Current Affairs Current Affairs - 05 July 2018 - Vikalp Education

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Current Affairs - 05 July 2018

General Affairs 

In Centre's Big Move For Farmers, Steep Hike In Support Price For Crops
  • The Narendra Modi government has cleared a new list of minimum support price for 14 summer (kharif) crops -- the biggest in its tenure that will cost the state nearly Rs. 15,000 crore in public funds. The minimum support price for paddy has been hiked by Rs. 200, or about 13 per cent, and the rest by up to 50 per cent. The decision, taken by the Union Cabinet headed by Prime Minister Narendra Modi, comes less than a year before next general elections.

    Also, by the end of this year, assembly elections will be held in three BJP-ruled states - Rajasthan, Madhya Pradesh and Chhattisgarh - where farmers, already restive, form a chunk of the population

    The delay in implementation of a big hike in support prices -- one of the pre-election promises of the BJP -- has triggered huge protests by farmers in many parts of the country.. They also had the support of the opposition, which has highlighted farmers' suicides to accuse the government of being insensitive to farmers' demands. While the move is expected to boost the rural economy, there are concerns that it could translate into food inflation.

    Called it a "historic decision" by the NDA government, Home Minister Rajnath Singh said, "Farmers are the largest producer, consumer and customer in this country but they never got the price they deserved for their produce. Modi ji understood this and now farmers will get 1.5 times more MSP on their produce."

    The MSP is like a shock absorber by the government to safeguard farmers against any sudden fall in produce prices. The MSP is a guaranteed price for their produce. In February, Finance Minister Arun Jaitley while presenting his fourth budget in the Modi government, promised to set MSP at 1.5 times the cost of production.

    The government was regularly attacked by farmer associations and the opposition for making "hollow promises" about doubling their income by 2022.

    Congress President Rahul Gandhi had accused the prime minister of "finishing the farmer". He said, "The government has to help the farmer. How will that happen? Through MSP and loan waivers. In the absence of such measures, small farmers are unable to make any money."

    Last year saw massive protests by farmer associations across the country over MSP and loan waivers. It started last summer in Madhya Pradesh, where six farmers were killed in police firing, and spread to other states where farmers destroyed fresh produce in symbolic protest. In March, it took shape of the colossal Kisan Long March in Maharashtra, in which around 50,000 farmers walked 180 km from Nasik to Mumbai.

    Last month, farmers across the country held a 10-day "Gaon Bandh", during which thousands refused to send supply of fruits, vegetables and dairy products to cities.

    According to the list, the MSP of common grade paddy has been fixed at Rs. 1,750 per quintal. The MSP for top variety cotton will be Rs. 5,450, up from 4,320 per quintal. The price for two varieties of pulses -- urad (lentil) and tur -- will see a revision of about Rs. 200 per quintal.

"Horrified At Mob Killings, Will Sanitize Platform": WhatsApp To Centre
  • Taking cognisance of the Indian government's concerns over the misuse of its platform for repeated circulation of provocative content, Facebook-owned WhatsApp on Wednesday wrote to the IT Ministry saying the company is "horrified" by terrible acts of violence.
    Reacting to the growing instances of mob killings of innocent people owing to large number of irresponsible messages filled with rumours and provocation circulated on WhatsApp, the IT Ministry on Tuesday asked WhatsApp to take immediate action and ensure that the platform is not used for such malafide activities.

    "Thank you for your letter dated July 2. Like the Government of India, we're horrified by these terrible acts of violence and wanted to respond quickly to the very important issues you have raised. We believe this is a challenge that requires government, civil society and technology companies to work together," WhatsApp said in the letter sent to the Ministry of Electronics and Information Technology (MeitY).

    WhatsApp which has over 200 million monthly active users in India, listed a number of measures it has taken in the recent past to control the spread of misinformation and abuse on its platform.

    "We have been testing a new label in India that highlights when a message has been forwarded versus composed by the sender. This could serve as an important signal for recipients to think twice before forwarding messages because it lets a user know if content they received was written by the person they know or a potential rumor from someone else. We plan to launch this new feature soon," the company informed. 

    According to media reports, over 30 people have been killed in the past one year by mobs after rumours of child lifting triggered via messages on WhatsApp.

    In Mid-May, said WhatsApp, it added new protections to prevent people from adding others back into groups which they had left -- a form of misuse we think it is important to correct. 

    "Last week, we launched a new setting that enables administrators to decide who gets to send messages within individual groups. This will help reduce the spread of unwanted messages into important group conversations - as well as the forwarding of hoaxes and other content," the popular messaging platform noted.

    WhatsApp has also announced a new project to work with leading academic experts in India to learn more about the spread of misinformation.

    "The fact-checking organisation Boom Live is available on WhatsApp and has published some reports on the source of the rumours that have contributed to the recent violence," the company said.

    While WhatsApp messages can be highly viral, the way people use the app is by nature still very private. 

    "Many people (nearly 25 per cent in India) are not in a group; the majority of groups continue to be small (less than 10 people); and nine in 10 messages are still sent from just one person to another," WhatsApp informed. 

    The company also asked to Indian government to talk further about the actions it is taking and its plans going forward. 

    "With the right action we can help improve everyone's safety by ensuring communities are better equipped to deal with malicious hoaxes and false information -- while still enabling people to communicate reliably and privately across India," it noted.

    WhatsApp also announced to soon start an engagement programme with the law enforcement officials across the country so "they are familiar with our approach and how we can be helpful".

"Big Victory For People Of Delhi": Arvind Kejriwal On Top Court Judgment
  • Delhi Chief Minister Arvind Kejriwal has welcomed the judgment of the Supreme Court, which today underscored that the powers of the Lieutenant Governor should stay within the limits set by the constitution. The court said an elected government's writ will run on all matters in Delhi except land, police and public order - marking a big boost for the government of Mr Kejriwal, which had gone to court after three years of tussle with the Lieutenant Governor.
    In a tweet, the Chief Minister, who recently held a sit-down protest at the Lieutenant Governor's House, said:

    Mr Kejriwal has been involved in a tussle with the Lieutenant Governor since his government swept to power in Delhi three years ago. His government had gone to the Supreme Court after the Delhi High Court ruled that the Lieutenant Governor as the last word in administrative issues.

    In its judgement, the Supreme Court upheld the elected government of Delhi and said the real power must be vested with it. "The real power must lie with the elected government in a democracy... Popular will can't be allowed lose its purpose," said the three-judge bench led by Chief Justice of India Dipak Misra.

    Mr Kejriwal's deputy Manish Sisodia underscored that the Lieutenant Governor will have no say now in service issues including transfer of government officials -- a huge point of conflict so far between the Aam Aadmi Party government and the Lieutenant Governor.

    "Service matters are now with the Delhi government... the Centre, on its own, said there was a 4th reserved subject. No need to send our files to the LG, due to which there was interference or delay," said Mr Sisodia, whose party had dubbed the Lieutenant Government the "Centre's agent" after several run-ins.

    Mr Sisodia was one of the protesters at the house of the Lieutenant Governor, holding a hunger strike till his health took a downturn. AAP is pushing for full statehood for Delhi with a massive signature campaign.

Commercial Flights Deployed To Evacuate Stranded Mansarovar Pilgrims
  • Nearly 100 Indian pilgrims were today evacuated, as authorities stepped up efforts to rescue those stranded in Nepal's mountainous region due to heavy rain while returning from the Kailash Mansarovar pilgrimage in Tibet.
    Five commercial flights and one Nepal Army chopper operated today, transporting 96 Indian stranded pilgrims from Simikot to Surkhet as the weather condition in Nepalgunj is bad. On the Hilsa-Simikot route, three Nepal Army choppers operated, the Indian Embassy said.

    Around 250 of the over 1,500 Indian pilgrims stranded were evacuated safely from Hilsa on Tuesday, the embassy had earlier said.

    A total of 158 people were evacuated yesterday from Simikot to Nepalganj, which is a fairly big city with all modern facilities and three hours road connectivity to Lucknow, the mission had said.

    The embassy has already set up a hotline for pilgrims and their family members, which also comprises other language speaking staff for Tamil, Telugu, Kannada and Malayalam speakers.

    Two pilgrims -- Leela Narayanan Mandredath, 56, of Kerala and Satya Laxmi of Andhra Pradesh -- died on Monday due to high altitude sickness in Simikot and heart attack in Tibet respectively, the Indian Embassy had said.

    Their bodies were brought by special helicopters to Kathmandu and Nepalganj respectively, it said in a statement.

    Tenzin Norbu Lama, the managing director of Sunny Travels and Treks, one of the major tour operators handling the Kailash Mansarovar Yatra, said Indian pilgrims were stranded as the air transport links were cut off due to bad weather but there were no problems in food and accommodation.

    "However, mountain areas lack proper medical facilities in the event of pilgrims suffering from altitude sickness due to their prolonged stay in the region," Mr Lama was quotes as saying by the local media.

    The pilgrimage to Kailash Mansarovar in Tibetan region of China is considered holy by Hindus, Buddhists and Jains. Every year, hundreds of Indians undertake the 'yatra' which involves trekking under inhospitable conditions.

PM Modi's "Magic" Bullet Train May Not Materialise: Rahul Gandhi
  • Congress president Rahul Gandhi hit out at the Centre today, claiming that the much talked about bullet train project was like a "magic train" which may not materialise.

    Targeting the Narendra Modi government and its foreign policy, Mr Gandhi also said that despite a contentious and sensitive issue like Doklam on the border, the prime minister was seen sitting on a swing with Chinese president Xi Jinping.

    "Modi's bullet train is like a magic train which may not materialise in reality," the Congress chief said speaking to party activists at Fursatganj.

    Continuing his attack, Mr Gandhi, who represents Amethi in the Lok Sabha, also claimed that the Centre's demonetisation decision had done nothing but derail business activity at all levels.

    Mr Gandhi also visited Pure Dhingai village to condole the death of a farmer who allegedly died some time back while waiting for the sale of his crop at a government centre.

Business Affairs

Sunil Mehta panel's 5-point NPA formula: Bankers protecting the bankers
  • Punjab National Bank CEO Sunil Mehta-led panel's 5-point formula to resolve NPAs in the banking system has come up with some outrageous recommendations that are largely aimed at deferring the inevitable, rather than resolving the NPA mess. That the government has already accepted the recommendations is even more intriguing.

    It is also truly uni-dimensional as it only looks at the bankers' perspective, which is hardly surprising considering the panel comprised only PSU bankers. SBI Chairman Rajnish Kumar and Bank of Baroda's BS Jayakumar are the other members of the panel.

    First, the speed with which the panel set up by the Finance Ministry on June 8 decided on the solutions itself raises a lot of questions. How did it deal with such a complex issue within a fortnight? Why were only bankers appointed on the panel? Moreover, why were only PSU bankers on the panel?

    Let's examine the futility of most of the recommendations:

    For loans up to Rs 50 crore, the panel has suggested a steering committee within the bank to resolve it within 90 days. Most banks already have this process in place for focused resolution. Providing another 90 days for resolution is futile because the loan is a bad loan precisely because it has already crossed the 90-day limit set by the RBI. By giving it another extension of 90 days, the panel has subverted the RBI's circular of February this year that mandated the banks to report a bad loan to RBI by the 91st day and plan to take it to insolvency thereafter. Surprisingly, it has even suggested giving additional loans to revive the asset. That amounts to ever-greening, just what must be avoided for non-performing assets.

    For loans of Rs 50-500 crore, the panel has suggested another bank-led resolution within 180 days. This process already exists under the Insolvency and Bankruptcy Code. By giving another 180 days, the panel has provided a buffer to the defaulting company when their default and non-performing asset has already been recognised. The resolution again has to be approved by 66 per cent of creditors. This provision already exists in IBC.

    For loans above Rs 500 crore, the committee has suggested setting up an asset management company with private participation. A specialist AMC just to resolve these assets is a retrograde move. It reflects the panel's refusal to take the bull by the horns. In its effort to turn around the asset, the AMC will defer the inevitable for a few more years. Corporate turnarounds are painful processes that are best left to experts such as the 24 Asset Reconstruction Companies and nearly 4 dozen AMCs that are already in operation in the country.

    The panel's other suggestion is to set up an Alternative Investment Fund that will raise resources from banks and institutional investors so that it can bid for the insolvent assets under insolvency and bankruptcy. Should the banks that have themselves taken those companies to insolvency really bid to buy the same assets? We leave that to your judgement.

    The fourth approach is to go to NCLT for insolvency and bankruptcy. Doesn't that option already exist?

    The fifth suggestion is an asset trading platform for stressed assets.  This is, perhaps, the most sensible solution to deal with sale or liquidation of stressed assets transparently.

    In conclusion, it appears that the panel of bankers was more focused on framing rules to defer decisions instead of taking the problem head-on. This protects their brethren-already rattled by charges of corruption and mismanagement-by postponing recognising bad loans by an additional 90 or 180 days.

LIC-IDBI Bank puzzle: It's the government, stupid!
  • Life Insurance Corporation's talks to acquire the ailing IDBI Bank amounts to throwing good money after bad. The nation's largest insurer has decided to acquire a majority stake in the hugely loss-making IDBI Bank, possibly under government pressure.

    While LIC already owns 10.82 pc of IDBI Bank, acquiring another 41 pc equity for majority 51 pc equity will cost another Rs 9,408 crore. But that's not the only bill for acquisition. Its eventual cost of acquisition may be 5-7 times higher. 

    But consider what LIC will be taking on: The bank has the highest gross non-performing assets (27.95 pc) as a percentage of total loans among all public sector banks. It has accumulated losses of over Rs 17,000 crore. IDBI Bank has reported losses of Rs 8,237.92 crore in FY 18, Rs 5,158.14 crore in FY 17 and Rs 3,664.80 crore FY16.

    IDBI Bank is already under banking regulator RBI's prompt corrective action (PCA), which restricts the bank's ability to expand loan business; requires it to shed non-core business and focus on returning to profitability by cutting expenses.

    IDBI Bank will be a burden on LIC for other reasons as well. Out of its total outstanding loans of Rs 1.99 lakh crore, it already has recognised gross NPAs worth Rs 55,588 crore while it has already provisioned for NPAs worth Rs 26,902 crore. With such high NPAs, the health of its other loan outstanding is also being questioned.

    Recovery rate in NPAs is between 15-50 pc only, a majority of them on the lower side of the spectrum. More NPAs will be bigger headache for LIC, which will have to provide for capital erosion as its majority shareholder.

    Hence, LIC will not just bear the brunt of funding its accumulated losses and its capital requirements but will also have to absorb any other loans turning NPAs in the future.

    LIC's own ambition to acquire a bank is hardly a secret. But a bill of between Rs 75,000 crore and Rs 1-lakh crore is a huge price to pay to fulfil the dream of owning a bank.

    There is a silver lining in the clouds though. If it manages to turn around the ailing bank, it can hope to reap the benefits when it dilutes its stake to 15 pc in future in line with the IRDA-imposed cap.

    Logically, LIC could have asked the RBI for a new bank licence of its own. If India Post can be given a full bank licence, why not LIC? After all, one of the biggest attractions in banks is their loan book and branches. Both of which are a disadvantage as far as IDBI Bank is concerned. LIC has 2,048 branches and 1,381 satellite offices of its own. IDBI Bank has 1995 branches. And its loan book hardly inspires any confidence.

    That raises the question: Why did LIC need IDBI Bank at all? The answer is: It's the government, stupid!

India's biggest Bitcoin exchange Zebpay bars crypto trading in rupee following RBI diktat
  • In a major fallout of the RBI's April-5 circular, which banned banks from providing financial services to crypto exchanges operating in India, Zebpay, the country's biggest digital exchange for trading in Bitcoin and virtual currencies, on Wednesday said it has disabled the rupee deposit and withdrawal options on its mobile app. The latest announcement comes after the company recently urged its customers to withdraw money, saying that "if Zebpay bank accounts are disrupted (after July-5 deadline), rupee deposits and withdrawals will become impossible."

    The current announcement from Zebpay means that neither can users make deposits in rupee on Zebpay nor can they withdraw money in the Indian currency from the crypto wallet. The users, however, can make coin or token deposits and withdraw the same. The company said: "the crypto-rupee and crypto-crypto pair trading service is also functional".

    "Today we are disabling the rupee deposit and withdrawal options on the Zebpay app. This is being done in light of the bank account closures as per the RBI guideline," the company said in a statement.

    Talking about the RBI freeze, company co-founder Sandeep Goenka on Wednesday tweeted that this is just a "speed bump and that we (crypto companies) shall prevail". He said on Tuesday that he will move the Supreme Court on July 5 to get a stay on the RBI circular till the next hearing on July 20.

    Earlier, Zebpay had also said that if the Zebpay bank accounts are disrupted, rupee deposits and withdrawals will become impossible, which can cause the discontinuation of crypto trade based on rupees, or at least cause significant price movements.

    On Tuesday, the Supreme Court of India also refused to stay the RBI circular issued on April 5. Citing the concerns over consumer protection, market integrity and money laundering, the Reserve Bank of India had said: "The entities regulated by the RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies)".

    Meanwhile, as the RBI deadline for bank ends on July 5, many crypto exchanges are trying to find out alternative ways to keep the business going. For example, cryptoexchanges like WazirX and Koinex Loop have announced that they are working on 'peer-to-peer model' to facilitate virtual currency trade without using normal banking channels. These exchanges are ready to launch 'P2P service', which will be based on escrow -- a contractual arrangement in which a third party keeps the financial instruments on behalf of two primary transacting parties.

    The digital currency exchanges have already approached the Supreme Court against the RBI circular, saying that it is against the interest of citizens. The next hearing in the case is scheduled for July 20.

RBI grants licence to Bank of China to set up its first branch in India
  • The Reserve Bank of India has issued licence to Bank of China to launch operations in India, official sources said today.

    Prime Minister Narendra Modi had made a commitment to Chinese President Xi Jinping to allow Bank of China to set up branches in India when they met on the sidelines of the SCO summit in Chinese city of Qingdao last month.

    "The RBI has issued licence to Bank of China to set up its first branch in India. It was a commitment made by the Prime Minister to the President of China," said a source.

    Bank of China is one of the very few state-owned commercial banks in China.

    India and China have been focusing on expanding their economic ties notwithstanding differences on several sticky issues including on the boundary dispute.

    After last year's Doklam standoff, both the countries have stepped up dialogue at various levels to reset the ties.

    Meanwhile, the sources said Chinese Defence Minister Wei Fenghe is scheduled to visit India soon and both sides are in the process of finalising the dates.

Sensex rises 266 points, Nifty closes at 10,769 post kharif crop MSP hike
  • The market closed higher today after the Modi government raised minimum support price (MSP) of kharif crops which boosted sentiment. While the Sensex rose 266 points to 24,327 level, the Nifty gained 70 points to 10,769. Auto stocks led the gains with BSE auto index rising 313 points or 1.31% to 24,327 level. The BSE bankex too rose 201 points to 29,326 level, a gain of 0.69%.

    Bajaj Auto (3.95%), Maruti Suzuki (2.69%), HDFC (2.09%) and HUL (2.03%) were the top Sensex gainers.

    Top Sensex gainers seem to be direct beneficiaries of the prospects of rising income of farmers after the CCEA raised hike in price of kharif crops. The decision will lead to a rise in purchase power of farmers and subsequently sales of the products of these companies.

    Stocks of rural players such as Hero MotorCorp (0.43%) and Mahindra and Mahindra (0.69%) too closed higher on the development.

    The stock of market heavyweight Reliance Industries Ltd (RIL) too closed 1.90% higher at 990 level on the BSE.

    VK Sharma, head, Private Client Group & Capital Market Strategy at HDFC Securities said, "The markets changed gears in the afternoon once the news came in that the CCEA had cleared the proposal to give a remunerative MSP of 150% of the production cost for the Kharif crop. Though on the face of it , it would increase inflation and the fiscal deficit, the markets rallied as it was already priced in. The FM had announced this very step in the budget. I think the markets have taken the view that the out go may not be much more than in the past.  The US markets will be closed today for Independence Day holiday. That was also one of the reasons for the street to be bullish as they would again make their own weather tomorrow. We believe 10,830 will be hard but to crack for the Nifty."

    The Shriram Transport Finance stock was the top loser on the BSE closing 11.83% lower at 1144 level after its annual report mentioned a Rs 870-crore corporate guarantee which the firm provided to its unlisted entity SVL Ltd. The stock which opened at 1,225 fell 17.89% to an intra day low of 1,066.10 level on the BSE. The guarantee is with respect to non-convertible debentures issued by SVL Ltd.

    Market breadth was marginally negative with 1,265 stocks closing higher compared with 1,350 ending in the red on BSE.

    Meanwhile, the rupee closed lower by 15 paise to 68.73 level in trade today.

    Global markets

    World shares were mostly lower on Wednesday as European shares tracked losses in Asia and on Wall Street, where tech shares were hit by worries over trade tensions between Beijing and Washington.

    Germany's DAX lost 0.4 percent to 12,306.49 and the CAC 40 of France lost 0.1 percent to 5,311.06. Britain's FTSE 100 slipped 0.2 percent to 7,579.87. But S&P 500 futures added 0.2 percent and Dow futures were up 0.1 percent.

    Japan's Nikkei 225 index fell 0.3 percent to 21,717.04 and the Shanghai Composite index dropped 0.1 percent to 2,759.13. Hong Kong's Hang Seng index fell 1.1 percent to 28,241.67 and the Kospi in South Korea lost 0.2 percent to 2,265.46. Australia's S&P ASX/200 gave up 0.4 percent to 6,183.40. Shares rose in Southeast Asia and Taiwan.

    General Awareness

    Payments Council of India
    • Context: Payments Council of India (PCI), an apex body representing companies in payments and settlement system, has a new Chairman in Vishwas Patel.

      ABOUT PCI:

      The Payments Council of India was formed under the aegis of IAMAI in the year 2013 catering to the needs of the digital payment industry.

      Functions:

      The Council was formed inter-alia for the purposes of representing the various regulated non-banking payment industry players, to address and help resolve various industry level issues and barriers which require discussion and action.
      The council works with all its members to promote payments industry growth and to support our national goal of ‘Cash to Less Cash Society’ and ‘Growth of Financial Inclusion’ which is also the Vision Shared by the RBI and Government of India.
      PCI works closely with the regulators i.e. Reserve Bank of India (RBI), Finance Ministry and any similar government, departments, bodies or Institution to make ‘India a less cash society’.


      About IAMAI:

      The Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India.
      It was established in 2004 by the leading online publishers, but in the last 10 years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce and mobile & digital payments among others.
      It is the only professional industry body representing the online and mobile VAS industry in India.
      The association is registered under the Societies Act and is a recognized charitable institution in Maharashtra.

      What’s important?

      For Prelims: PCI, IAMAI.

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