finding market-led solutions to financial sector difficulties.
  • The Centre declared in the Budget for 2021-22 the privatisation of two public sector banks, but has yet to alter the appropriate banking regulations to allow the sale of its majority holding in them.

What Are the Justifications for Privatization?

  • Public Sector Banks’ Financial Position is deteriorating:
  • Years of capital injections and governance changes have failed to appreciably improve the financial position of public sector banks.
  • Many of them have more stressed assets than private banks and fall behind them in terms of profitability, market capitalization, and dividend payment history.
Part of a Long-Term Initiative:
  • The privatisation of two public sector banks will kick off a long-term project that envisions only a handful of state-owned banks, with the remainder combined with strong banks or privatised.
  • The government’s initial aim was to privatise four. Depending on the success of the first two, the government may divest in another two or three banks in the coming fiscal year.
  • This will relieve the government, as the majority owner, of the obligation to continue providing equity support to the banks year after year.
  • After a series of steps over the last few years, the government currently has 12 state-owned banks, down from 28 previously.
Bank Strengthening:

To decrease its support burden, the government is attempting to strengthen strong banks while also reducing their number through privatisation.

Recommendations from several committees:

Many committees had advocated reducing the government’s interest in public banks to less than 51 percent:
  • The Narasimham Committee suggested a 33% tax.
  • The P J Nayak Committee recommended a percentage of less than 50%.
  • An RBI Working Group has recommended that business houses enter the banking market.
Creation of Large Banks:
  • One of the goals of privatisation is to build large banks. Unless privatised PSBs merge with existing large private banks, they will not be able to achieve the scale and size required to generate a higher risk appetite and lending capability.
  • As a result, privatisation is a complicated process that must be approached from all perspectives in order to address different difficulties and explore new ideas, but it can lead the way for the development of a more sustainable and powerful banking system that benefits all stakeholders.

What are the Concurrent Issues?

  • Crony Capitalism Will Be Rewarded: Privatizing the PSBs is the same as selling the banks to private corporates, many of whom have failed on PSB loans, and will only reward crony capitalism.
Job Losses:

 Job losses, branch closures, and financial isolation will all arise from privatisation.

  • Because the private sector does not respect quota regulations for the weaker parts, privatisation will reduce employment prospects for Scheduled Castes, Scheduled Tribes, and Other Backward Classes (OBC).
  • Financial Exclusion of Weaker Sections: Private sector banks focus on the more affluent segments of the population and metropolitan/urban areas, resulting in financial exclusion of the society’s weaker segments, notably in rural areas.
  • Banks in the public sector were bringing banking to rural areas and achieving financial inclusion.
  • Bank unions have referred to the privatisation process as a “bailout operation” for corporate defaulters.
  • The private sector is to blame for the massive bad loans. They should, in fact, be penalised for this crime. However, the government is rewarding them by transferring the banks to the private sector.

The Way Forward

  • PSB governance and management must be improved. The PJ Nayak committee advocated separating the government from top public sector appointments as a strategy to accomplish this (everything the Banks Board Bureau was supposed to do but could not).
  • Rather of just privatising, PSBs can be transformed into corporations such as Life Insurance Corporation (LIC). PSBs will have more autonomy while still being owned by the government.

Aadhaar Data Security

Why in the news?

The Unique Identification Authority of India (UIDAI) recently issued a caution to the public not to share a photocopy of their Aadhaar with any organisation, only to withdraw the advice due to concerns that it could be misinterpreted.

What is India’s Unique Identification Authority?

  • Legislative Authority: The UIDAI is a statutory authority established by the Government of India on July 12, 2016, under the jurisdiction of the Ministry of Electronics and Information Technology, in accordance with the requirements of the Aadhaar Act 2016.
  • The UIDAI was established as an affiliated office under the auspices of the Planning Commission by the Government of India in January 2009.
  • Mandate: 
  • The UIDAI is responsible for assigning a 12-digit unique identity (UID) number (Aadhaar) to all Indian residents.
  • UIDAI had issued 131.68 crore Aadhaar numbers as of October 31, 2021.

What was the initial UIDAI warning?

  • The UIDAI advised the public not to “share a photocopy of one’s Aadhaar with any organisation because it can be misused.”
  • Instead, it advised utilising “a disguised Aadhaar, which only reveals the last four digits of the Aadhaar number.”
  • It also advised the people to avoid downloading their e-Aadhaar from public computers.
  • In that instance, they were instructed to “permanently erase” any downloaded copies.
  • Only organisations that have secured a User License from the UIDAI can use Aadhaar to verify a person’s identification.
  • Furthermore, the Aadhaar Act prohibits hotels and movie theatres from collecting or retaining copies of Aadhaar cards.

What are the Aadhaar-Related Concerns?

Aadhaar Data Misuse:
  • Many private entities in the country require an Aadhaar card, and users frequently share the information.
  • There is no consensus on how these organisations keep these data private and secure.
  • Many people will have noted, more lately, with Covid-19 testing, that most laboratories want Aadhaar card info, including a photocopy.
  • It should be noted that sharing this information is not required in order to take the Covid-19 test.
Excessive Imposition:
  • The Supreme Court declared in 2018 that Aadhaar authentication can only be made mandatory for benefits paid from the Consolidated Fund of India, and that alternate means of identity verification must always be available where Aadhaar fails.
  • Children were exempt, however aadhaar is still commonly required for essential rights such as anganwadi services or school enrollment.
Arbitrary exclusions:
  • To enforce the linking of welfare benefits with Aadhaar, the central and state governments have routinely used the “ultimatum approach.”
  • Benefits are simply removed or cancelled in this technique if beneficiaries do not comply with the linkage instructions in a timely manner, such as failing to link their work card, ration card, or bank account with Aadhaar.
Aadhaar-enabled Payment System (AePS) is prone to fraud:
  • AePS is a service that allows someone with an Aadhaar-linked account to withdraw money from it anywhere in India using biometric authentication with a “business correspondent” — a mini-ATM.
  • This facility has been widely abused by corrupt business correspondents.

What recent issue has arisen?

  • The Comptroller and Auditor General of India (CAG) has summoned the Unique Identification Authority of India (UIDAI) to investigate a number of concerns concerning the issuance of Aadhaar cards.
  • Section 57 of the Aadhaar Act was knocked down by the Supreme Court in 2018.
  • Section 57 of the Aadhaar Act essentially authorised private businesses to obtain Aadhaar details from citizens. The provision was deemed “unconstitutional” by the Supreme Court while it was being read down.
  • Later, the Aadhaar and Other Laws (Amendment) Ordinance, 2019, was passed, allowing banks and telecom operators to collect Aadhaar details as identification.

What Is Aadhaar’s Importance?

  • Promoting Transparency and Good Governance: The Aadhaar number can be verified online and at a low cost.
  • It is distinct and robust enough to eliminate duplicates and forged identities, and hence serves as the foundation/primary identity for the implementation of various government welfare programmes, encouraging openness and good governance.
  • Bottom of the Pyramid Assistance: Aadhaar has provided identity to a significant number of people who previously lacked it.
  • It has been employed in a variety of activities, including financial inclusion, broadband and telecom services, and direct benefit payments to individuals’ bank accounts in a transparent manner.
  • Aadhaar numbers lack intelligence and do not profile people based on caste, religion, income, health, or geography.
  • The Aadhaar number serves as confirmation of identity, but it does not confer any right of citizenship or residence on the person.
  • Aadhaar is a strategic policy tool for social and financial inclusion, public sector delivery reforms, fiscal budget management, improving convenience, and fostering hassle-free people-centric government.
  • Aadhaar can be utilised as a permanent Financial Address, facilitating financial inclusion of the underprivileged and weaker elements of society, and is thus a weapon of distributive justice and equality.
  • As a result, the Aadhaar identification platform is one of the critical foundations of ‘Digital India.’

The Way Forward

  • Respect the Supreme Court Ruling: 
  • The government must respect and implement Supreme Court rulings, such as (1) limiting mandatory Aadhaar to acceptable applications, (2) providing an alternative whenever Aadhaar authentication fails, and (3) providing unconditional exemption for children.
  • Ensure that benefits are not withdrawn or suspended: 
  • Benefits should never be withdrawn or suspended without (1) advance disclosure of the names that are likely to be deleted, as well as the reason for proposed deletion, (2) issuing a show cause notice to those affected and providing them with an opportunity (with ample time) to respond or appeal, and (3) ex-post disclosure of all cases of deletion, with date and reason.
  • Stronger Protections Required: 
  • The National Payments Corporation of India (NPCI) must put in place stronger safeguards against the vulnerabilities of Aadhaar-enabled Payment Systems, as well as enhanced grievance redressal facilities, immediately.

North East India Infrastructure Development

Why in the news?

  • Recently, India’s Finance Minister announced the completion of several rail, road, and air connectivity projects in the northeast totaling Rs. 1,34,200 crore.
  • These initiatives will help to bring the rest of India closer to the North East and vice versa.
  • Connectivity with Southeast Asian countries will also be prioritised.

What are the Northeast’s significant infrastructure projects?

  • Rail, road, and air connectivity are all being developed: 4,000 km of roadways, 20 railway projects totaling 2,011 km, and 15 air connectivity projects.
Waterway Connectivity:
  • National waterways on the Ganges, Brahmaputra, and Barak rivers are being developed to improve connectivity (National Waterways (NW)-1 on the Ganges, NW-2 on the Brahmaputra, and NW-16 on the Barak).
  • The riverine systems of India and Bangladesh can be used for all modes of transportation because they are the least expensive when compared to air, road, and rail networks.
  • The number of ‘Indo-Bangladesh Protocol Routes’ has been expanded from eight to ten.
  • The entire area between Sadiya and Dhubri in Assam is being developed for enhanced connectivity along the Brahmaputra River.
  • A multimodal centre in Guwahati is being built, which will comprise a ship repairing port at Pandu, four tourist jetties, and 11 floating terminals on the Brahmaputra.
Eastern Waterways Connectivity Transport Grid:
  • It will provide 5,000 km of navigable waterways to connect the northeast with the rest of India.
  • North Eastern Region Power System Improvement Project (NERPSIP): (NERPSIP) is an important step toward the North Eastern Region’s economic development by enhancing intra-state transmission and distribution systems.
  • The government is also focusing on power transmission and distribution projects, mobile networks, 4G, and internet connections.
  • PM-DevINE (Prime Minister’s Development Initiative for the North East): It was announced in the Union Budget for the fiscal year 2022-23. This would fund infrastructure in the spirit of PM Gati Shakti, as well as social development projects based on North-East requirements.
Strategic Location: 

The North-East region is strategically positioned, having access to the traditional home market of eastern India, as well as close to key eastern states and neighbouring countries such as Bangladesh and Myanmar.

Southeast Asian connections:
  • With ASEAN involvement becoming a fundamental pillar of India’s foreign policy approach, the North-East states play a vital role as the physical bridge between India and Southeast Asia.
  • The northeastern states are on the territorial frontier of India’s eastward involvement under the Act East Policy.
  • Economic Importance: The North-East has abundant natural resources, accounting for around 34% of the country’s water resources and nearly 40% of India’s hydroelectric potential.
  • Sikkim is the country’s first organic state.
Tourism Potential:
  • The northeast of India is home to various wildlife sanctuaries, including Kaziranga National Park in Assam, Nameri, Orang, Dibru Saikhowa in Arunachal Pradesh, Balpakram in Meghalaya, Keibul Lamjao in Manipur, Intanki in Nagaland, and Khangchendzonga in Sikkim.
  • Cultural Importance: North-East tribes have their distinct culture. Popular events include Nagaland’s Hornbill Festival and Sikkim’s Pang Lhabsol.

What are the various government programmes and initiatives for the North-East region?

  • North Eastern Development Region Ministry (DoNER): In 2001, the Department of Development of the North Eastern Region (DoNER) was founded. In 2004, it was upgraded to the status of full ministry.
  • Infrastructure-related initiatives include the Bharatmala Pariyojana (BMP), which funds road infrastructure.
  • The Regional Connectivity Scheme (RCS)-UDAN will make air travel more cheap.
  • Water connectivity is being developed by the Kaladan Multi-Modal Transit Project in Myanmar.
  • Corridor Bangladesh-China-India-Myanmar (BCIM).
  • The India-Myanmar-Thailand Trilateral Highway.
  • The Ministry of Tourism’s Swadesh Darshan Scheme promotes tourism.
  • NEIDS (North-East Industrial Development Scheme): Through this scheme, the government is primarily rewarding the MSME sector in order to promote employment in the North East states.
  • The Northeast is particularly important to the National Bamboo Mission.
  • Vision 2020 for the North Eastern Region: The paper establishes an overarching framework for the development of the North-East region in order to bring it up to speed with other developed regions, in support of which many Ministries, notably the Ministry of DoNER, have launched numerous initiatives.
  • The Digital North East Vision 2022 emphasises the use of digital technology to revolutionise the lives of people in the north east and improve their quality of life.

The Way Forward

  • Investing in infrastructure would create jobs and play a significant role in preventing secessionist efforts in the North-East region.
  • Because India’s North East is bounded by national and international boundaries, national and international infrastructure development will be the most viable option for equitable development in the region.

Other’s News


  • India has surpassed the milestone of 100 unicorn firms valued at more than $300 billion.
  • Aileen Lee, an American venture capitalist, created the word “Unicorn” in 2013.
  • Unicorns are startups valued at $1 billion that are privately held and funded by venture capital.
  • Unicorn valuation is not explicitly connected to present financial performance.
  • However, the valuation is mostly based on their estimated development potential by investors and venture capitalists that have participated in various investment rounds.
  • It was used to emphasise the rarity of such firms’ formation.

Forest Rights in the Community

  • Chhattisgarh has become the country’s second state to recognise a village’s Community Forest Resource (CFR) rights within a national park.
  • CFR Area is common forest property that has traditionally been safeguarded and conserved for long-term use by a certain community.
  • The community uses it to access resources accessible within the village’s traditional and customary boundaries, as well as for seasonal landscape utilisation in pastoralist groups.
  • Each CFR region has a traditional boundary with distinct landmarks recognised by the community and adjacent villages
  • It may encompass any type of forest, including revenue forest, classified and unclassified forest, considered forest, DLC land, reserve forest, protected forest, sanctuary, and national parks, among others.
  • The Forest Rights Act (FRA), also known as the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, recognises two major forms of rights to forestland with forest-dwelling communities:
  • Individual forest rights (IFR) and community forest rights (CFR) are two types of forest rights (CFR).
CFR rights are recognised by Section 3(1)(i)
  • of the FRA, which provides for the right to protect, regenerate, conserve, or manage the CFR.
  • These rights enable the community to develop norms for forest use by itself and others, fulfilling its obligations under Section 5 of the FRA.
  • CFR rights, in conjunction with Community Rights (CRs), which comprise nistar rights and rights over non-timber forest products, safeguard the community’s long-term livelihood.
  • These rights empower the Gram Sabha to implement local customary forest conservation and management methods within the community forest resource boundaries.
  • The FRA recognises the community’s right to use, manage, and conserve forest resources, as well as to lawfully keep forest land used for cultivation and housing.
  • It also emphasises the critical role that forest residents play in forest sustainability and biodiversity protection.
  • It is more important in protected forests such as national parks, sanctuaries, and tiger reserves because traditional residents use their traditional knowledge to help maintain the protected woods.
  • While CFR rights are a crucial empowerment tool, reaching an agreement among several villages about their traditional limits can be difficult.
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