Current affairs- May 6, 2016
LS clears decks for MPC
The Lok Sabha recently approved the Finance Bill 2016 which included an amendment to the RBI Act clipping the central
bank governor’s powers to set monetary policy.- The amendment made to the
RBI Act through the Finance Bill removed the governor’s powers to
singularly set monetary policy vesting them in a six-member Monetary
Policy Committee.
- After the Finance Bill is
approved by the Rajya Sabha, the process of setting up of the Monetary
Policy Committee (MPC) will be set in motion.
About the MPC:
Last year, the government and the Reserve Bank of India (RBI) had
agreed to adopt a monetary policy framework, which will make taming inflation
the primary priority of the central bank’s policy decisions.
What it does?
The MPC will set interest rates to keep retail inflation within
targets. Inflation targets will be set once every five years.
Composition:
The committee will have six members. Of the six members, the
government will nominate three. The RBI Governor will chair the committee. The
governor, however, will not enjoy a veto power to overrule the other panel
members, but will have a casting vote in case of a tie. No government official
will be nominated to the MPC.
- The other three members
would be from the RBI with the governor being the ex-officio chairperson.
Deputy governor of RBI in charge of the monetary policy will be a member,
as also an executive director of the central bank. Decisions will be taken
by majority vote with each member having a vote.
- The government nominees to
the MPC will be selected by a Search-cum-Selection Committee under Cabinet
Secretary with RBI Governor and Economic Affairs Secretary and three
experts in the field of economics or banking or finance or monetary policy
as its members.
- Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment
Present scenario:
At present, the RBI’s Monetary Policy Department (MPD) assists the
governor in formulating the monetary policy. Views of all key stakeholders in
the economy, advice of the Technical Advisory Committee (TAC) contribute to the
process for arriving at the key decision on policy repo rate — the rate at
which the central bank lends to banks. The governor, however, has overriding
powers to decide on interest rates.
RBI for easier bank permits
As part of its plan to put universal bank licences ‘on tap’, the Reserve Bank of India
has unveiled draft guidelines that could encourage big non-banking financial
players to throw their hats in the banking ring.
What is ‘on tap mechanism?
The central bank has been opening the bank licence window only
periodically. Under the ‘on tap’ mechanism, however, an application can be made
at any time subject to certain conditions.
Who is eligible?
According to the draft RBI guidelines, non-banking finance
companies and resident individuals or professionals with 10 years of experience
in banking and finance will be eligible to apply.
- Also eligible are private
sector entities and groups owned and controlled by residents, provided
they have total assets worth at least 5,000 crore, with the non-financial
group business not accounting for more than 40% of the total assets or the
gross income.
- Individuals and companies
directly or indirectly connected with large industrial houses may also
take equity in a new private bank but only up to 10%. Such shareholders
will not get any representation on the board.
Capital requirements:
- The initial minimum
paid-up voting equity capital for a bank has been left unchanged at 500
crore. But the bank has to have a minimum net worth of Rs. 500 crore at
all times.
- The promoters need to hold
a minimum 40% of the paid-up voting equity capital, which will be locked-in
for five years from the date of commencement of business. The RBI has
allowed banks to get their shares listed within six years (three years
earlier) of commencement of business.
- In the case of an NBFC
applying for a licence, if the entity has diluted the promoter
shareholding to below 40% but above 26%, the RBI may not insist on the
promoters’ minimum initial contribution. However, the lock-in period of
five years will apply to the 26% promoter shareholding.
India eyes bad debt cleanup as wary state-run
banks balk
India is considering setting up an independent panel to help
state-owned banks negotiate settlements with big businesses on bad loans.
Background:
India’s $121 billion troubled debt pile, over $100 billion of
which is on the books of state-owned banks, has come under close scrutiny from
prosecutors, media and politicians. Some have blamed banks for going too easy
on corporate tycoons, and do not want taxpayers propping up the struggling
banking sector.
What has been proposed?
The decision-making will be much better under an independent
panel. The proposal envisages setting up a panel comprising leading bankers and
government and central bank officials, to review some larger outstanding loans
and try to arrive at a settlement. There is also a suggestion to include judges
in the panel. The proposal would give the panel power to define the “haircut” a
bank should face on a loan gone sour.
Why create a panel for this?
Bad debt has hampered banks’ ability to lend, threatening to
throttle a nascent economic recovery. RBI Governor Raghuram Rajan has also set
a deadline of March 2017 for banks to clean up their books.
Commerce Ministry’s visa plan runs into MHA wall
The Union Commerce Ministry has proposed an ambitious scheme to
waive the visa requirement for business visitors and tourists from 18
countries, which are considered critical to economic and trade strategy. The 18
countries belong to BRICS and the Asia Pacific group that is part of the
proposed Regional Comprehensive Economic Partnership (RCEP).
- However, the Home Ministry has raised objections to this omnibus exemption. It has raised strong objections to granting such benefits to citizens of China and Pakistan due to security concerns.
Intention behind this proposal:
The visa procedure for foreign business visitors will contribute
towards making India an attractive destination for investors from RCEP
countries, keeping in mind the ‘Make in India’ policy. It will also boost
India’s services trade and help earn foreign exchange. Visa waiver for business
visitors and tourists is very important, given the stakeholders’ feedback
regarding the time-consuming onerous visa application processes which deter
business travellers and tourists.
Present regime:
Currently, India has a visa-free entry regime for Nepal, Bhutan
and the Maldives. The e-Tourist Visa Scheme (for tourism, healthcare, business
and family visits) is available to citizens of around 113 countries, including
some 40 countries for whom India has already granted visa on arrival facility.
About Regional Comprehensive Economic
Partnership:
The RCEP is among the proposed three mega FTAs in the world so far
– the other two being the TPP (Trans Pacific Partnership, led by the US) and
the TTIP (Trans -atlantic Trade and Investment Partnership between the US and
the EU).
- The agreement (FTA) is
proposed between the ten member states of the Association of Southeast
Asian Nations (ASEAN) (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos,
Malaysia, the Philippines, Singapore, Thailand, Vietnam) and the six
states with which ASEAN has existing FTAs (Australia, China, India, Japan,
South Korea and New Zealand).
- RCEP negotiations were
formally launched in November 2012 at the ASEAN Summit in Cambodia.
- RCEP is viewed as an
alternative to the TPP trade agreement, which includes the United States
but excludes China.
Rs.100-cr. fine proposed for wrong India map
The government has proposed a law where wrong depiction of the map
of India could land the violators in jail with a maximum term of seven years
and fine up to Rs. 100 crore.
Details:
- The new draft bill, ‘The Geospatial
Information Regulation Bill, 2016‘, basically aims to
regularize critical information on Maps services that affect “the
security, sovereignty and integrity” of the country.
- According to the draft, it
will be mandatory to take permission from a government authority before
acquiring, disseminating, publishing or distributing any geospatial
information of India.
- The draft Bill will ensure
that online platforms like Google will have to apply for a licence to run
Google Maps or Google Earth in India.
- Also, no person shall
depict, disseminate, publish or distribute any wrong or false topographic
information of India including international boundaries through internet
platforms or online services or in any electronic or physical form.
Mogao caves reveal pivotal India-China Buddhist
link
Various studies have revealed that Dunhuang in China was a major
point of intersection along the ancient Silk Road. Studies show that Silk Road
had played a foundational role in bringing about the Indian-China confluence of
the past.
- From this oasis
town, the Silk Road, which had started from the not-so-distant Xian, and
after having passed through the Gansu corridor, stood at a prominent
junction. Dunhuang houses the famous Mogao caves.
About Mogao caves:
These caves are a magnificent treasure trove of Buddhist art and
are located in the desert. The early caves show greater Indian and Western
influence, while during the Tang dynasty (618-906 C.E.) the influence of the
Chinese painting styles of the imperial court is apparent.
- The art also reflects the
changes in religious belief and ritual at the pilgrim site. In the early
caves, jataka tales (previous lives of the Historical Buddha) were
commonly depicted. During the Tang dynasty, Pure Land Buddhism became very
popular.
- In terms of art, it was
the Graeco-Buddhist Gandhara School, known for depicting Buddha in human
form, that finally reached China, heavily influencing the emergence of
what became known as Serendian art, embodying a powerful Chinese artistic
tradition as well.
- The Mogao Caves are the
best known of the Chinese Buddhist grottoes and, along with Longmen
Grottoes and Yungang Grottoes, are one of the three famous ancient
Buddhist sculptural sites of China. Mogao cave-temples of Dunhuang are a World
Heritage Site.
Facts
- The government has
approved proposal of Infosys to set up an IT/ITeS special economic
zone in Bengaluru in an area spread over 4 hectares. The decision
was taken by an inter-ministerial Board of Approval (BoA) recently.
- To make easier doing
business in India, the government has announced revocation of the earlier requirement oflanding certificates
to be submitted by exporters under the Merchandise
Export from India Scheme (MEIS). The government has also decided to extend
the market coverage to all countries. Aimed to incentivise merchandise
exports, MEIS was introduced in the Foreign Trade Policy (FTP) 2015-20,
approved in April last year. The current trade policy has merged all the
earlier export promotion projects under two plans – MEIS and the Served
from India scheme (SFIS) – for services
exporters. Landing certificate is the proof of landing of the consignment
in the designated market.
- NASSCOM (National
Association of Software and Services Companies) has inked a partnership
agreement with social networking site Facebook to build a ‘product design
initiative’ in the country. This nation-wide initiative by NASSCOM is
aimed at offering focused programmes to build awareness around product
design, training on design tools, design lab, awards, design sprints and
mentorship. This will be a flagship programme of the NASSCOM Product
Council. This will aim at supporting over 500 product start-ups on product
design. It will also focus on training over 5,000 product designers in the
next two years.
- Gravitational
wave scientists have won $3m Special Breakthrough
Prize in Fundamental Physics. It will be shared among
the founders of the Laser Interferometer Gravitational-Wave Observatory (LIGO) group, Kip Thorne, Rainer Weiss, and Ronald Drever, and
scores of physicists and engineers on the team. The three founders will
divide $1m between them, with the remaining $2m (£1.35m) shared equally
among the 1,012 other researchers and engineers on the LIGO team.
