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DAILY NEWS ANALYSIS

Monthly DNA

16 Dec, 2019

4 Min Read

Pending dues: visitor centres at Ajanta, Ellora shut

GS-I : Modern History Ancient History

Pending dues: visitor centres at Ajanta, Ellora shut

Syllabus subtopic: Indian culture will cover the salient aspects of Art Forms, Literature and Architecture from ancient to modern times.

Prelims and Mains focus: About Ajanta and Ellora Caves, UNESCO World Heritage Sites; ecological and other threats faced by our historical monuments

News: Two tourist visitor centres set up at Ajanta and Ellora caves by the Maharashtra government with funding from the Japanese International Cooperation Agency ( JICA) have been shut due to their pending water and electricity dues worth ?5 crore, an official said.

About the two centres and their objectives

The centres, which were supposed to serve as a one-stop location for all information about history and importance of these world famous UNESCO heritage sites, have replicas of some sculptures located inside the caves.

The State set up the two centres, having facilities like audio­visual presentations and library, in 2013 for which ? 125 crore was spent in two phases, the official said. A big chunk of this fund came from JICA.

These centres have replicas of sculptures in Ajanta and Ellora caves. Using multimedia, these facilities make tourists understand the Jataka tales. This helps reduce the time spent by visitors in the caves, which will in turn help in the longevity of these monuments.

Why are the centres closed now?

The facilities ran smoothly for sometime but have been closed since September last year as they do not have water and power supply. The dues of these two centres are now running into ? 5 crore.

The Maharashtra Tourism Development Corporation (MTDC) demanded funds from the government five to six times to clear the dues. The MTDC needs around ?10 crore to clear all the dues and to make these centres operational, the official said, adding the government should sanction regular funds for these facilities.

What it may lead to and way ahead?

The Japanese govern­ment spent money on this project. If these centres re­ main closed for a long time, their whole purpose becomes meaningless. This will also affect the image of our country and the State. The government should plan something concrete for the sustainability of such centres..

People travel thousands of miles to visit Ajanta and Ellora caves. They prefer to spend time in the caves rather than seeing their replicas (at the tourist visitor centres).

These centres surely help elderly tourists who cannot walk for long. But to make these facilities sustainable, the commercial angle also needs to be looked into. There should be additional facilities like a cafeteria, hotel, and a hub to showcase local items.

About Ajanta and Ellora Caves

Rock-cut cave architecture occupies a very important place in the Indian Art tradition. From the humble beginnings at the Barabar Caves, they evolve into spectacular caves at Ajanta and Ellora. Both these caves have been accorded the UNESCO World Heritage Site status.

Table summing up the contrasting features are as follows

Ajanta Caves

Ellora/ Elura/Verul Lena Caves

Location

Near Aurangabad district of Maharashtra

North West of Aurangabad district of Maharashtra

Timeline

Constructed between 2nd Century BC to 6thCentury AD

Constructed between 6th Century AD to 10th Century AD

Number of caves

30 caves with one incomplete so sometimes considered 29.

4 chaityas and rest viharas.

100 caves with 34 open for public. Caves dedicated to Hinduism are more followed by Buddhist caves.

Cave 10 is the only Chaitya while rest are viharas.

Religions

Entirely Buddhism

Hinduism, Buddhism and Jainism

Patronage

Satavahanas, Vakatakas and Chalukyas

Rashtrakutas, Kalachuris, Chalukyas and the Yadavas

Chronology of Construction

2nd-1st Century BC – Hinayana Phase

5th – 6th Century AD – Mahayana Phase

550 – 600 AD – Hindu Phase

600 – 730 AD – Buddhist Phase

730 – 950 AD – Hindu and Jain Phase

Major attraction

Paintings, architecture and sculptures

Architecture and sculptures.

Especially the Kailashnath temple.

About UNESCO world heritage sites

A UNESCO World Heritage Site is a place that is listed by the United Nations Educational, Scientific and Cultural Organization (UNESCO) as of special cultural or physical significance.

The list is maintained by the international World Heritage Programme administered by the UNESCO World Heritage Committee, composed of 21 UNESCO member states which are elected by the General Assembly.

Each World Heritage Site remains part of the legal territory of the state wherein the site is located and UNESCO considers it in the interest of the international community to preserve each site.

Selection of a site:

To be selected, a World Heritage Site must be an already classified landmark, unique in some respect as a geographically and historically identifiable place having special cultural or physical significance (such as an ancient ruin or historical structure, building, city, complex, desert, forest, island, lake, monument, mountain, or wilderness area). It may signify a remarkable accomplishment of humanity, and serve as evidence of our intellectual history on the planet.

Legal status of designated sites:

UNESCO designation as a World Heritage Site provides prima facie evidence that such culturally sensitive sites are legally protected pursuant to the Law of War, under the Geneva Convention, its articles, protocols and customs, together with other treaties including the Hague Convention for the Protection of Cultural Property in the Event of Armed Conflict and international law.

UNESCO World Heritage Sites in India

The Archaeological Survey of India (ASI) is the nodal agency for forwarding any request for World Heritage status to any Indian site whether cultural or natural.

Based on the proposals received from the Central or State Government agencies as well as management Trusts, etc., and after their due scrutiny, the Government forwards the nomination dossiers to the World Heritage Center.

There are 38 World Heritage Sites located in India. These include 30 cultural sites, 7 natural sites and one mixed-criteria site. India has the sixth largest number of sites in the world.

Note: to know more about UNESCO world heritage sites in India, click on the following link below:

https://en.wikipedia.org/wiki/List_of_World_Heritage_Sites_in_India

Source: The Hindu

Longest UN climate talks end with no decision about key issue on agenda

GS-II :

Syllabus subtopic: Important International institutions, agencies and fora, their structure, mandate.

Prelims focus: about COP 25, UNFCCC, IPCC

Mains focus: Challenges for the international community in framing policies to check climate change and their implications

News: The longest-ever climate conference delivered probably the weakest outcome ever.

What led to the deadlock?

The two-week Madrid climate conference could produce an agreement only after removing everything that any country objected to from the final text, and postponing all decisions on the only major agenda item it had to finalise.

After several countries rejected the draft agreement texts, the conference had little option but to remove all contentious phrases and provisions, and produce an agreement that was mired in generalities and lacked any specific decisions.

The issue of framing rules for setting up a new carbon market under Paris Agreement, the only big issue to be finalised in Madrid, was deferred entirely to next year, as no country was willing to budge from their stated positions.

Civil society groups, an important and vocal stakeholder in the negotiations, reacted with anger and disappointment at the outcome of what was the longest ever climate talks.

Mandate of COP 25

Apart from framing the rules for a new carbon market, the Madrid talks was expected to direct all countries to increase their climate actions in view of recent scientific assessments that show the world was not doing enough to prevent the extreme impacts of climate change.

Contentious issues

Some countries, especially the most vulnerable ones like small island states, were pushing for language directing all countries to update their climate action plans by next year to reflect the new realities. Such demands were resisted mainly be big developing countries like China, India and Brazil, which had been arguing that countries be asked to deliver on their past and current promises before being asked to make any new commitments.

These developing countries repeatedly pointed out that the current situation was a direct result of developed countries not meeting their targets in the pre-2020 period, and has demanded an assessment of the performance of developed countries on climate action, including their obligation to provide finance and technology to the developing world.

What did the final agreement say?

The final agreement included a general call stressing “the urgency of enhanced ambition” by all countries. There was no direction to update climate action plans by next year.

Similarly, the demand of developing countries, reflected in the earlier drafts in the form of a provision setting up a two-year work programme to assess the performance of developed countries, was also not included in the final agreement.

Even something as innocuous as acknowledging the special reports of the Intergovernmental Panel on Climate Change (IPCC) had run into trouble. Some countries had objected to the fact that an earlier draft mentioned IPCC’s report on oceans but ignored the report on land, both having come out this year. The final agreement thus dropped the names of both the reports and only expressed its “appreciation and gratitude” to the IPCC for coming out with the two special reports.

Way ahead

The result from Madrid means negotiators face an uphill task next year to complete all the unfinished tasks ahead of the transition of the global climate regime from the 1997 Kyoto Protocol to the 2015 Paris Agreement. With the Paris Agreement set to come into effect next year, the rules of the new carbon market will have to be finalised soon. Moreover, with latest studies showing the world needs to do even more than what the Paris pact mandates, countries will be under pressure to increase their commitments.

About UNFCCC

  1. International environmental treaty that came into existence under the aegis of UN.
  2. UNFCCC was negotiated at the Earth (Rio) Summit 1992.
  3. Signed in 1992, New York City.
  4. As of March 2019, UNFCCC has 197 parties.
  5. Role: UNFCCC provides a framework for negotiating specific international treaties (called “protocols”) that aim to set binding limits on greenhouse gases.
  6. Objective of UNFCCC: Stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous consequences.
  7. Legal Effect: Treaty is considered legally non-binding.
  8. The treaty itself sets no binding limits on greenhouse gas emissions for individual countries.
  9. In 1997, the Kyoto Protocol (3rd COP) was concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions.

Paris Climate Deal

The Paris Agreement of 2016 is a historic international accord that brings almost 200 countries together in setting a common target to reduce global greenhouse emissions in an effort to fight climate change.

The pact seeks to keep global temperature rise to below 2 degrees Celsius from pre-industrial levels, and to try and limit the temperature increase even further to 1.5 degrees Celsius.

To this end, each country has pledged to implement targeted action plans that will limit their greenhouse gas emissions.

The Agreement asks rich and developed countries to provide financial and technological support to the developing world in its quest to fight and adapt to climate change.

How does a country leave the Agreement?

Article 28 of the Paris Agreement allows countries to leave the Paris Agreement and lays down the process for leaving.

A country can only give a notice for leaving at least three years after the Paris Agreement came into force.

This happened on November 4, 2016. Therefore, the US was eligible to move a notice for leaving on November 4 this year, which it did.

The withdrawal is not immediate, however. It takes effect one year after the submission of the notice. It means the United States will be out of Paris Agreement only on November 4 next year.

About Intergovernmental Panel of Climate Change (IPCC)

The Intergovernmental Panel on Climate Change (IPCC) is the UN body for assessing the science related to climate change.

Established by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988.

Aim: to provide political leaders with periodic scientific assessments concerning climate change, its implications and risks, as well as to put forward adaptation and mitigation strategies.

Composition: It has 195 member states.

The IPCC has three working groups:

Working Group I, dealing with the physical science basis of climate change.

Working Group II, dealing with impacts, adaptation and vulnerability.

Working Group III, dealing with the mitigation of climate change.

About its 6th Assessment Report (AR6)?

It will examine topics such as the link between consumption and behaviour and greenhouse gas emissions, and the role of innovation and technology.

It will assess the connection between short to medium-term actions and their compatibility with the long-term temperature goal in the Paris Agreement.

It will assess mitigation options in sectors such as energy, agriculture, forestry and land use, buildings, transport and industry

Source: Indian Express

Turkey to sign off on military pledge to Libya

GS-II : Miscellaneous

Turkey to sign off on military pledge to Libya

Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.

Prelims and Mains focus: About the crisis in Libya and geographical locations related to ir related to it; challenges for the international community for peace in Libya

News: Turkey moved closer to military support for Libya’s internationally recognised government when a bilateral deal that provides for a quick reaction force if requested by Tripoli was sent to Parliament.

Background

Late last month, Ankara and Tripoli signed expanded security and military accord and, separately, a memorandum on maritime boundaries that Greece said violates international law.

While the maritime accord has been sent to the United Nations for approval, the military deal has been presented to Turkey’s Parliament. Parliament will enter it into force after approval.

What it may lead to?

Ankara’s latest move raises tensions in the Mediterranean region and risks confrontation with forces led by Khalifa Haftar based in eastern Libya, where rival political factions have been based since 2014.

Egypt, which has condemned the maritime deal as “illegal”, urged other countries to stop intervening in Libya to enable the country to restore its own security and stability, in an apparent rebuke to Turkey.

About Libyan crisis

Libya has been beset by chaos since Nato-backed forces overthrew long-serving ruler Col Muammar Gaddafi in October 2011.

The oil-rich country, a key departure point for some of the thousands of migrants travelling to Europe, once had one of the highest standards of living in Africa, with free healthcare and free education.

But the stability that led to its prosperity has been shattered and the capital, Tripoli, is now the scene of serious fighting between rival forces as negotiations to build a post-Gaddafi Libya stall.

Is anyone in control?

Only Libya's myriad armed militias really hold sway - nominally backing two centres of political power in the east and west with parallel institutions.

Tripoli administration, the internationally recognised government, known as the Government of National Accord (GNA)

This is under the leadership of Prime Minister Fayez Sarraj, an engineer by profession. He arrived in Tripoli in March 2016, four months after an UN-brokered deal to form a unity government, to set up his administration. Over the last three years, he has worked to gain the support of the various militias and politicians, but he has little real power over the whole country or over the forces ostensibly under his control.

Tobruk administration includes the parliament elected in 2014 after disputed elections

When those who held power in Tripoli refused to give it up in 2014, the newly elected MPs moved to the port of Tobruk, 1,000km (620 miles) away, along with the old government. In 2015 some of these MPs backed the UN deal for a unity government, but the parliament has since refused to recognise it and has been blocking efforts to organise fresh elections because it wants military strongman Gen Khalifa Haftar, who leads a powerful force called the Libyan National Army (LNA), to be guaranteed a senior role in any new set-up.

Some go as far as to suggest that Gen Haftar has ambitions to be "the Sisi of Libya", a reference to Gen Abdul Fattah al-Sisi, who seized power in neighbouring Egypt.

And it is guns that matter. Some security analysts describe Libya as an arms bazaar. It is awash with weapons looted from Gaddafi's arsenal and from allies in the region supporting rival factions.

Militia allegiances often shift out of convenience and with the need to survive.

Weren't they all once allies?

They were united in their hatred for Gaddafi - but nothing more. There was no single group in charge of the rebellion. Militias were based in different cities, fighting their own battles.

They are also ideologically divided - some of them are militant or moderate Islamists, others are secessionists or monarchists, and yet others are liberals. Furthermore, the militias are split along regional, ethnic and local lines, making it a combustible mix.

And after more than four decades of authoritarian rule, they had little understanding of democracy.

Former US President Barack Obama, in an interview published in April 2016, said that the "worst mistake" of his presidency was the failure to prepare for the aftermath of Col Gaddafi's overthrow.

He partly blamed then-UK Prime Minister David Cameron for "the mess", saying he had not done enough to support the North African nation.

Who is Gen Haftar?

He helped Col Gaddafi seize power in 1969 before falling out with him in the 1980s and going into exile. He returned amid the uprising against Gaddafi to fight against his former boss - and in the aftermath cast himself as the main opponent of the Islamist militias in eastern Libya.

For three years he battled various Islamist militias, including groups aligned to al-Qaeda, in the eastern city of Benghazi. However, his critics accused him of labelling anyone who challenged his authority as "terrorists".

After taking control of Benghazi, he then set his sights on the top job, but the main bone of contention has been a clause in the UN-brokered agreement that prevents a military figure from taking political office.

Observers say Gen Haftar's appearance at a series of talks in France, Italy and the United Arab Emirates (UAE) was more about establishing himself on the international stage than finding common ground.

This January his forces launched an offensive to seize two southern oil fields. He is now believed to control most of Libya's oil reserves.

Source: The Hindu

Pleas in SC speak of past judgments

GS-II :

Syllabus subtopic: Indian Constitution- historical underpinnings, evolution, features, amendments, significant provisions and basic structure

Prelims and Mains focus: about various judgements cited and their significance

News: The dozen or so petitions filed against the Citizenship (Amendment) Act, 2019, trace a series of Supreme Court judgments in which the court stood up for the dignity of the individual against the “tyranny of the majority”.

What do these judgements say?

These Constitution Bench judgments, which range from the decriminalisation of homosexuality to striking down triple talaq, hold that the State cannot discriminate on the basis of an intrinsic and core identity of an individual. Being Muslim is part of a person’s core identity and dignity. It cannot be the basis for discrimination for granting citizenship, they argue.

  1. The Constitution Bench judgment in the petition filed by the Delhi government — State (NCT of Delhi) v. Union of India — said the court should follow its constitutional morality to check State power and the “tyranny of the majority”.

  1. Another Constitution Bench in the Navtej Singh Johar case (decriminalisation of homosexuality) upheld the concept of “identity with dignity”.

“Destruction of individual identity would tantamount to crushing of intrinsic dignity that cumulatively encapsulates the values of privacy, choice, freedom of speech and other expressions,” the Constitution Bench held.

It reminded that religion, race, caste, sex or place of birth were intrinsic and core elements of an individual’s identity under Article 15.

  1. If at all the state ventures to classify people on the basis of religion, it should be reasonable, based on intelligible differentia and have a rational basis with the objective sought to be achieved by the law, the petitions argued, quoting the Anwar Ali Sarkar verdict reported in 1952.

They contend that the amendments classify illegal migrants from Pakistan, Afghanistan and Bangladesh as those who are Hindu, Sikh, Buddhist, Jain, Parsi or Christian on one side, and those who are Muslim on the other. The amendments provide benefitts to illegal migrants who practise any of the six faiths and excludes Muslims.

  1. The Constitution Bench in the S.R. Bommai judgment lays down that the State cannot favour any particular religion. It is the government’s duty to accord equal treatment to members of all faiths.

  1. A Constitution Bench in its Shayara Bano (triple talaq case) held that a legislation which is manifestly arbitrary, capricious, irrational, excessive or disproportionate should be struck down.

Source: The Hindu

‘Maternity scheme exclusionary, need benefits for all’

GS-II :

Syllabus subtopic: Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections

Prelims and Mains focus: about PMMVY and its significance, challenges in implementation and the govt’s performance in addressing them

News: Three years after a pan­India maternity benefit programme promising ?6,000 to new mothers was first announced, the chorus on its many exclusions is growing louder leading to a demand for a scheme that is truly universal.

Why so many exclusions?

The many clauses introduced into the long and tedious documentation work totalling 32 pages has led to single women and young brides being left out of its purview, say activists working at the grassroots level.

Activists say that registration for the scheme requires an applicant to provide her husband’s Aadhaar details along with her own, affecting single women which include unwed mothers, deserted a mother seeking benefits needs to provide proof of address of her marital home, which proves challenging for a newlywed expecting a child and often residing in her natal home during pregnancy. She is then forced to go from pillar to post to claim benefits.

About PM Matru Vandana Yojana (PMMVY)

The Pradhan Mantri Matru Vandana Yojana (PMMVY) was announced by PM Modi in a televised address to the nation on December 31, 2016. Five month’s later when the Union Cabinet approved the scheme, it decided to give a benefit of ?5,000 to pregnant and lactating mothers for the birth of the first child.

This would be disbursed in three installments upon meeting several conditionalities registration of pregnancy, at least one ante­natal check-up, registration of child birth and vaccinations.

The remaining cash incentive of upto ?1,000 is to be given under a separate scheme called the Janani Suraksha Yojana so that on an “average” women get a total sum of ?6,000.

Objective

The objective is to compensate women for wage loss due to child birth.

Problems faced by a newlywed woman

A mother is unable to get the compensation when she needs it the most, i.e. during the nine months of her pregnancy. While the scheme is solely for the first living child, it ironically leaves out those who are most likely to give birth to one — a newlywed woman.

The requirement that the applicant has to be at least 19 years old also leaves out younger brides, who hesitate in getting their marriages registered as the legal age of marriage is 18 years. 30­35% first­time mothers are under the age of 18 years.

The application form requires separate undertakings from the woman and her husband that the child for whom they are seeking the benefit will be “the first living child for both of them”, further making it prohibitive.

Govt’s target versus actual performance of the scheme

Since the scheme came into effect on January 2017, it has benefited a total of 128 lakh women as per the government’s reply in Parliament last week.

This is 80% of the total target the government has set out for itself — 53 lakh women per year.

Experts estimate that the government’s target itself is 43% of the total 123 lakh first births in the country in a year as derived from the population size of 133.9 crore in 2017 and the birth rate of 20.2 per thousand.

Questions and Concerns raised by the activists

  1. Eligible beneficiaries have to jump through several hoops to claim their entitlement. Moreover, this is a woman’s right under the National Food Security Act, 2013, why then insist on the husband’s identity proof?

  1. The documentation work is likely to result in many women living on the margins, such as sex workers, women in custody, migrant and those living in post­conflict situations unable to claim benefits even though they are most in need of monetary compensation.

  1. Women have to pay a hefty bribe during the application process. The lengthy documentation work includes filling up six documents totaling 32 pages — an application form to be filled for each of the three installments, an application for linking the Aadhaar card with bank account, another one for linking the Aadhaar card with post office account and a feedback form. Applicants have to also submit at least nine other documents for verification —Aadhaar card (or enrolment slip when there is no card), an identity proof, voter ID card (as age proof ) of the mother and her husband; ration card (for husband's address), copy of bank passbook and maternal and child protection (MCP) card.

Way ahead

Activists and grassroot workers must make a “formal representation” to the government highlighting their concerns so that corrective actions can be taken. Activists urge for a need for reviewing the scheme and making it universal by re­ moving restrictions on the number of children as well as including all women, whether they are in the formal or informal sector, engaged in paid or unpaid work.

The sum promised should also be at least on par with minimum wages for women in self­employment, unpaid work, or working for less than minimum wages.

In order to raise these demands, protest marches are planned across several States on December 31, the third anniversary of the scheme. Workers, part of the Right to Food Campaign’s M.P. Chapter, have also started a signature campaign on the demands, which has so far been endorsed by 1,18,000 people

Source: The Hindu

Bank NPAs again stoke asset quality concerns

GS-III : Economic Issues Banking

Bank NPAs again stoke asset quality concerns

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Prelims and mains focus: above the NPA crisis and the role of auditors in reporting bad loans; ethical standards related to auditing

News: India’s bad loan crisis seems far from over, with as many as 10 banks disclosing they had under-reported non-performing assets (NPAs) of close to 24,000 crore in the year ended 31 March.

These banks are State Bank of India (SBI), Yes Bank, Punjab National Bank, Central Bank of India, UCO Bank, Bank of India, Union Bank of India, Indian Overseas Bank, Indian Bank and Lakshmi Vilas Bank.

For India’s banks, saddled with bad loans of ?9.5 trillion, the findings by the Reserve Bank of India do not bode well.

Background

In 2017, the central bank directed banks to disclose the extent to which their assessment of NPAs and their provisioning diverged from that of RBI, and released guidelines for such classification. In April, RBI mandated banks to disclose information about provisioning divergence, if it exceeded 10% of a bank’s pre-provisioning profit.

Banks were also directed to disclose information if additional NPAs were more than 15 % of reported NPAs.

SBI’s case

The country’s largest lender, SBI, reported the largest bad loan divergence so far this year, under-reporting gross NPAs of ?11,932 crore. Divergence refers to the difference between what a bank reports as its bad loans and provisions, and what the central bank finds when auditing that bank’s books. SBI also reported divergence in provision of ?12,036 crore.

The bank disclosed the divergence to the stock exchange last week.

Earlier, SBI had reported its highest bad loan divergence of ?23,239 crore for 2016-17.

While loans turn bad once the repayment overdue exceeds 90 days, provision is the money set aside for each loan a bank disburses. Provisions mirror the change in an asset’s classification from standard to NPA and increase as the asset deteriorates.

Following these disclosures, experts have raised questions about the role of auditors in the reporting process.

Role of auditors in the regulation of bank accounts

From a regulatory perspective, auditors are the first line of defence, as bank accounts are prepared in accordance with the guidelines determined by RBI, with which bank auditors are well-versed. Hence, if the regulator RBI has detected misreported accounts, the auditors have to be held responsible and need to be penalized.

As banks hold unsecured deposits from the public, are highly leveraged and play a critical role in payments in the economy, they have to maintain the highest ethical standards. Indeed, by their very nature, banks are meant to stand for integrity and trust.

Is the fault only of auditors?

Lenders are not always at fault and the central bank would have sought NPA classification of some assets in retrospect and with abundant caution.

Not all divergences are a result of incorrect reporting or error of judgement.

In many cases, the stress in the account may have become apparent only in subsequent quarters after March ending. In such cases, it would be challenging for banks to pre-empt stress and, hence, report the such accounts as non-performing. Further, in many cases, divergent accounts would have been factored in the reported results of the first half of the year.

About NPAs (non-performing assets)

Classification of NPAs

Depending upon the period up to which a loan has remained as NPA, it is classified into three types:

Substandard Assets: An asset which remains as NPA for less than or equal to 12 months.

Doubtful Assets: An asset which remained in the above category for 12 months.

Loss Assets: These are assets where loss has been identified by the bank or the RBI. However, there may be some value remaining in it and hence the loan has not been not completely written off.

An example of NPA: Suppose State Bank of India (SBI) gives a loan of Rs. 5 crore to a company. They agreed upon for an interest rate of say 5 percent per annum. Now suppose that initially everything was good and the market forces were working in support of the company. In this scenario, the company was able to service the interest amount. Later, due to administrative, technical, legal, environmental, corporate reasons etc. suppose the company is not able to pay the interest rates for 90 days. In that case, a loan given to the company is a good case for the consideration as NPA.

Origin of the present NPA crisis:

The origin of the crisis lies partly in the credit boom of the years 2004-05 to 2008-09. In that period, commercial credit (‘non-food credit’) doubled.

It was a period in which the world economy as well as the Indian economy were booming. Indian firms borrowed furiously in order to avail of the growth opportunities they saw coming.

Most of the investment went into infrastructure and related areas: telecom, power, roads, aviation, steel. Businessmen were overcome with exuberance, partly rational and partly irrational. They believed, as many others did, that India had entered an era of 9% growth.

Thereafter, as the Economic Survey of 2016-17 notes:

Many things began to go wrong. Thanks to problems in acquiring land and getting environmental clearances, several projects got stalled. Their costs soared.

At the same time, with the onset of the global financial crisis in 2007-08 and the slowdown in growth after 2011-12, revenues fell well short of forecasts.

Financing costs rose as policy rates were tightened in India in response to the crisis. The depreciation of the rupee meant higher outflows for companies that had borrowed in foreign currency.

This combination of adverse factors made it difficult for companies to service their loans to Indian banks.

Source: mint

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IIP shrinks again, inflation accelerates

IIP shrinks again, inflation accelerates Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims focus: Terms like inflation, stagflation, IIP and  CPI Mains focus: the impact of the recent slowdown on va

India faces a diplomatic challenge

India faces a diplomatic challenge Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora. Prelims and Mains focus: about USCRIF 2019 report, citizenship amendment bill 2019, diplomatic challenges faced by India regard

SC, ST quota in Parliament extended

Syllabus subtopic: Parliament and State Legislatures - structure, functioning, conduct of business, powers & privileges and issues arising out of these. Prelims and Mains focus: About the key features of the Bill and the controversy around it, constitutional provisions related to Anglo Indian

CAG hints at massive diversion of LPG

Syllabus subtopic: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies. Prelims and Mains focus: key findings and significance of CAG report, About PMUY, CAG News: The Comptroller and Auditor General (CAG) of India, in a report o

Andhra Cabinet clears law to deal with crime against women

Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Prelims and mains focus: about the new laws cleared by the AP assembly and their significance; about Zero FIR News: The Andhra Pradesh Disha Ac

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