General Affairs
Amid India's Plans To Buy Russian S-400 Missiles, US Warns Of Sanctions
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The purchase of major military equipment like the multi-billion-dollar S-400 Triumf missile system from Russia would be considered as a "significant transaction" and has a potential for imposing tough US sanctions, the Trump administration said today, as India considers buying the air defence systems.
Donald Trump on Thursday signed an executive order, paving the way for slapping crippling sanctions on countries and foreign entities and individuals violating the Countering America's Adversaries Through Sanctions Act (CAATSA).
After signing of the order, the US imposed sanctions on China, an Equipment Development Department under China's Ministry of Defence and its director Li Shangfu for its recent purchase of Russian Sukhoi Su-35 fighter jets and S-400 surface-to-air missile, a senior administration official told reporters during a conference call.
The CAATSA that imposed sanctions on Iran, North Korea and Russia, has the potential to affect India's defence purchases as it is planning to buy five S-400 Triumf missile air defence systems from Russia for around $4.5 billion.
"We want to stress that the legislative standard here is a significant transaction with an entity that appears on the List of Specified Persons. We took these actions because China took delivery of 10 Sukhoi fighter aircraft, specifically Su-25s, in December of 2017, after the CAATSA statute came into force. It also took delivery of a batch of S-400 - sometimes known as SA-21 - surface-to-air missile systems or related equipment in January of this year," the official said.
The US official, who did not wish to be identified emphasised that the ultimate target of these sanctions was Russia.
"CAATSA sanctions in this context are not intended to undermine the defence capabilities of any particular country. They are instead aimed at imposing costs upon Russia in response to its malign activities," he said.
"Those malign activities are undertaken to compete with the US and its allies and partners. This is for the first time that the US has sanctioned anyone under Section 231 of CAATSA, which focuses upon, those who engage in significant transactions with entities that appear on the LSP (List of Specified Persons)," the official said.
He declined to answer a question whether the US would be taking similar action against countries, like Turkey, that buy S-400 missile defence system.
"As to other potential recipients of the S-400, we haven't made any determinations yet with respect to what to do about those, but you can be confident that we have spent an enormous amount of time talking about prospective purchases of things such as S-400s and Sukhois with people all around the world who may have been interested in such things and some who may still be," the official said.
He said the Trump administration has made it "very clear" to these countries that these systems like the S-400 are a system of key concern with potential CAATSA implications.
"So while decisions on other cases have yet to be made, and indeed other transactions have yet to occur, we hope that at least this step will send a signal of our seriousness and perhaps encourage others to think twice about their own engagement with the Russian defence and intelligence sectors, which would of course be precisely what we hope Congress intended, and what we are required to do pursuant to the fact," the official said.
In the recent 2+2 Dialogue held in New Delhi, US Defence Secretary James Mattis had said, "The sanctions aren't intended to adversely impact countries like India. They are intended to have an impact the sanctioned country, which is Russia. And so we'll work our way through the waiver decision as the days and weeks proceed, and we'll do that alongside our partner, India, as well."
He had also said that the US was working to impose CAATSA Section 231 in a way that is appropriate and lawful and to exercise that waiver authority only where it makes sense.
Donald Trump on Thursday signed an executive order, paving the way for slapping crippling sanctions on countries and foreign entities and individuals violating the Countering America's Adversaries Through Sanctions Act (CAATSA).
After signing of the order, the US imposed sanctions on China, an Equipment Development Department under China's Ministry of Defence and its director Li Shangfu for its recent purchase of Russian Sukhoi Su-35 fighter jets and S-400 surface-to-air missile, a senior administration official told reporters during a conference call.
The CAATSA that imposed sanctions on Iran, North Korea and Russia, has the potential to affect India's defence purchases as it is planning to buy five S-400 Triumf missile air defence systems from Russia for around $4.5 billion.
"We want to stress that the legislative standard here is a significant transaction with an entity that appears on the List of Specified Persons. We took these actions because China took delivery of 10 Sukhoi fighter aircraft, specifically Su-25s, in December of 2017, after the CAATSA statute came into force. It also took delivery of a batch of S-400 - sometimes known as SA-21 - surface-to-air missile systems or related equipment in January of this year," the official said.
The US official, who did not wish to be identified emphasised that the ultimate target of these sanctions was Russia.
"CAATSA sanctions in this context are not intended to undermine the defence capabilities of any particular country. They are instead aimed at imposing costs upon Russia in response to its malign activities," he said.
"Those malign activities are undertaken to compete with the US and its allies and partners. This is for the first time that the US has sanctioned anyone under Section 231 of CAATSA, which focuses upon, those who engage in significant transactions with entities that appear on the LSP (List of Specified Persons)," the official said.
He declined to answer a question whether the US would be taking similar action against countries, like Turkey, that buy S-400 missile defence system.
"As to other potential recipients of the S-400, we haven't made any determinations yet with respect to what to do about those, but you can be confident that we have spent an enormous amount of time talking about prospective purchases of things such as S-400s and Sukhois with people all around the world who may have been interested in such things and some who may still be," the official said.
He said the Trump administration has made it "very clear" to these countries that these systems like the S-400 are a system of key concern with potential CAATSA implications.
"So while decisions on other cases have yet to be made, and indeed other transactions have yet to occur, we hope that at least this step will send a signal of our seriousness and perhaps encourage others to think twice about their own engagement with the Russian defence and intelligence sectors, which would of course be precisely what we hope Congress intended, and what we are required to do pursuant to the fact," the official said.
In the recent 2+2 Dialogue held in New Delhi, US Defence Secretary James Mattis had said, "The sanctions aren't intended to adversely impact countries like India. They are intended to have an impact the sanctioned country, which is Russia. And so we'll work our way through the waiver decision as the days and weeks proceed, and we'll do that alongside our partner, India, as well."
He had also said that the US was working to impose CAATSA Section 231 in a way that is appropriate and lawful and to exercise that waiver authority only where it makes sense.
High Alert In Uttar Pradesh After "Mystery Fever" Claims 84 Lives
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A "mystery fever" has claimed 84 lives across six districts of Uttar Pradesh in the last six weeks, forcing the Yogi Adityanath government to sound a high alert. While Bareilly district in the west reported 24 casualties, the highest among affected areas, 23 succumbed to the ailment in adjoining Budaun district.
Among the victims in Bareilly was 12-year-old Omkar, who was rushed to the district hospital two days ago with high fever. "His body was burning. I initially took him to the village doctor, but there was no improvement in his condition. Although I took him to the district hospital after that, he did not survive," said his father.
The Uttar Pradesh health ministry has ordered an audit of every death to identify the disease, and both central and state teams have been deployed in the affected districts. "Prima facie, it seems like these are cases of viral fever, typhoid and malaria. We are distributing medicines, organising camps and conducting mosquito-fogging drives. I am confident that we will be able to control this," said Uttar Pradesh Director General of Health Services Padmakar Singh.
The Uttar Pradesh government confirmed reports of the outbreak in a press release. They identified the affected districts as Bareilly and Budaun in western Uttar Pradesh, followed by Hardoi, Sitapur, Bahraich and Shahjahanpur -- which are close to state capital Lucknow.
Uttar Pradesh Health Minister Sidharth Nath Singh said people take their sick relatives to quacks first, and approach authorised health officials only after things have gone out of control. This, he asserted, was one of the main reasons for the high casualty rate.
"I appeal to everyone to take their relatives to govt hospitals, and not these quacks," said Mr Singh.
A government spokesperson said an awareness drive will also be launched to counter the unnecessary alarm being caused by "misleading and incorrect" media reports.
Among the victims in Bareilly was 12-year-old Omkar, who was rushed to the district hospital two days ago with high fever. "His body was burning. I initially took him to the village doctor, but there was no improvement in his condition. Although I took him to the district hospital after that, he did not survive," said his father.
The Uttar Pradesh health ministry has ordered an audit of every death to identify the disease, and both central and state teams have been deployed in the affected districts. "Prima facie, it seems like these are cases of viral fever, typhoid and malaria. We are distributing medicines, organising camps and conducting mosquito-fogging drives. I am confident that we will be able to control this," said Uttar Pradesh Director General of Health Services Padmakar Singh.
The Uttar Pradesh government confirmed reports of the outbreak in a press release. They identified the affected districts as Bareilly and Budaun in western Uttar Pradesh, followed by Hardoi, Sitapur, Bahraich and Shahjahanpur -- which are close to state capital Lucknow.
Uttar Pradesh Health Minister Sidharth Nath Singh said people take their sick relatives to quacks first, and approach authorised health officials only after things have gone out of control. This, he asserted, was one of the main reasons for the high casualty rate.
"I appeal to everyone to take their relatives to govt hospitals, and not these quacks," said Mr Singh.
A government spokesperson said an awareness drive will also be launched to counter the unnecessary alarm being caused by "misleading and incorrect" media reports.
Smriti Irani Hits Out At Rahul Gandhi's "Chowkidaar A Thief" Remark
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Union Textile Minister Smriti Irani yesterday slammed Congress president Rahul Gandhi for his comments on Prime Minister, saying he is desperate to attract attention.
Earlier in the day, Mr Gandhi had said at a public meeting in Dungarpur district that people now thought that the country's "watchman" is a "thief."
Ms Irani said Mr Gandhi has no regard for the prime minister's post, which he respected only when a member of his own family held it.
"I think that the desperation of the clown prince, as Jaitley calls him, is to attract attention to himself at the cost of the prime minister's name," she told reporters on the sidelines of an Carpet Export Promotion Council event.
"One needs to ask Rahul Gandhi what is his vision for the country. National building is not something that Rahul Gandhi is keen on," she said.
"People of the country know that Rahul Gandhi lacks vision," she added.
At his rally in Dungarpur, Mr Gandhi had referred to the Rafale fighter deal with France and mocked PM Modi's assertions on tackling corruption.
He said people were now heard saying that the country's watchman is a "thief".
"Galli galli mein shor hai, Hindustan ka chowkidar chor hai," Mr Gandhi had said.
Ms Irani's reaction came on the sidelines of an interaction with Jaipur-based exporters.
Earlier in the day, Mr Gandhi had said at a public meeting in Dungarpur district that people now thought that the country's "watchman" is a "thief."
Ms Irani said Mr Gandhi has no regard for the prime minister's post, which he respected only when a member of his own family held it.
"I think that the desperation of the clown prince, as Jaitley calls him, is to attract attention to himself at the cost of the prime minister's name," she told reporters on the sidelines of an Carpet Export Promotion Council event.
"One needs to ask Rahul Gandhi what is his vision for the country. National building is not something that Rahul Gandhi is keen on," she said.
"People of the country know that Rahul Gandhi lacks vision," she added.
At his rally in Dungarpur, Mr Gandhi had referred to the Rafale fighter deal with France and mocked PM Modi's assertions on tackling corruption.
He said people were now heard saying that the country's watchman is a "thief".
"Galli galli mein shor hai, Hindustan ka chowkidar chor hai," Mr Gandhi had said.
Ms Irani's reaction came on the sidelines of an interaction with Jaipur-based exporters.
Indian Army, US Troops Play Advanced War Games In Uttarakhand
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On the fourth day of Yudh Abhyas 2018, Indian Army and US troops participated in a battle obstacle course, rock and ice craft wall, room intervention and unarmed combat. A joint military exercise between the armies of both the countries started on September 16 at the foothills of Chaubattia in Uttarakhand and it will end on September 29.
The 14th edition of the exercise "Yudh Abhyas", which is hosted alternately by the two countries, kicked off with a short yet impressive ceremony that saw the unfurling of the national flags of both the countries.
While the Indian contingent was represented by an infantry battalion of the Congo Brigade, Garud Division, Surya Command and a central command, their US counterpart was represented by the 1st Infantry Battalion and the 23 Infantry Regiment, 2 Stryker Brigade Combat Team, and 7 Infantry Division.
General Officer Commanding, Garud Division, in his inaugural remarks, welcomed the US soldiers and highlighted the commonly shared beliefs of democracy, freedom, equality and justice that are precious to both the countries.
The two-week long event will see both the armies hone their tactical and technical skills in countering insurgency and terrorism in a UN peacekeeping scenario involving a combined deployment at a brigade level.
The exercise will also witness the state-of-the-art equipment for surveillance and tracking, specialist weapons for close quarter battle with terrorists, explosives and improvised explosive device detectors, as well as the latest communication equipment being fielded by both sides.
Both the sides will jointly train, plan and execute a series of well-developed tactical drills for neutralisation of likely threats that may be encountered in UN peacekeeping operations during division level command post exercise.
The experts from both sides will also hold discussions to share each other's experience in varied topics for mutual benefit.
The 14th edition of the exercise "Yudh Abhyas", which is hosted alternately by the two countries, kicked off with a short yet impressive ceremony that saw the unfurling of the national flags of both the countries.
While the Indian contingent was represented by an infantry battalion of the Congo Brigade, Garud Division, Surya Command and a central command, their US counterpart was represented by the 1st Infantry Battalion and the 23 Infantry Regiment, 2 Stryker Brigade Combat Team, and 7 Infantry Division.
General Officer Commanding, Garud Division, in his inaugural remarks, welcomed the US soldiers and highlighted the commonly shared beliefs of democracy, freedom, equality and justice that are precious to both the countries.
The two-week long event will see both the armies hone their tactical and technical skills in countering insurgency and terrorism in a UN peacekeeping scenario involving a combined deployment at a brigade level.
The exercise will also witness the state-of-the-art equipment for surveillance and tracking, specialist weapons for close quarter battle with terrorists, explosives and improvised explosive device detectors, as well as the latest communication equipment being fielded by both sides.
Both the sides will jointly train, plan and execute a series of well-developed tactical drills for neutralisation of likely threats that may be encountered in UN peacekeeping operations during division level command post exercise.
The experts from both sides will also hold discussions to share each other's experience in varied topics for mutual benefit.
Terrorists Kidnap, Kill 3 Cops In Kashmir After "Resign Or Die" Threat
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The bodies of three policemen with multiple bullet wounds were found hours after they were kidnapped by terrorists who barged into their homes in south Kashmir early on Friday. A fourth policeman was freed with the "help of villagers", home ministry officials told.
The policemen, all Special Police Officers, were dragged out of their homes in Kapran village of Shopian days after Hizbul Mujahideen terrorists put out a video threatening to kill policemen unless they posted their resignations online. Their bodies were found in an orchard.
Police said the villagers had chased the terrorists to try and rescue the three but the terrorists fired warning shots in the air. The terrorists crossed a river and shot the policemen.
Soon after the killings, six policemen reportedly announced that they have resigned. Videos were allegedly posted on social media, claiming resignations. The home ministry denied the reports saying they are "based on false propaganda by mischievous element."
When the Hizbul video emerged on Tuesday, the home ministry had expressed worry about repercussions. The video surfaced a day after an Army jawan was shot dead by the Hizbul Mujahideen.
Television visuals today showed villagers and grieving family members carrying the bodies of the policemen back to the village.
"We have lost 3 of our brave colleagues in a barbaric terror strike. Our tribute to the 3 martyred Jawans - Nisar Ahmad, Firdous Kuchay & Kulwant Singh. We condemn this inhuman act and assure that all the culprits shall be dealt under law," the Kashmir police tweeted.
The home ministry sees the killings as desperate fight-back because of the centre's tough policy. "Terrorists are under pressure as they are not able to execute anything big. Protest politics and stone-pelting has come down. So they are taking out their frustration by targeting policemen in their houses," said a home ministry official.
But PDP chief Mehbooba Mufti, who quit as chief minister after the ruling BJP ended its alliance with her, said the killings proved the central government's "muscular policy" was not working. "Clearly, with the rise in kidnapping of police personnel and their families, Centre's muscular policy is not working at all. Dialogue, the only way forward seems to be a distant dream for now," Ms Mufti tweeted.
"Three more policemen have lost their lives to militant bullets. Outrage, shock and condemnation will be expressed by all of us on expected lines. Unfortunately, it brings no solace to the families of the victims," said the PDP chief.
Three weeks ago, three policemen and eight relatives of police personnel were kidnapped by terrorists in south Kashmir. They were set free after the Jammu and Kashmir police released around a dozen family members of terrorists, including the father of Hizbul Mujahideen terrorist Riaz Naikoo. The swap provoked a huge controversy and was said to be one of the triggers for the abrupt exit of SP Vaid as state police chief.
The home ministry says in last two months, security forces have be able to break down much of the local support structure of terrorists. "They are getting alienated as villagers are not supporting these abductions so these are desperate measures," said an official.
The rise in kidnappings of security personnel comes as the state heads to local civic body polls and panchayat elections in October and November. While the PDP and National Conference have decided to stay away from the polls to protest what they call a threat to Article 35A of the Constitution, separatist groups have asked the "freedom-loving people" of Kashmir to observe a complete boycott.
Article 35A bars outsiders from acquiring land in Jammu and Kashmir.
The security of the candidates contesting in the local body polls has become a huge concern, say sources. Intelligence agencies have warned of increased violence during this period. The newly-appointed police chief of Jammu and Kashmir, Dilbag Singh on Monday, directed his officers to be fully prepared to ensure peaceful and smooth urban local bodies and panchayat polls in the state.
The policemen, all Special Police Officers, were dragged out of their homes in Kapran village of Shopian days after Hizbul Mujahideen terrorists put out a video threatening to kill policemen unless they posted their resignations online. Their bodies were found in an orchard.
Police said the villagers had chased the terrorists to try and rescue the three but the terrorists fired warning shots in the air. The terrorists crossed a river and shot the policemen.
Soon after the killings, six policemen reportedly announced that they have resigned. Videos were allegedly posted on social media, claiming resignations. The home ministry denied the reports saying they are "based on false propaganda by mischievous element."
When the Hizbul video emerged on Tuesday, the home ministry had expressed worry about repercussions. The video surfaced a day after an Army jawan was shot dead by the Hizbul Mujahideen.
Television visuals today showed villagers and grieving family members carrying the bodies of the policemen back to the village.
"We have lost 3 of our brave colleagues in a barbaric terror strike. Our tribute to the 3 martyred Jawans - Nisar Ahmad, Firdous Kuchay & Kulwant Singh. We condemn this inhuman act and assure that all the culprits shall be dealt under law," the Kashmir police tweeted.
The home ministry sees the killings as desperate fight-back because of the centre's tough policy. "Terrorists are under pressure as they are not able to execute anything big. Protest politics and stone-pelting has come down. So they are taking out their frustration by targeting policemen in their houses," said a home ministry official.
But PDP chief Mehbooba Mufti, who quit as chief minister after the ruling BJP ended its alliance with her, said the killings proved the central government's "muscular policy" was not working. "Clearly, with the rise in kidnapping of police personnel and their families, Centre's muscular policy is not working at all. Dialogue, the only way forward seems to be a distant dream for now," Ms Mufti tweeted.
"Three more policemen have lost their lives to militant bullets. Outrage, shock and condemnation will be expressed by all of us on expected lines. Unfortunately, it brings no solace to the families of the victims," said the PDP chief.
Three weeks ago, three policemen and eight relatives of police personnel were kidnapped by terrorists in south Kashmir. They were set free after the Jammu and Kashmir police released around a dozen family members of terrorists, including the father of Hizbul Mujahideen terrorist Riaz Naikoo. The swap provoked a huge controversy and was said to be one of the triggers for the abrupt exit of SP Vaid as state police chief.
The home ministry says in last two months, security forces have be able to break down much of the local support structure of terrorists. "They are getting alienated as villagers are not supporting these abductions so these are desperate measures," said an official.
The rise in kidnappings of security personnel comes as the state heads to local civic body polls and panchayat elections in October and November. While the PDP and National Conference have decided to stay away from the polls to protest what they call a threat to Article 35A of the Constitution, separatist groups have asked the "freedom-loving people" of Kashmir to observe a complete boycott.
Article 35A bars outsiders from acquiring land in Jammu and Kashmir.
The security of the candidates contesting in the local body polls has become a huge concern, say sources. Intelligence agencies have warned of increased violence during this period. The newly-appointed police chief of Jammu and Kashmir, Dilbag Singh on Monday, directed his officers to be fully prepared to ensure peaceful and smooth urban local bodies and panchayat polls in the state.
Business Affairs
World Bank Endorses Plan For India To Become Higher Middle-Income Country
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A day after Prime Minister Narendra Modi said India will become a $5 trillion economy by 2022, the World Bank board today endorsed an ambitious five-year Country Partnership Framework (CPF) for India, which aligns with New Delhi's objectives of high, sustainable and inclusive growth.
Aimed at supporting India's transition to a higher middle-income country by addressing some of its key development priorities -- resource efficient and inclusive growth, job creation and building its human capital -- the framework is expected to bring between $25-30 billion in financial support from the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).
"With a fast-growing economy, global stature, and its unique experience of lifting the highest number of poor out of poverty in the past decades, India is well-positioned to become a high middle-income country by 2030," said Hartwig Schafer, World Bank South Asia vice president.
"It's a five-year framework that commits the World Bank's engagement in India, both in areas where what we'll do, how we will work in these areas and the level of financial commitment. This is the first country partnership framework written with India," Junaid Ahmad, Country Director, World Bank, India, told news agency PTI in an exclusive interview.
"The CPF was preceded by a systematic country diagnostic or SCD that offered a narrative about India. What are the challenges going forward in terms of the growth of India? And what are the challenges that India faces in achieving the twin goals that the World Bank has put for itself, which is reduction in extreme poverty and the increase in shared prosperity," Mr Ahmad said.
Soon after the World Bank endorsed the CPF for India, Ahmad said, the Board recognises the incredible growth and development of India over the last several decades.
"It recognizes that India has gone from a low-income country status to a low-middle income. And now India is entering the economic transformation from low-middle income to high-middle income (country). This CPS is about how can the Bank support this transition," he said.
Noting that the systematic country diagnostic is a highly consultative document, Mr Ahmad said, the CPF is a joint document with the Indian government.
"I complement the World Bank Group for aligning the CPF with India's development and investment objectives of high, sustainable and inclusive growth," said Subhash Chandra Garg, Economic Affairs Secretary, in a statement.
Observing that the systematic country diagnostic basically said India's big story is steady growth from very low several decades back to a steady growth of seven per cent plus, Ahmad said, this document also showed that the growth is quite diversified. "Some of it is based on export. A lot of it is based on an internal consumption and investment, unlike say China, which is highly export led growth. So India's is more broad based, diversified growth path," he said.
"Over time, this growth has become more stable and is resilient. Recently there were shocks on the economy, which included demonetisation and the GST implementation and there was this fall in the growth. But it is now rebounded, and not only has it gone back to seven per cent, this quarter it is at eight per cent," Mr Ahmad said.
Based on the systematic country diagnostic goal of taking the Indian growth rate to eight per cent plus, the World Bank argued that there were several areas of engagement that were very important: natural resource management, jobs and competitiveness, and human development, he said, adding that the framework addresses these issues.
"The first point we make is India needs to unleash the power of markets and private sector. It needs to leverage private sector and in particular private capital. The challenge for the Bank is how do you take the little amount of money ultimately you're putting into the country and you go from being a lending bank to being a leveraging bank," Mr Ahmad said.
He said complementing transformational national programs, the Bank will also develop strategic state partnerships to address state-specific development priorities and support implementation capabilities at the state and the local level.
"The future of India lies in the states of India. The country's transition to high middle-income status will be determined in large part by the effectiveness of India's federal compact. In this context, an important focus of the CPF will be to deepen engagement with India's states and invest in the institutions and capabilities of the states and local governments to address their development priorities," Mr Ahmad said.
He said the Bank was going for a "Lighthouse India" approach. "Lighthouse India basically means learning from the innovation of the states and sharing with other states. We also recognise that the learning is what India also has to offer the rest of the world. As it goes from low-income to middle-income to high-middle-income, its learning over its development path is going to be very valuable for other nations," he said.
"The Indian economy has evolved to a level where the private sector can be counted on to close large developmental gaps. Through this the CPF, the WBG will help India leverage additional resources from the private sector to help India realize its full potential," said Jun Zhang, Country Head, IFC, India.
Aimed at supporting India's transition to a higher middle-income country by addressing some of its key development priorities -- resource efficient and inclusive growth, job creation and building its human capital -- the framework is expected to bring between $25-30 billion in financial support from the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).
"With a fast-growing economy, global stature, and its unique experience of lifting the highest number of poor out of poverty in the past decades, India is well-positioned to become a high middle-income country by 2030," said Hartwig Schafer, World Bank South Asia vice president.
"It's a five-year framework that commits the World Bank's engagement in India, both in areas where what we'll do, how we will work in these areas and the level of financial commitment. This is the first country partnership framework written with India," Junaid Ahmad, Country Director, World Bank, India, told news agency PTI in an exclusive interview.
"The CPF was preceded by a systematic country diagnostic or SCD that offered a narrative about India. What are the challenges going forward in terms of the growth of India? And what are the challenges that India faces in achieving the twin goals that the World Bank has put for itself, which is reduction in extreme poverty and the increase in shared prosperity," Mr Ahmad said.
Soon after the World Bank endorsed the CPF for India, Ahmad said, the Board recognises the incredible growth and development of India over the last several decades.
"It recognizes that India has gone from a low-income country status to a low-middle income. And now India is entering the economic transformation from low-middle income to high-middle income (country). This CPS is about how can the Bank support this transition," he said.
Noting that the systematic country diagnostic is a highly consultative document, Mr Ahmad said, the CPF is a joint document with the Indian government.
"I complement the World Bank Group for aligning the CPF with India's development and investment objectives of high, sustainable and inclusive growth," said Subhash Chandra Garg, Economic Affairs Secretary, in a statement.
Observing that the systematic country diagnostic basically said India's big story is steady growth from very low several decades back to a steady growth of seven per cent plus, Ahmad said, this document also showed that the growth is quite diversified. "Some of it is based on export. A lot of it is based on an internal consumption and investment, unlike say China, which is highly export led growth. So India's is more broad based, diversified growth path," he said.
"Over time, this growth has become more stable and is resilient. Recently there were shocks on the economy, which included demonetisation and the GST implementation and there was this fall in the growth. But it is now rebounded, and not only has it gone back to seven per cent, this quarter it is at eight per cent," Mr Ahmad said.
Based on the systematic country diagnostic goal of taking the Indian growth rate to eight per cent plus, the World Bank argued that there were several areas of engagement that were very important: natural resource management, jobs and competitiveness, and human development, he said, adding that the framework addresses these issues.
"The first point we make is India needs to unleash the power of markets and private sector. It needs to leverage private sector and in particular private capital. The challenge for the Bank is how do you take the little amount of money ultimately you're putting into the country and you go from being a lending bank to being a leveraging bank," Mr Ahmad said.
He said complementing transformational national programs, the Bank will also develop strategic state partnerships to address state-specific development priorities and support implementation capabilities at the state and the local level.
"The future of India lies in the states of India. The country's transition to high middle-income status will be determined in large part by the effectiveness of India's federal compact. In this context, an important focus of the CPF will be to deepen engagement with India's states and invest in the institutions and capabilities of the states and local governments to address their development priorities," Mr Ahmad said.
He said the Bank was going for a "Lighthouse India" approach. "Lighthouse India basically means learning from the innovation of the states and sharing with other states. We also recognise that the learning is what India also has to offer the rest of the world. As it goes from low-income to middle-income to high-middle-income, its learning over its development path is going to be very valuable for other nations," he said.
"The Indian economy has evolved to a level where the private sector can be counted on to close large developmental gaps. Through this the CPF, the WBG will help India leverage additional resources from the private sector to help India realize its full potential," said Jun Zhang, Country Head, IFC, India.
Fitch ups India's growth forecast to 7.8% for FY19
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Fitch Ratings on Friday upped India's growth forecast for the current fiscal to 7.8 per cent, from 7.4 per cent projected earlier.
In its Global Economic Outlook, Fitch, however, flagged tightening of financial conditions, rising oil bill and weak bank balance sheets as headwinds to growth.
"We have revised up our forecast for FY2018-2019 growth to 7.8 per cent from 7.4 per cent on the back of the better-than-expected 2Q18 outturn. India's growth likely peaked in 2Q18 (April-June) though," Fitch said.
The Indian rupee (INR) has been the worst-performing major Asian currency so far this year.
"And despite the central bank's greater tolerance for currency depreciation, interest rates have been raised by more than anticipated," the global rating agency said in the report.
Fitch also forecast inflation picking up to the upper part of the central bank's target band (4 per cent, plus-minus 2 per cent) within the forecast horizon on relatively high demand-pull pressures and INR depreciation.
The upward revision in growth forecast comes in the backdrop of GDP expanding 8.2 per cent in April-June quarter, higher than Fitch's expectation of 7.7 per cent.
"This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in 2Q17 (April-June) by companies de-stocking ahead of the rollout of the goods and services tax," Fitch said.
It has cut the growth forecasts for FY 2019-2020 and FY 2020-2021 growth by 0.2 percentage points to 7.3 per cent.
"Fiscal policy should remain quite supportive of growth in the run-up to elections likely to be held in early 2019. The investment/GDP ratio has stopped trending down, helped by ramped-up public infrastructure outlays, in particular by state-owned enterprises (SOEs)," it said.
In its Global Economic Outlook, Fitch, however, flagged tightening of financial conditions, rising oil bill and weak bank balance sheets as headwinds to growth.
"We have revised up our forecast for FY2018-2019 growth to 7.8 per cent from 7.4 per cent on the back of the better-than-expected 2Q18 outturn. India's growth likely peaked in 2Q18 (April-June) though," Fitch said.
The Indian rupee (INR) has been the worst-performing major Asian currency so far this year.
"And despite the central bank's greater tolerance for currency depreciation, interest rates have been raised by more than anticipated," the global rating agency said in the report.
Fitch also forecast inflation picking up to the upper part of the central bank's target band (4 per cent, plus-minus 2 per cent) within the forecast horizon on relatively high demand-pull pressures and INR depreciation.
The upward revision in growth forecast comes in the backdrop of GDP expanding 8.2 per cent in April-June quarter, higher than Fitch's expectation of 7.7 per cent.
"This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in 2Q17 (April-June) by companies de-stocking ahead of the rollout of the goods and services tax," Fitch said.
It has cut the growth forecasts for FY 2019-2020 and FY 2020-2021 growth by 0.2 percentage points to 7.3 per cent.
"Fiscal policy should remain quite supportive of growth in the run-up to elections likely to be held in early 2019. The investment/GDP ratio has stopped trending down, helped by ramped-up public infrastructure outlays, in particular by state-owned enterprises (SOEs)," it said.
Sebi issues revised KYC norms for foreign portfolio investors
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Markets regulator Sebi Friday issued revised KYC norms for foreign portfolio investors, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities. Two circulars pertaining to KYC (Know Your Client) requirements and eligibility conditions for FPIs have been issued.
These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance.
NRIs, OCIs (Overseas Citizens of India) and RIs (Resident Indians) have been permitted to hold non-controlling stake in FPIs. There would also be no restriction on them to manage non-investing FPIs Sebi-registered offshore funds as well as registered investment managers, according to the regulator.
These entities would be allowed to be constituents of FPIs subject to certain conditions. If single and aggregate NRI/OCI/RI holding is below 25 per cent and 50 per cent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI.
According to Sebi, FPIs can be controlled by Investment Managers (IMs) which are controlled and/ or owned by NRI, OCI, or RI. In this regard, the conditions include that the investment manager is appropriately regulated in its home jurisdiction and registers itself with Sebi as non-investing FPI.
Among others, a non-investing FPI can be directly or indirectly owned or controlled by a NRI, OCI or RI.
"The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs which are 'offshore funds' for which no-objection certificate has been provided by the board in terms of mutual fund regulations," Sebi noted.
Existing FPIs and new applicants would be given two years from the date of the new norms coming into force or date of registration, whichever is later. In case of temporary breach, a time period of 90 days would be given to ensure compliance. The watchdog said that FPIs under category II and III have to maintain a list of beneficial owners and the same has to be provided to it.
Further, additional KYC documentation requirements for beneficial owners have been done away with for government-related entities that come under Category I FPIs. Beneficial owners are the natural persons who ultimately own or control an FPI. The FPIs have been categorised into three classes based on their risk profile. Regarding FPIs from 'high risk jurisdictions', the intermediaries may apply lower materiality threshold of 10 per cent for identification of beneficial owners as well as ensure KYC documentation as applicable for category III entities.
There is also a framework for identification of senior managing official of FPIs, beneficial owners of listed entities besides requirements with respect to disclosure of personal information.
According to Sebi, senior managing official would mean "an individual as designated by the FPI who holds a senior management position and makes key decisions relating to the FPI". In case of companies or trusts represented by service providers like lawyers or accountants, Sebi said that FPIs should provide information of the real owners of those companies or trusts.
If a beneficial owner exercises controls through means like voting rights, agreements, arrangement among others that should also be specified. However, Sebi said that a beneficial owner should not be a nominee of another person. The new rules would apply equally to those investors using the Offshore Derivative Instruments, popularly known as P-Notes or Participatory Notes.
With regard to KYC documentation for Category III FPIs, Sebi has prescribed that audited annual financial statement or a net worth certificate from auditor should be obtained.
However, Sebi said that exempted documents should be provided during investigations or an enquiry.
"In respect of exempted documents, FPIs concerned should submit an undertaking to designated depository participants or custodians that upon demand by regulators or law enforcement agencies, the relevant documents would be provided," the regulator said.
Custodians should maintain KYC records in original for at least five years from the date of cessation of the transactions with the FPI concerned. In case any litigation is pending, these records should be maintained till the completion of the proceedings.
The regulator has given six months to FPIs for compliance to new rules, while the non-compliant investors can be given further 180 days to wind down their existing positions. "Category II and III FPIs registered prior to this circular (existing FPIs) should provide the list of beneficial owners and applicable KYC documentation within six months," the Securities and Exchange Board of India (Sebi) said.
According to the regulator, a circular regarding clubbing of investment limits for FPIs would be issued separately. In April, the regulator proposed new norms on KYC and beneficial owner identification but several FPIs had expressed concerns over the proposed changes in rules. The final guidelines have been prepared by taking into account recommendations made by the panel, headed by former RBI Deputy Governor H R Khan, and public comments on the draft proposals.
These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance.
NRIs, OCIs (Overseas Citizens of India) and RIs (Resident Indians) have been permitted to hold non-controlling stake in FPIs. There would also be no restriction on them to manage non-investing FPIs Sebi-registered offshore funds as well as registered investment managers, according to the regulator.
These entities would be allowed to be constituents of FPIs subject to certain conditions. If single and aggregate NRI/OCI/RI holding is below 25 per cent and 50 per cent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI.
According to Sebi, FPIs can be controlled by Investment Managers (IMs) which are controlled and/ or owned by NRI, OCI, or RI. In this regard, the conditions include that the investment manager is appropriately regulated in its home jurisdiction and registers itself with Sebi as non-investing FPI.
Among others, a non-investing FPI can be directly or indirectly owned or controlled by a NRI, OCI or RI.
"The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs which are 'offshore funds' for which no-objection certificate has been provided by the board in terms of mutual fund regulations," Sebi noted.
Existing FPIs and new applicants would be given two years from the date of the new norms coming into force or date of registration, whichever is later. In case of temporary breach, a time period of 90 days would be given to ensure compliance. The watchdog said that FPIs under category II and III have to maintain a list of beneficial owners and the same has to be provided to it.
Further, additional KYC documentation requirements for beneficial owners have been done away with for government-related entities that come under Category I FPIs. Beneficial owners are the natural persons who ultimately own or control an FPI. The FPIs have been categorised into three classes based on their risk profile. Regarding FPIs from 'high risk jurisdictions', the intermediaries may apply lower materiality threshold of 10 per cent for identification of beneficial owners as well as ensure KYC documentation as applicable for category III entities.
There is also a framework for identification of senior managing official of FPIs, beneficial owners of listed entities besides requirements with respect to disclosure of personal information.
According to Sebi, senior managing official would mean "an individual as designated by the FPI who holds a senior management position and makes key decisions relating to the FPI". In case of companies or trusts represented by service providers like lawyers or accountants, Sebi said that FPIs should provide information of the real owners of those companies or trusts.
If a beneficial owner exercises controls through means like voting rights, agreements, arrangement among others that should also be specified. However, Sebi said that a beneficial owner should not be a nominee of another person. The new rules would apply equally to those investors using the Offshore Derivative Instruments, popularly known as P-Notes or Participatory Notes.
With regard to KYC documentation for Category III FPIs, Sebi has prescribed that audited annual financial statement or a net worth certificate from auditor should be obtained.
However, Sebi said that exempted documents should be provided during investigations or an enquiry.
"In respect of exempted documents, FPIs concerned should submit an undertaking to designated depository participants or custodians that upon demand by regulators or law enforcement agencies, the relevant documents would be provided," the regulator said.
Custodians should maintain KYC records in original for at least five years from the date of cessation of the transactions with the FPI concerned. In case any litigation is pending, these records should be maintained till the completion of the proceedings.
The regulator has given six months to FPIs for compliance to new rules, while the non-compliant investors can be given further 180 days to wind down their existing positions. "Category II and III FPIs registered prior to this circular (existing FPIs) should provide the list of beneficial owners and applicable KYC documentation within six months," the Securities and Exchange Board of India (Sebi) said.
According to the regulator, a circular regarding clubbing of investment limits for FPIs would be issued separately. In April, the regulator proposed new norms on KYC and beneficial owner identification but several FPIs had expressed concerns over the proposed changes in rules. The final guidelines have been prepared by taking into account recommendations made by the panel, headed by former RBI Deputy Governor H R Khan, and public comments on the draft proposals.
Sensex skips a heartbeat! NBFCs drive market down 1,100 points, recovers soon after
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The Sensex and Nifty crashed in afternoon trade amid heavy selling in housing finance companies stocks. The stocks of non-banking finance companies (NBFCs) crashed today and spooked Sensex and Nifty which fell nearly 1,128 points and 368 points, respectively. However, the indices later recovered on management of these companies allaying concerns over their financial position.
The stock of Dewan Housing Finance fell 59.67 per cent or 364 points to a new low of 246.25, the most among the NBFCs. Other housing finance companies such as India Bulls Housing Finance, LIC Housing, L&T Finance Holding stocks too fell in afternoon trade.
DHFL CMD Kapil Wadhawan told CNBC TV 18 that stock fall has come as a surprise and shock. When asked if he had any pledged shares or loan against shares, Wadhawan said, "Absolutely not, that's a policy of the family not to go and pledge your own shares. We have never done this in the past. There is no intention of doing that in the future."
Responding to a question whether he was aware of a fund selling DHFL paper on Wednesday, Wadhawan added, "That's a secondary trade between a buyer and a seller. It's got nothing to do with the fundamentals of a company which are extremely strong. Obviously this panic has been started for some other fundamental reasons. There seems to be some cascading effect - my fundamentals are strong, my NPA position is strong, my asset quality...With all this unfortunate mayhem that has gone around in the market, this only puts a dent on any further primary issues that we do for the immediate future. These are all sentiment spoilers in the market."
The BSE Sensex recovered nearly 900 points after plummeting over 1,100 points within a matter of minutes in afternoon session on major selloff in finance stocks, despite firm global cues and rupee recovery. The 30-share index had plunged 1127.58 points, or 3.03 per cent, to hit an intra-day low of 35,993.64. It, however, recovered nearly 900 points within minutes of the fall.
The broader NSE Nifty cracked below the 11,000 mark, falling 367.90 points, or 3.27 per cent, to touch a low of 10,866.45, before recovering over 300 points to traded near 11,169.90.
The Sensex finally ended lower by 279.62 points, or 0.75 per cent, at 36,841.60. This is its lowest closing since July 25, when it had finished at 36,858.23.
YES Bank was the worst performer on the index, losing a whopping 28.71 per cent. The Reserve Bank on Wednesday curtailed the term of its founding CEO Rana Kapoor and asked the private sector lender to look for his replacement by January 2019.
The broader Nifty too suffered a mid-session plunge and ended at 11,143.10, down 91.25 points.
The indices closed with losses for the third straight week. The Sensex lost a hefty 1,249.04 points, or 3.28 per cent, while the NSE Nifty fell 372.10 points, or 3.23 per cent, during the week.
Joseph Thomas, Head of Research, Wealth Management at Emkay Global Financial Services said, "The events surrounding YES Bank and DHFL sent the broader markets sharply lower. The trigger on the surface seems to be the selling of debt papers of DHFL by one of the prominent AMCs, but the broader issue is that of a contagion leading to selloff in papers of other companies The ILFS exposure led to selling by the impacted institutional investor of some other unrelated NBFC to keep the liquidity channel open. The major concern here is of risk sentiment and that appears to be pretty weak in the wake of top quality papers getting downgraded to junk status in a matter of days All these influenced the markets to a significant extent. But it was bit overdone given the fact that the markets closed much higher than the lows seen earlier in the day."
Heavy selling was witnessed in realty, healthcare, banking, IT, auto, teck, power consumer durables, FMCG, capital goods, infrastructure, metal and PSU indices, which fell up to 3.65 per cent.
YES Bank was the biggest Sensex loser intra day, cracking 34 per cent to hit a one-year low.
Other banking stocks such as PNB, Federal Bank, Bank of Baroda, Kotak Bank and SBI, dropped up to 7.44 per cent.
Other major losers were Adani Ports, Tata Motors, Infosys, Sun Pharma, SBI, Maruti Suzuki and HUL, falling up to 3.15 per cent.
Among housing finance stocks, DHFL led the pack by tanking over 50 per cent, followed by Indiabulls Housing Finance, Can Fin Homes, PNB Housing Finance and LIC Housing Finance cracking up to 17 per cent.
The stock of Dewan Housing Finance fell 59.67 per cent or 364 points to a new low of 246.25, the most among the NBFCs. Other housing finance companies such as India Bulls Housing Finance, LIC Housing, L&T Finance Holding stocks too fell in afternoon trade.
DHFL CMD Kapil Wadhawan told CNBC TV 18 that stock fall has come as a surprise and shock. When asked if he had any pledged shares or loan against shares, Wadhawan said, "Absolutely not, that's a policy of the family not to go and pledge your own shares. We have never done this in the past. There is no intention of doing that in the future."
Responding to a question whether he was aware of a fund selling DHFL paper on Wednesday, Wadhawan added, "That's a secondary trade between a buyer and a seller. It's got nothing to do with the fundamentals of a company which are extremely strong. Obviously this panic has been started for some other fundamental reasons. There seems to be some cascading effect - my fundamentals are strong, my NPA position is strong, my asset quality...With all this unfortunate mayhem that has gone around in the market, this only puts a dent on any further primary issues that we do for the immediate future. These are all sentiment spoilers in the market."
The BSE Sensex recovered nearly 900 points after plummeting over 1,100 points within a matter of minutes in afternoon session on major selloff in finance stocks, despite firm global cues and rupee recovery. The 30-share index had plunged 1127.58 points, or 3.03 per cent, to hit an intra-day low of 35,993.64. It, however, recovered nearly 900 points within minutes of the fall.
The broader NSE Nifty cracked below the 11,000 mark, falling 367.90 points, or 3.27 per cent, to touch a low of 10,866.45, before recovering over 300 points to traded near 11,169.90.
The Sensex finally ended lower by 279.62 points, or 0.75 per cent, at 36,841.60. This is its lowest closing since July 25, when it had finished at 36,858.23.
YES Bank was the worst performer on the index, losing a whopping 28.71 per cent. The Reserve Bank on Wednesday curtailed the term of its founding CEO Rana Kapoor and asked the private sector lender to look for his replacement by January 2019.
The broader Nifty too suffered a mid-session plunge and ended at 11,143.10, down 91.25 points.
The indices closed with losses for the third straight week. The Sensex lost a hefty 1,249.04 points, or 3.28 per cent, while the NSE Nifty fell 372.10 points, or 3.23 per cent, during the week.
Joseph Thomas, Head of Research, Wealth Management at Emkay Global Financial Services said, "The events surrounding YES Bank and DHFL sent the broader markets sharply lower. The trigger on the surface seems to be the selling of debt papers of DHFL by one of the prominent AMCs, but the broader issue is that of a contagion leading to selloff in papers of other companies The ILFS exposure led to selling by the impacted institutional investor of some other unrelated NBFC to keep the liquidity channel open. The major concern here is of risk sentiment and that appears to be pretty weak in the wake of top quality papers getting downgraded to junk status in a matter of days All these influenced the markets to a significant extent. But it was bit overdone given the fact that the markets closed much higher than the lows seen earlier in the day."
Heavy selling was witnessed in realty, healthcare, banking, IT, auto, teck, power consumer durables, FMCG, capital goods, infrastructure, metal and PSU indices, which fell up to 3.65 per cent.
YES Bank was the biggest Sensex loser intra day, cracking 34 per cent to hit a one-year low.
Other banking stocks such as PNB, Federal Bank, Bank of Baroda, Kotak Bank and SBI, dropped up to 7.44 per cent.
Other major losers were Adani Ports, Tata Motors, Infosys, Sun Pharma, SBI, Maruti Suzuki and HUL, falling up to 3.15 per cent.
Among housing finance stocks, DHFL led the pack by tanking over 50 per cent, followed by Indiabulls Housing Finance, Can Fin Homes, PNB Housing Finance and LIC Housing Finance cracking up to 17 per cent.
How Vijaya Bank compensates for Dena Bank's inclusion in merger with Bank of Baroda
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The announcement of Bank of Baroda, Dena Bank and Vijaya Bank merging into a single bank is part of the government's strategy to merge public sector lenders and promote consolidation in the sector marred by loads of non-performing assets (NPAs).
All the 38 listed banks accounted for gross NPAs totalling over Rs 10.17 lakh crore in the quarter ended March 2018.
Cleaning of the balance sheet and minimising NPAs is the objective of the latest merger announced by the government.
The strategy which the government has adopted is merging one weak bank with its stronger counterparts. In this case, the weaker bank is Mumbai-based Dena Bank. The lender came under prompt corrective action of the RBI in May 2017 in view of high Net NPA and negative RoA (return on assets) and now faces restrictions on lending and several other bank operations.
On May 12, 2018, the Reserve Bank of India asked the lender not to issue any fresh loans and hire new personnel as part of its restrictions under prompt corrective action.
A day after the announcement, the stock hit upper circuit of 19.75% on the BSE.
On the other hand, Bank of Baroda stock closed over 17% lower on the BSE.
The reason is obvious: Bank of Baroda is the largest among the three and will take a hit on its asset quality post merger with Dena Bank.
We explore the financials of the three lenders in details to find out how the three made ideal candidates for a merger.
Dena Bank
Dena Bank's net loss for the fiscal ending March 2018 widened to Rs 1,923.15 crore compared to a loss of Rs 863.62 crore for the fiscal ending March 2017.
In fact, during the last three fiscals, the bank posted net loss amounting to Rs 3,722.09 crore.
However, for the fiscal ending March 2015, the bank posted a net profit of Rs 265.48 crore down from Rs 551.66 crore for the fiscal ending March 2014.
The fall in net profit of the bank can be attributed to a rise in NPAs over the years.
Gross NPAs of the bank rose from Rs 2,616.03 crore for the fiscal ending March 2014 to Rs 16,361.44 crore for the fiscal ending March 2018.
Similarly, net NPAs of the bank rose from Rs 1,818.92 crore in the fiscal ending March 2014 to Rs 7,838.78 crore crore for fiscal ending March 2018.
Bank deposits fell from Rs 1,17,430.96 crore for the fiscal ending March 2016 to Rs 1,06,130.14 crore in the fiscal ending March 2018.
Similarly, advances for the fiscal ending March 2018 fell to Rs 65,581.51 crore compared to Rs 82,328 crore for the fiscal ending March 2016.
The above figures throw light on the deteriorating financial condition in the state-run lender over the last few years after which RBI had to intervene and bring the lender under preventive corrective action.
Vijaya Bank
The Bangalore-based lender is on a better financial footing than its weaker counterpart Dena Bank.
Net profit for the fiscal ending March 2018 fell to Rs 727.02 crore compared to a net profit of Rs 750.48 crore for the fiscal ending March 2017. However, net profit rose to Rs 750.48 crore from Rs 381.80 crore for the fiscal ending March 2016.
In fact, Vijaya Bank is the only lender among the three to post net profit in last fiscal.
During the last three fiscals, the bank posted net profit amounting to Rs 1,859.3 crore compared to Dena Bank's net loss of Rs 3,722.09 crore for the same period.
Gross NPAs of the bank rose from Rs 1,985.86 crore for the fiscal ending March 2014 to Rs 7,526.09 crore for the fiscal ending March 2018.
Similarly, net NPAs rose from Rs 1,262.37 crore in the fiscal ending March 2014 to Rs 5,021.24 crore for fiscal ending March 2018.
However, on the deposits front, the bank seems to have clocked a healthy growth during the last five fiscals.
Deposits rose from Rs 1,24,296.16 crore for the fiscal ending March 2014 to Rs 157,287. 54 crore for the fiscal ending March 2018 depicting a 26.54 percent rise over five years.
On the other hand, advances for the fiscal ending March 2018 rose to Rs 116,165.44 crore compared to Rs 81,504.03 crore for the fiscal ending March 2014, depicting a 42.52% growth over five years.
Bank of Baroda
The Vadodara-based lender is the largest lender among the three banks.
It did not perform well in the March 2018 fiscal as the bank posted a net loss of Rs 2,431.81 crore amid rise in provisions and contingencies and NPAs compared to net profit of Rs 1,383.13 crore for the fiscal ending March 2017.
In last five years, the bank reported the highest net profit of Rs 4,541.08 crore for the fiscal ending March 2014 and the highest loss of Rs 5,395.55 crore for the fiscal ended March 2016.
In fact, the lender posted a net loss of Rs 6,444.23 crore during the last three fiscals.
Gross NPAs of the bank rose from Rs 11,875.90 crore for the fiscal ending March 2014 to Rs 56,480.39 crore for the fiscal ending March 2018.
Similarly, net NPAs rose from Rs 6034.76 crore in the fiscal ending March 2014 to Rs 23,482.65 crore for fiscal ending March 2018.
However, on the deposits front, the bank logged a zigzag pattern of growth during the last five fiscals.
Deposits rose from Rs 5,68,894.39 crore for the fiscal ending March 2014 to Rs 5,91,314.82 crore for the fiscal ending March 2018. Deposits crossed the Rs 6 lakh crore mark twice for fiscals ended March 2017 and March 2015 but could not sustain the momentum.
On the other hand, advances for the fiscal ending March 2018 rose to Rs 4,27,431.83 crore compared to Rs 3,97,005.81 crore for the fiscal ending March 2014, depicting a 7.66% growth over five years.
Conclusion
The above figures signal that even as Bank of Baroda (BoB) is the largest among the three banks but it has its own share issues such as rising NPAs and provisions and contingencies amid volatile deposits and advances growth.
With Dena Bank joining the merger process, the quality of BOB assets will only suffer as it would have to deal with rising toxic assets of its weaker counterpart.
Similar is the case with Vijaya Bank. The bank is the healthiest among the three when it comes to financials but being a public sector lender, it could not also escape from the vicious cycle of NPAs which now plague the entire sector.
It seems Vijaya Bank with its healthy loan, deposit growth rate and stable net profit growth rate, neutralises the adverse impact of Dena Bank's inclusion in the merger with its errant track record on the financial front and makes for a comfortable financial merger for bank of Baroda.
All the 38 listed banks accounted for gross NPAs totalling over Rs 10.17 lakh crore in the quarter ended March 2018.
Cleaning of the balance sheet and minimising NPAs is the objective of the latest merger announced by the government.
The strategy which the government has adopted is merging one weak bank with its stronger counterparts. In this case, the weaker bank is Mumbai-based Dena Bank. The lender came under prompt corrective action of the RBI in May 2017 in view of high Net NPA and negative RoA (return on assets) and now faces restrictions on lending and several other bank operations.
On May 12, 2018, the Reserve Bank of India asked the lender not to issue any fresh loans and hire new personnel as part of its restrictions under prompt corrective action.
A day after the announcement, the stock hit upper circuit of 19.75% on the BSE.
On the other hand, Bank of Baroda stock closed over 17% lower on the BSE.
The reason is obvious: Bank of Baroda is the largest among the three and will take a hit on its asset quality post merger with Dena Bank.
We explore the financials of the three lenders in details to find out how the three made ideal candidates for a merger.
Dena Bank
Dena Bank's net loss for the fiscal ending March 2018 widened to Rs 1,923.15 crore compared to a loss of Rs 863.62 crore for the fiscal ending March 2017.
In fact, during the last three fiscals, the bank posted net loss amounting to Rs 3,722.09 crore.
However, for the fiscal ending March 2015, the bank posted a net profit of Rs 265.48 crore down from Rs 551.66 crore for the fiscal ending March 2014.
The fall in net profit of the bank can be attributed to a rise in NPAs over the years.
Gross NPAs of the bank rose from Rs 2,616.03 crore for the fiscal ending March 2014 to Rs 16,361.44 crore for the fiscal ending March 2018.
Similarly, net NPAs of the bank rose from Rs 1,818.92 crore in the fiscal ending March 2014 to Rs 7,838.78 crore crore for fiscal ending March 2018.
Bank deposits fell from Rs 1,17,430.96 crore for the fiscal ending March 2016 to Rs 1,06,130.14 crore in the fiscal ending March 2018.
Similarly, advances for the fiscal ending March 2018 fell to Rs 65,581.51 crore compared to Rs 82,328 crore for the fiscal ending March 2016.
The above figures throw light on the deteriorating financial condition in the state-run lender over the last few years after which RBI had to intervene and bring the lender under preventive corrective action.
Vijaya Bank
The Bangalore-based lender is on a better financial footing than its weaker counterpart Dena Bank.
Net profit for the fiscal ending March 2018 fell to Rs 727.02 crore compared to a net profit of Rs 750.48 crore for the fiscal ending March 2017. However, net profit rose to Rs 750.48 crore from Rs 381.80 crore for the fiscal ending March 2016.
In fact, Vijaya Bank is the only lender among the three to post net profit in last fiscal.
During the last three fiscals, the bank posted net profit amounting to Rs 1,859.3 crore compared to Dena Bank's net loss of Rs 3,722.09 crore for the same period.
Gross NPAs of the bank rose from Rs 1,985.86 crore for the fiscal ending March 2014 to Rs 7,526.09 crore for the fiscal ending March 2018.
Similarly, net NPAs rose from Rs 1,262.37 crore in the fiscal ending March 2014 to Rs 5,021.24 crore for fiscal ending March 2018.
However, on the deposits front, the bank seems to have clocked a healthy growth during the last five fiscals.
Deposits rose from Rs 1,24,296.16 crore for the fiscal ending March 2014 to Rs 157,287. 54 crore for the fiscal ending March 2018 depicting a 26.54 percent rise over five years.
On the other hand, advances for the fiscal ending March 2018 rose to Rs 116,165.44 crore compared to Rs 81,504.03 crore for the fiscal ending March 2014, depicting a 42.52% growth over five years.
Bank of Baroda
The Vadodara-based lender is the largest lender among the three banks.
It did not perform well in the March 2018 fiscal as the bank posted a net loss of Rs 2,431.81 crore amid rise in provisions and contingencies and NPAs compared to net profit of Rs 1,383.13 crore for the fiscal ending March 2017.
In last five years, the bank reported the highest net profit of Rs 4,541.08 crore for the fiscal ending March 2014 and the highest loss of Rs 5,395.55 crore for the fiscal ended March 2016.
In fact, the lender posted a net loss of Rs 6,444.23 crore during the last three fiscals.
Gross NPAs of the bank rose from Rs 11,875.90 crore for the fiscal ending March 2014 to Rs 56,480.39 crore for the fiscal ending March 2018.
Similarly, net NPAs rose from Rs 6034.76 crore in the fiscal ending March 2014 to Rs 23,482.65 crore for fiscal ending March 2018.
However, on the deposits front, the bank logged a zigzag pattern of growth during the last five fiscals.
Deposits rose from Rs 5,68,894.39 crore for the fiscal ending March 2014 to Rs 5,91,314.82 crore for the fiscal ending March 2018. Deposits crossed the Rs 6 lakh crore mark twice for fiscals ended March 2017 and March 2015 but could not sustain the momentum.
On the other hand, advances for the fiscal ending March 2018 rose to Rs 4,27,431.83 crore compared to Rs 3,97,005.81 crore for the fiscal ending March 2014, depicting a 7.66% growth over five years.
Conclusion
The above figures signal that even as Bank of Baroda (BoB) is the largest among the three banks but it has its own share issues such as rising NPAs and provisions and contingencies amid volatile deposits and advances growth.
With Dena Bank joining the merger process, the quality of BOB assets will only suffer as it would have to deal with rising toxic assets of its weaker counterpart.
Similar is the case with Vijaya Bank. The bank is the healthiest among the three when it comes to financials but being a public sector lender, it could not also escape from the vicious cycle of NPAs which now plague the entire sector.
It seems Vijaya Bank with its healthy loan, deposit growth rate and stable net profit growth rate, neutralises the adverse impact of Dena Bank's inclusion in the merger with its errant track record on the financial front and makes for a comfortable financial merger for bank of Baroda.
General Awareness
Portals to strengthen Women Safety launched
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What to study?
For Prelims: Key features of portals launched.
For Mains: Issues and challenges involved in women safety.
Context: The government has launched two portals to strengthen Women Safety:
Cyber Crime Prevention against Women and Children (CCPWC) portal to check objectionable online content.
National Database on Sexual Offenders (NDSO) to aid in monitoring & investigation of sexual crimes.
Details:
Cyber Crime Prevention against Women and Children (CCPWC) portal:
The portal will receive complaints from citizens on objectionable online content related to child pornography, child sexual abuse material, sexually explicit material such as rape and gang rape.
The portal is convenient and user friendly that will enable complainants in reporting cases without disclosing their identity. This will not only aid the victims/complainants but also help the civil society organizations and responsible citizens to anonymously report complaints pertaining to child pornography, child sexual abuse material or sexually explicit material such as rape and gang rape.
Complainants can also upload the objectionable content and URL to assist in the investigation by the State Police. The complaints registered through this portal will be handled by police authorities of respective State/UTs. There are other features such as a victim or complainant can track his/her report by opting for “report and track” option using his/her mobile number.
The National Crime Records Bureau (NCRB) will proactively identify such objectionable content and take up with intermediaries for its removal. For this NCRB has already been notified as the Government of India agency to issue notices under Section 79(3)b of IT Act.
National Database on Sexual Offenders (NDSO):
The National Database on Sexual Offenders (NDSO), which is accessible only to law enforcement agencies, will assist in effectively tracking and investigating cases of sexual offences.
It is a central database of “sexual offenders” in the country which will be maintained by the NCRB for regular monitoring and tracking by the State Police. The database is accessible only to the law enforcement agencies for investigation and monitoring purpose.
The database will include offenders convicted under charges of rape, gang rape, POCSO and eve teasing. At present the database contains 4.4 lakh entries.
The State Police have been requested to regularly update the database from 2005 onwards. The database includes name, address, photograph and fingerprint details for each entry. However, the database will not compromise any individual’s privacy.
Way ahead:
The two portals launched are part of efforts in the direction of strengthening security of women and children. However, the field level challenges have to be overcome by the Police at the ground level to ensure speedy justice to the victims. The security agencies should fully utilize potential of the two portals and update the database regularly for greater effectiveness.
There is also need for timebound completion of investigation in sexual crimes to instill deterrence among potential offenders.
What to study?
For Prelims: Key features of portals launched.
For Mains: Issues and challenges involved in women safety.
Context: The government has launched two portals to strengthen Women Safety:
Cyber Crime Prevention against Women and Children (CCPWC) portal to check objectionable online content.
National Database on Sexual Offenders (NDSO) to aid in monitoring & investigation of sexual crimes.
Details:
Cyber Crime Prevention against Women and Children (CCPWC) portal:
The portal will receive complaints from citizens on objectionable online content related to child pornography, child sexual abuse material, sexually explicit material such as rape and gang rape.
The portal is convenient and user friendly that will enable complainants in reporting cases without disclosing their identity. This will not only aid the victims/complainants but also help the civil society organizations and responsible citizens to anonymously report complaints pertaining to child pornography, child sexual abuse material or sexually explicit material such as rape and gang rape.
Complainants can also upload the objectionable content and URL to assist in the investigation by the State Police. The complaints registered through this portal will be handled by police authorities of respective State/UTs. There are other features such as a victim or complainant can track his/her report by opting for “report and track” option using his/her mobile number.
The National Crime Records Bureau (NCRB) will proactively identify such objectionable content and take up with intermediaries for its removal. For this NCRB has already been notified as the Government of India agency to issue notices under Section 79(3)b of IT Act.
National Database on Sexual Offenders (NDSO):
The National Database on Sexual Offenders (NDSO), which is accessible only to law enforcement agencies, will assist in effectively tracking and investigating cases of sexual offences.
It is a central database of “sexual offenders” in the country which will be maintained by the NCRB for regular monitoring and tracking by the State Police. The database is accessible only to the law enforcement agencies for investigation and monitoring purpose.
The database will include offenders convicted under charges of rape, gang rape, POCSO and eve teasing. At present the database contains 4.4 lakh entries.
The State Police have been requested to regularly update the database from 2005 onwards. The database includes name, address, photograph and fingerprint details for each entry. However, the database will not compromise any individual’s privacy.
Way ahead:
The two portals launched are part of efforts in the direction of strengthening security of women and children. However, the field level challenges have to be overcome by the Police at the ground level to ensure speedy justice to the victims. The security agencies should fully utilize potential of the two portals and update the database regularly for greater effectiveness.
There is also need for timebound completion of investigation in sexual crimes to instill deterrence among potential offenders.
For Prelims: Key features of portals launched.
For Mains: Issues and challenges involved in women safety.
Context: The government has launched two portals to strengthen Women Safety:
Cyber Crime Prevention against Women and Children (CCPWC) portal to check objectionable online content.
National Database on Sexual Offenders (NDSO) to aid in monitoring & investigation of sexual crimes.
Details:
Cyber Crime Prevention against Women and Children (CCPWC) portal:
The portal will receive complaints from citizens on objectionable online content related to child pornography, child sexual abuse material, sexually explicit material such as rape and gang rape.
The portal is convenient and user friendly that will enable complainants in reporting cases without disclosing their identity. This will not only aid the victims/complainants but also help the civil society organizations and responsible citizens to anonymously report complaints pertaining to child pornography, child sexual abuse material or sexually explicit material such as rape and gang rape.
Complainants can also upload the objectionable content and URL to assist in the investigation by the State Police. The complaints registered through this portal will be handled by police authorities of respective State/UTs. There are other features such as a victim or complainant can track his/her report by opting for “report and track” option using his/her mobile number.
The National Crime Records Bureau (NCRB) will proactively identify such objectionable content and take up with intermediaries for its removal. For this NCRB has already been notified as the Government of India agency to issue notices under Section 79(3)b of IT Act.
National Database on Sexual Offenders (NDSO):
The National Database on Sexual Offenders (NDSO), which is accessible only to law enforcement agencies, will assist in effectively tracking and investigating cases of sexual offences.
It is a central database of “sexual offenders” in the country which will be maintained by the NCRB for regular monitoring and tracking by the State Police. The database is accessible only to the law enforcement agencies for investigation and monitoring purpose.
The database will include offenders convicted under charges of rape, gang rape, POCSO and eve teasing. At present the database contains 4.4 lakh entries.
The State Police have been requested to regularly update the database from 2005 onwards. The database includes name, address, photograph and fingerprint details for each entry. However, the database will not compromise any individual’s privacy.
Way ahead:
The two portals launched are part of efforts in the direction of strengthening security of women and children. However, the field level challenges have to be overcome by the Police at the ground level to ensure speedy justice to the victims. The security agencies should fully utilize potential of the two portals and update the database regularly for greater effectiveness.
There is also need for timebound completion of investigation in sexual crimes to instill deterrence among potential offenders.
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