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9 PM Daily NEWS Brief

9 PM Daily Brief – 1st December 2016

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Click here to download 9 PM Daily Brief PDF (1st Dec. 2016)


  • Front Page / NATIONAL

  1. National anthem must be played before screening of films
  2. Airlines seek stay on levy, HC issues notice
  3. ‘Delhi government worried about everything except environment’
  4. Route all wages via bank accounts:Govt
  5. Cap on Jan Dhan withdrawal:
  • Editorial/OPINION

  1. Provocation at Nagrota
  2. India’s missing girl children
  3. Reeling out patriotism
  • ECONOMY

  1. Agriculture spurs GDP growth to 7.3%
  2. Trade costs of India remain high: UN body:
  • ART AND CULTURE

  1. Cuban rumba and Ugandan music now on UNESCO’s heritage list
  • Indian Express

  1. How to sow a reform:
  • Live Mint

  1. What does the currency ban mean for banks?

Front Page/ Nation


[1] National anthem must be played before screening of films


Context – The Supreme Court on Wednesday ordered all cinema halls across the country to play the national anthem before the screening of films and that all present must “stand up in respect” till the anthem ended.

Background

The Supreme Court was hearing a plea to clarify when the national anthem should be sung.

The PIL was filed by Shyam Narayan Chouskey seeking a set of parameters on what amounts to abuse of the anthem.

The Supreme Court’s decision to consider this PIL followed after a wheelchair-bound man was assaulted by a couple at a cinema hall in Panaji for not standing up during the rendition of the anthem.

Supreme Court’s ruling

  • Cinema halls must play the national anthem before the screening of films and that all present must “stand up in respect” till the anthem ended.
  • Cinema halls should also display the national flag on screen when the anthem is played.
  • The Bench said it is the duty of every person to show respect when the national anthem is played or recited or sung under the Prevention of Insults to National Honour Act of 1951.
  • All the doors of cinema halls must be closed when the national anthem is being played to prevent people from entering or exiting.

Purpose of ruling

  • According to SC, practice would “instill a feeling within one a sense of committed patriotism and nationalism.”
  • People should feel that they live in a nation and show respect to the national anthem and the national flag.
  • People should imbibe and express respect to the inherent quality of the anthem and the flag.

Ban on commercial uses of national anthem

  • Court issued a complete ban on the commercial exploitation of the national anthem and the flag.
  • The court banned dramatization of the anthem or it to be used in any part of any variety shows or for entertainment purposes.
  • The court banned the display of the national anthem on any “undesirable or disgraceful places.
  • It also banned the display, recitation or use of the abridged version of the national anthem.

[2] Airlines seek stay on levy, HC issues notice


Context – Delhi High Court on Wednesday issued notices to the Centre, the Airports Authority of India and the Directorate General of Civil Aviation as the Federation of Indian Airlines (FAI) sought a stay on the government’s notification on levy of Rs.7,500 to Rs.8,500 per flight operated by Indian airlines to create a regional connectivity fund (RCF).

Background – government recently decided to levy up to Rs 8,500 per flight on major routes.

The fund will be used to develop regional airports and enhance regional connectivity under its UdeDeshKaAamNaagrik (UDAN) scheme.

The FAI has sought quashing of the October 21 notification, by which a rule for such a levy was brought into the Aircraft Rules, 1934.

Argument against the levy

  • According to FAI, levy is not contemplated in the aircraft rules and cannot be brought in as an obligation.
  • This levy is a tax and not a fee.
  • The chief purpose of this levy is to raise funds for the RCF to fulfil a public purpose, i.e., to enhance regional connectivity.
  • The levy is an amount that is payable to the government.
  • It is not in the nature of a charge for any privilege or benefit or service rendered by the government
  • Hence due to all the above reasons this levy is a tax and therefore cannot be levied without statutory sanction.

UDAN scheme

  • The UDAN scheme is aimed at connecting under-served airports and regions.
  • As per the government, a participating carrier has to bid for at least nine seats and a maximum of 40 seats.
  • In the case of a helicopter, the operator has to bid for a minimum of five seats and a maximum of 13 seats.

[3] ‘Delhi government worried about everything except environment’


Context – National Green Tribunal has recently expressed displeasure over the Delhi government and the municipal corporations’ failure to come to a consensus over the total quantum of waste generated in the Capital.

Need for data

According to NGT, data is required due to:-

  • Effects on environment
  • mosquito breeding, dengue and different kinds of viral fevers

This observation has come after a plea for closure of the Okhla waste-to-energy plant.

The plea has alleged that the plant uses illegal mass burning technology, leading to air pollution.


[4] Route all wages via bank accounts:Govt


Context – The Centre has asked all employers and contractors to ensure that wages are paid to all employees, including casual and contract workers, through cheques or electronic transfers into a bank account.

And electronic payments has to be made from the last month.

While Chief labor commissioner has also asked firms to get bank accounts opened for all those workers who do not have one already.

Concerns of industry representatives

  • Critics are saying that it is not against the law to pay wages in cash.
  • And this decision could lead to possible harassment of businesses by labor inspectors.
  • Mid-size and smaller firms may face an issue, particularly with regard to contract and casual workers, whose dues are linked to the frequency of their employment during a month.
  • Migrant workers, who move from one project site to another, are not keen to open an account in one specific bank branch.
  • Industry has concerns about paying all wages by cheque, since they don’t usually pay any social security benefits like provident fund and gratuity to such casual workers.

Alternative suggested

Government could have allowed firms to execute this plan till the end of December.


[5] Cap on Jan Dhan withdrawal:


Cap on Jan Dhan withdrawal

Context – The Reserve Bank of India (RBI) has decided to limit cash withdrawals from Jan Dhan accounts at Rs. 10,000 per month to avoid misuse.

Issues – There has been a surge of deposits in Jan Dhan accounts following the withdrawal which came into effect from the midnight of November 9.

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Rules

While full KYC-compliant account holders can withdraw Rs. 10,000 in a month, partial KYC-compliant account holders can withdraw only Rs. 5,000.

For full KYC-compliant account holders amount beyond Rs. 10000 can be withdrawn on the

Decision has been taken for the PMJDY accounts funded through specified notes after November 09, 2016.

Reasons

Protecting farmers and rural account holders of PMJDY from money launderers and legal consequences under the Benami Property Transaction & Money Laundering laws.


Editorial / Opinion


[1] Provocation at Nagrota


Issue:-Seven soldiers, including two Majors have martyred in the recent terrorist attack on an Army base in Nagrota.

Army’s increasing casualties

  • Attack came just 2 months after the Uri attack, in which 19 soldiers lost their lives.
  • With the latest incident, at least 89 security personnel have been killed in Jammu and Kashmir so far in 2016.
  • Since the surgical strikes of September 29 in response to the Uri attack, India has lost 27 security personnel.
  • The attrition rate among the security forces has been going up steadily vis-à-vis the terrorists.

Concerns regarding the attack

  • The attack took place, not very far from the headquarters of 16 Corps, one of the largest and most important corps of the Indian Army.
  • Breaching into a securitized area in the 166 Medium Regiment premises, despite the presence of 2 road blocks there.
  • These recent terrorist attacks on the security installations have challenged the army’s decades of experience in fighting insurgencies and defensive tactics.

Hostage situation tackled

At least four unarmed officers, the wives of two officers and two children were at the risk of being taken hostage.

But 2 women showed exemplary presence of mind, and blocked their doors with household items.

Causes of increasing violence in Kashmir

  • Recent unrest in the Kashmir valley
  • Growing enmity with Pakistan and increasing tension at international border.

Way ahead

  • There needs to be an appraisal of the costs that have come with the breakdown of the 2003 ceasefire.
  • As of now creating peace with Pakistan is a complex process, there is need for Drawing up a plan to minimize loss of life will be a good place to begin.

[2] India’s missing girl children


The Hindu

Some basic facts

  • According to the data of Civil Registration System of the Registrar General of India, There is fall in sex ratio at birth from 898 girls to 1,000 boys in 2013, to 887 in 2014.
  • Falling trend in consistency with the census figures of 2001 and 2011.
  • Overall data does not make apparent the dismal performance at the level of districts and Panchayats falling below national level.
  • Situation has prompted Supreme Court and National Human Rights Commission to ask for explanation from state governments.

Causes presented by center to parliament:-

Girls stand poor chances of survival, because of:-

  • The socio-cultural mindset of preferring sons over daughters.
  • Girls are seen as a burden, and family size has begun to shrink.

Government response

Government responded with the ‘BetiBachao, BetiPadhao’ campaign.

The program aimed at:-

  • Prevention of sex-selective abortions,
  • Creation of opportunities for girl’s education
  • And protection of girl children

State of Tamil Nadu:-

  • Tamil Nadu, despite being a state with strong social development foundation, has slipped on sex ratio at birth of 834.
  • Cradle baby scheme was started in 1992 in Tamil Nadu to raise the survival chances of girl children by encouraging mothers to give them anonymously for adoption.
  • 260 babies being abandoned in just one center over a six-year period shows that neither the state program nor the national scheme has performed well.

Way ahead

Enforcement of the law that prohibits determination of the sex of the foetus.

Prohibition must be accompanied with massive social investments to protect both immediate and long-term prospects of girls in the form of:-

  • Cash incentives through registration of births,
  • A continuum of health care,
  • Early educational opportunities
  • And social protection.

[3] Reeling out patriotism


Context:Supreme Court has ruled that the national anthem must be played in cinema halls across the country before a film is screened, and everyone present must stand to pay respect.

Are the movies viable options for behavioral change?

Warning of the smoking need to be depicted on the bottom of the screen, every time, when a scene involving a smoking scene appears.

While the government can take several measures to curb smoking, like:-

  • Stopping the sales of single cigarette.
  • Raising the cost of a cigarette pack.

Why not acting against other evils?

If the reasoning is that it is an educational measure against a harmful act, then there should be warnings every time, when:-

  • A rape occurs on screen.
  • Every time a man stalks a woman, trying to get her to reciprocate his love
  • Or every time thieves hatch a plan to rob a bank

Other areas, where National Anthem should be played:-

As the idea behind ruling of SC is indeed to teach people the words, there are many other important avenues where national anthem should be played, like:-

  • Every day at school and college.
  • Before television news
  • When our cricket team beats England or any other team
  • Before the films with “nationalistic” subjects like ‘swadesh’ and ‘border’.

Arguments against the SC ruling

  • National Anthem is an expression of one’s reverence for the country. It stirs the soul, makes us feel patriotic even when things around us make us angry about the state of the nation.
  • But enforced patriotism is simply transforming a private emotion into a tokenistic public gesture.
  • National anthem before a film with a subject like sexual comedy would not a good option.
  • Now people would be forced to stand up, not because they want to, but because of a fear of being labelled a traitor, or worse, screamed at or assaulted by self-styled nationalists.
  • The same was happened with poet, disability activist and writer SalilChaturvedi, who could not stand up for the national anthem as he was in a wheelchair.

Is it the only patriotism?

There are many ways to prove your love for your country.

  • One could contribute to flood relief or volunteer in a tsunami-stricken area
  • One, who has enough cash, can ensure the domestic help to the needy till they get used to plastic.
  • All of this is a form of loving, caring for, respecting the nation.

Economy


[2] Agriculture spurs GDP growth to 7.3%


Context – Gross value added growth slows to 7.1 per cent in second quarter, from 7.3 per cent in April-June.

Basic data

Both GDP and GVA growth were slower in the second quarter of this financial year as compared with the same period in the previous year, with a growth of 7.6 per cent and 7.3 per cent respectively.

Year of two halves

  • Lead Economist, Deloitte India have predicted a negative impact on full year GDP of around 30-50 bps from our earlier estimate of 7.6 per cent.
  • Agricultural sector growth registered a 3.3 per cent GVA growth rate in Q2 of this financial year as compared with 1.8 per cent in the previous quarter and 2 per cent in Q2 of 2015-16.
  • Agriculture did better largely due to the improved monsoon.

 

Manufacturing slowdown

The manufacturing sector saw a significant slowdown, with growth of 7.1 per cent in Q2 of this financial year as compared with 9.1 per cent in the first quarter, and 9.2 per cent in Q2 of 2015-16.

Reasons

Indicators like IIP and the quarterly estimates filed by small number of companies show slower growth

The poor performance of the IIP is due to:-

  • Very poor performance in fabricated metal products, furniture manufacturing, and apparel,
  • all of these sectors play a major role in the informal manufacturing sector

Mining contraction

Mining and quarrying sector contracted by 1.5 per cent in Q2 compared with a contraction of 0.4 per cent in the first quarter.

Reasons

  • Private investment is down substantially.
  • Base effect
  • Growth continues to be driven by consumption expenditure and higher spending by the government to aid recovery,

Fiscal deficit

Fiscal deficit in October stood at 79.3 per cent of Budget Estimates down from 83.9 per cent in September.

Total revenue receipts as of October accounted for 50.7 per cent of Budget Estimates for the full year, up from 41.2 per cent in September.

While tax and non-tax revenue collections jumped during the month of October,

 


[2] Trade costs of India remain high: UN body


Context – The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said international and intra-regional trade costs of India remained higher compared with the trade costs of best-performing economies in Asia and the Pacific.

ESCAP has recently released Asia-Pacific Trade and Investment Report 2016.

Some excerpts of report

Factors which may contribute to the FDI attractiveness of India:-

  • India’s robust economic growth and large domestic market,
  • Government’s “Make in India” initiative and
  • Easing of FDI regulations for about 15 sectors including aviation, defense and pharmaceuticals.

On the other hand, overseas investment from India contracted considerably by 36 per cent, which reflects:-

  • FDI diversion as Indian investors start to invest more at home than overseas

Data on FDI

  • FDI inflows to India expanded by 10 per cent on average during 2010-2015
  • In 2015 inflows recorded an even stronger expansion at 27.8 per cent, was higher than the Asia-Pacific region’s average 5.6 per cent.
  • The services, construction development, computer software and hardware, and telecommunications sectors attracted the highest investments.
  • In 2015, Indian goods exports shrank by 17.2 per cent, which was close to twice as much as the Asia-Pacific region decline of 9.7 per cent.
  • India was the largest partner with several economies in South Asia, such as Bhutan, Nepal and Sri Lanka.
  • Exports from Asia-Pacific are expected to increase by 4.5 per cent and imports by 6.5 per cent in developing countries of Asia
  • Report forecasts more modest growth in exports and imports in volume terms, at 2.2 per cent and 3.8 per cent, respectively, ESCAP said in a statement.

Trend of Restrictive policies in Asia Pacific

Trend of the restrictive policies have risen in the Asia-Pacific, due to:-

  • Past distortive trade measures and
  • Current excess capacity in several key sectors

Region is seeing a proliferation of preferential trade agreements (PTA), contributing to almost 63 per cent of world PTAs.

Service sector performance of the region

Improvements in trade

Region had improved its market share in the commercial services trade.

Services trade has more than doubled between 2005 and 2015, from just under $600 billion to close to $1,400 billion.

Falling trade

There is fall in the region’s export and import of services by 4.5 per cent and 4.9 per cent in 2015. Mainly due to:-

  • Persisting economic uncertainty resulting in the global decline in merchandise trade
  • And a depressed demand for the services sector including transport.

Art and Culture


[1] Cuban rumba and Ugandan music now on UNESCO’s heritage list


Context – Cuba’s sensual rumba dance and Belgium’s thriving beer culture brought new effervescence to UNESCO’s coveted list of “intangible” heritage on Wednesday.

U.N. body designated Ugandan traditional music, which is dying out partly because it requires materials from endangered species, as intangible heritage.

A black pottery manufacturing process from the Portuguese village of Bisalhaes was also added to the UNESCO list.

Another cultural gem added to the list is Cossack song from Ukraine’s Dnipropetrovsk region.

Introduction

The list of “intangible” cultural treasures was created 10 years ago, mainly to increase awareness about them.

UNESCO also sometimes offers financial or technical support to countries struggling to protect them.

Some facts

Making and appreciating beer is part of the living heritage throughout Belgium.

Belgium produces some 1,500 types of beer.

While in Cuba Rumba sprang from poor communities, the dance is an enduring “expression of resistance and self-esteem”.

Uganda’s Ma’di Bowl Lyre music and dance is one of the oldest cultural practices of the Madi people of Uganda.

Concerns

  • It is still performed at some weddings and to celebrate harvests but is at risk “due to it being considered old-fashioned by younger generations.
  • And also because it requires materials from plants and animals now endangered.

Black pottery manufacturing process from the Portuguese village designed for decorative and cooking purposes.

Concern

  • The pottery is suffering from “waning interest from younger generations and popular demand for industrial alternatives

Cossack song from Ukraine’s Dnipropetrovsk region tells stories about the tragedy of war and personal relationships of Cossack soldiers.

Concern

  • This art form is also in danger due to losing interest towards it.

Indian Express


[1] How to sow a reform


Issue

Unorganized sector has been hit hard due to demonetization, and within the unorganized sector, farmers are suffering as they do not have enough cash to purchase the required inputs for the sowing of Rabi crops.

Effects

Rabi area has reduced by 7 percentage points, as on November 25th, compared to the average of last 5 years.

Fertilizer consumption during November 1-28 is about 12 per cent lower than the average of the last three years.

What can be done?

Some assisting facts

  • In September 2016, almost 76 per cent of the total outstanding agri-credit came from commercial banks, and the remaining from cooperative banks and regional rural banks almost in equal proportion.
  • There are almost 13 crore Kisan Credit Cards (KCC) issued by various banking agencies, of which about 7.5 crore are active.

What above facts implies?

  • There is a good chance to upgrade much of the agri-credit to the electronic platform quickly.
  • Given the low density of banks and ATMs in rural areas, fixing new ATMs or new bank branches in rural areas will not be economically or timely viable.
  • Alternatively, providing custom-made Point of Sale (POS) machines with business correspondent/agri-entrepreneur model is much cheaper.

Advantages of POS machines

  1. These machines can sync farmers’ accounts with their Aadhaar numbers and also use credit/debit cards to conduct financial transactions, including cash withdrawal.
  2. POS machines can help create new jobs and augment incomes in rural areas.
  3. It would also help in narrowing down the rural-urban digital divide.

What should be done?

  • Government should invite all corporate bodies, especially those with a stake in agriculture and rural finance, to use their CSR funds to supply POS machines.
  • All APMC-regulated agri-mandis should make the transactions above a certain amount, say Rs 20,000, mandatory through electronic transfers.
  • Using POS machines and converting all KCCs into chip-based plastic cards needs high priority.
  • Payment for MSP of wheat and paddy in MP, Chhattisgarh, Odisha and UP etc is already being made to farmers’ bank accounts.
  • Punjab and Haryana, who route these payments through arhatiyas, should also do the same.
  • NABARD, in association with cooperatives and RRBs should organize nation-wide training camps for farmers to familiarize them with digital banking.
  • The steps of NABARD who is supporting solar-based VSAT through its financial inclusion fund, wherever connectivity is a problem, should be ramped up.
  • Bringing food and fertiliser subsidies under the direct benefit transfer regime, especially in regions having high literacy and bank density like Goa, Kerala, Chandigarh etc.

Would demonetization curb black money?

Demonetization will only impact the cumulative stock of wealth stashed in cash.

While, the Bigger chunks of black income may be hidden in real estate, jewelry, and even outside the country.

What more should be done to fight black money?

  • Rationalization of taxes, from stamp duties to agricultural income tax.
  • Bringing agricultural income under taxation with an exemption limit of, say, Rs 7.5 lakh.
  • As currently agricultural incomes are exempt from income tax. Agricultural income has become an easy route for many non-farming actors to hide their income.
  • This would exempt almost 98 per cent of the farmers, even in an agriculturally prosperous state like Punjab.
  • Making political funding through electronic transfers will bring more transparency and credibility to government.

All these measures, if taken quickly and cohesively, have the potential not only to relieve rural India of the pain of the current cash crunch but also put it permanently on a digital platform, which will be a major long-term gain.


Live Mint


[1] What does the currency ban mean for banks?


ContextThe sudden inflow of deposits in the banks has given rise to speculation about how these deposits will be utilized by the banks.

While the analysis provided by the author suggests that:

  • Banks are not in a position to significantly increase lending,
  • Their Net Interest Income (NII) may fall over the next few quarters, worsening their capital position,
  • Their NPA situation may get worse, further adding to their capital woes.

Basic facts

86% of the currency in circulation, amounting to roughly Rs14 trillion, was withdrawn recently.

By 13 November, Rs5.1 trillion out of this had been deposited in the banking system and Rs0.3 trillion had been exchanged over the counter.

As, now exchange of old notes has been discontinued, it is expected that remaining Rs9 trillion will get deposited in banks.

Problems facing banks

  • Withdrawal limits on bank deposits,
  • Logistical constraints of re-stocking ATMs,
  • Banks’ capacity constraints in dealing with the surge in transaction volumes

Banking principles on deposits

Deposits are liabilities on a bank’s balance sheet, which they use to make loans and advances, which are their assets

And in making these loans and advances, banks have to adhere to 2 principles:-

  1. Principle of asset liability matching:

This broadly means that short-term liabilities are used to generate short-term assets.

If long-term loans are made using short-term deposits, banks are exposed to the risk of not being able to pay back when required.

  1. Principle of maintaining bank capital in ratio with the risk profile and quantum of loans made

Dilemma faced by banks

  1. Uncertainty over deposits

As the banks do not know how long these deposits will stay on their books, can deploy these deposits only in short-term assets.

  1. Burgeoning NPAs

In June, gross NPAs (GNPAs) of listed banks were Rs6.7 trillion or 9.1% of their advances.

The 27 public sector banks (PSBs) account for 80% of these NPAs. In 15 of them, GNPAs as a percentage of advances are more than or close to the capital to risk weighted assets ratio (CRAR).

Except for the State Bank of India and a few other PSBs, the CRAR with other banks does not allow them to make new loans.

  1. Low demand for loans

The currency ban has imposed a big negative shock on consumption demand, which in turn may lead to businesses cutting back on their working capital requirement.

Hence Corporate credit demand has been slow.

Options available with banks and their feasibility

In the absence of the option of making loans by deposits, banks are left with only 2 options:-

  1. Depositing funds in reserves with RBI

As these reserves do not earn interests, banks would not prefer that option.

Recently RBI decisions to make it mandatory for banks to hold 100% CRR on incremental deposits, prevents banks from investing the incremental deposits in G-secs.

  1. Investing in Government Securities (G-secs)

Banks may prefer this option as G-secs being sovereign bonds do not pose any capital requirements on banks.

Viability of G-Secs- Availability of G-secs in the market is determined by the borrowing program of the government and is not easy to expand without raising fiscal concerns.

Since there has been no announcement yet on the expansion of the supply of G-secs, with more incoming deposits, RBI will soon run out of G-secs that are needed to absorb the excess liquidity.

  1. Lowering deposit rate

Another option with the banks is to lower the deposit rates.

But lowering deposit rates below 4% may cause a public uproar. Hence it is highly unlikely that banks may take this step.

Affects

  • Thus now banks will have to service the cost of these fresh deposits without earning commensurate income on them
  • And it will negatively affect their NIIs and their profits.
  • Banks are not in a position to significantly increase lending and their capital base may get worse.
  • NPAs may spike if the economic activities slows down further due to currency ban.
  • Normal banking business has been disrupted and bank employees have been occupied in dealing with exchange, deposits and withdrawals of currency.

Situation of banking industry may get worsened, if they keep on struggling to recover their bad loans and to find adequate capital to deal with provisioning challenges.

Categories
Daily Editorials for UPSC IAS Exam Preparation

Daily Editorial – A critical analysis of effects of demonetization on Banking Industry


  • A critical analysis of effects of demonetization on Banking Industry

  1. Introduction
  2. Positive effects on banking industry
  3. Negative affects
  4. Options available with banks and their feasibility
  5. Dilemma faced by banks
  6. Issue of cooperative banks

Click here to Download Daily Editorial PDF (1st Dec. 2016)


Introduction


Demonetization is a generations’ memorable experience and is going to be one of the economic events of our time. Its impact is felt by every Indian citizen.

Banks work as a lifeline for any economy; any positive or negative effect over them also affects economy of the country proportionately. Hence, it becomes important to know how recent Demonetization will affect the banking industry.

The total value of old Rs.500 and Rs.1000 notes in the circulation is to the tune of Rs.14.2 trillion, which is about 85% of the total value of currency in circulation.

This means that the total cash has to now pass though the formal banking channels to get legitimacy. Banks are getting heavy amount of cash daily. Would that be beneficial or harmful for the banking industry?


Positive effects on banking industry


  • Banking System will get a boost, as more than Rs 7-8 lakh crore base money (new legal money) will enter the system.
  • Banks will get the much needed liquidity.
  • Banks will get a lot of CASA (current and savings account) deposits coming at a huge spread to them.
  • Increase in the current accounts and savings account will increase the Net National Income and Net earnings of the banks.
  • More funds deposited in the current and saving account means, banks get funds at either no or at very low cost.
  • As the banks get a lot of liquidity they may lend the money at very low interest rate.
  • Banks will be paying an interest of 2-3% on deposits and will be deploying them at 6-7%. This gives them a spread of 3-4% on a huge sum of deposits
  • Banks will not need to look for the other sources like RBI or government for funds.

However, effects of demonetization on banking industry are not all positive, it has negative affects too.


Negative affects


  • Thus now banks will have to service the cost of these fresh deposits without earning commensurate income on them
  • And it will negatively affect their NIIs and their profits.
  • Banks are not in a position to significantly increase lending and their capital base may get worse.
  • NPAs may spike if the economic activities slows down further due to currency ban.
  • Normal banking business has been disrupted and bank employees have been occupied in dealing with exchange, deposits and withdrawals of currency.

Options available with banks and their feasibility


In the absence of the option of making loans by deposits, banks are left with only 2 options:-

  1. Depositing funds in reserves with RBI

As these reserves do not earn interests, banks would not prefer that option.

Recently RBI decisions to make it mandatory for banks to hold 100% CRR on incremental deposits, prevents banks from investing the incremental deposits in G-secs.

  1. Investing in Government Securities (G-secs)

Banks may prefer this option as G-secs being sovereign bonds do not pose any capital requirements on banks.

Viability of G-Secs- Availability of G-secs in the market is determined by the borrowing program of the government and is not easy to expand without raising fiscal concerns.

Since there has been no announcement yet on the expansion of the supply of G-secs, with more incoming deposits, RBI will soon run out of G-secs that are needed to absorb the excess liquidity.

  1. Lowering deposit rate

Another option with the banks is to lower the deposit rates.

But lowering deposit rates below 4% may cause a public uproar. Hence it is highly unlikely that banks may take this step.


Dilemma faced by banks


  1. Uncertainty over deposits

As the banks do not know how long these deposits will stay on their books, can deploy these deposits only in short-term assets.

  1. Burgeoning NPAs

In June, gross NPAs (GNPAs) of listed banks were Rs6.7 trillion or 9.1% of their advances.

The 27 public sector banks (PSBs) account for 80% of these NPAs. In 15 of them, GNPAs as a percentage of advances are more than or close to the capital to risk weighted assets ratio (CRAR).

Except for the State Bank of India and a few other PSBs, the CRAR with other banks does not allow them to make new loans.

  1. Low demand for loans

The currency ban has imposed a big negative shock on consumption demand, which in turn may lead to businesses cutting back on their working capital requirement.

Hence Corporate credit demand has been slow.


Issue of cooperative banks


Restrictions on Cooperative banks

Cooperative banks have been barred from accepting the old Rs 500, Rs 1,000 currency note deposits or exchange those notes with the new currency notes.

This meant that these lenders could only deal with permissible denominations of Rs 100 and below or takes deposits in new currencies.

Choking funds to cooperative banks can inflict significant damage to the health of several cooperative banks.

Following restrictions, there has been hardly any business in cooperative banks across the country.

Reasons of putting ban

  • Checks and balances at these banks aren’t perceived to be strong enough to counter efforts to push black money into the banking system.
  • These banks aren’t as tightly regulated as scheduled commercial banks.
  • Most of these banks are indirectly controlled by politicians or local businessmen.

Why survival of cooperative banks is important:-

  • Cooperative banks have been the trusted centers to bank for millions of farmers and middle, low-income people for long.
  • These institutions are known to offer them easier loan and deposit products and hence are the favorite institution for the poor.
  • Other options likeBanking Correspondents (BCs) system haven’t worked well so far.

Importance of banking industry for our economy is not needed an explanation, government must come up with some important measures to tackle the problems facing banks due to demonetization.

Categories
Motivation UPSC Preparation Strategy

Mains 2016 – Getting the Most out of You & Last Minute Tips

The one thing that separates us – the homo sapiens – from all other species is that while humans have a “history”, the history of all other species is merely read as evolutionary biology.

Which is why you do not have a history of trees. Or dogs. Or cats. All that we know is dogs evolved from wolves.

But humans ? We have departed far from what our biology destined us to be, to create a history for ourselves.

And history is created by individuals. Like you and me.

While the destiny of all other species is guided by its DNA, we have accomplished feats far greater than our biological destiny – which was to hunt, forage, and survive. Like other apes.

That brings us to the grand conclusion – we can drastically change the course of our lives with what we choose to do. If you don’t like things around you – like your address, or your current sitting position – you are uniquely positioned to change it. Imagine, what if a tree doesn’t like its address?

You could begin that, right now, right at this moment, by even a simple act like just cleaning your glasses  – and the world will suddenly look a little brighter.

Trust me, it works. 100% for all people who wear glasses 🙂

So while you embark on your most important mission starting this week, I would like to share some thoughts.

Be the sparkling light. Not the spent fuel.

This may not be helpful if this is your first Mains. Because then, you must already be brimming with energy. You should be.

But a lot of our friends are writing their not-first Mains this year. Some of them have secured an interview call more than once before – and some of them are in services too.

But both I and they know, that knowing is not enough. Translating knowledge into words in a limited time frame  and limited world limit is a different ballgame.

And I could tell you that the most important component of this act is – energy and ethusiasm, not knowledge – which is why all knowing people don’t make it.

But those who write a good paper with all their energy do.

Just like David beat Goliath.

Underdogs win.

So do not be like spent fuel. Or burnt coal –  ( which can burn again and again, but with much lesser calorific value each time ).

Be ignited instead. And write a good paper.

When you are in the examination hall, give your 110% to the paper in front of you – WITH.ALL.YOUR.ENERGY. And that will do half the job.

Remember that preparation levels won’t matter eventually. If you think you only prepared for 3 months, look at this guy. So what you have done is sufficient to write a good paper, if you really give it your best shot :

  • even when your hands are hurting
  • even when your shoulder is hurting
  • even when you feel, like last mains, this mains isn’t going to get you a top rank.
  • even when it is the second paper of the day and if you have lost all your energy and enthusiasm.

Don’t let the fatigue of having written earlier Mains or having written a dozen tests in past 2 weeks get you.

Write with all the energy of a million dreams you and your close ones have had for you getting into the IAS. Its worth it. You know it

Complete the Paper – a radical approach

You already know this. You just don’t know how to do it. So here are some practical tips. Do this only if completing paper is a problem with you. ( People with fast handwriting can choose to ignore this part. Really) This is how to do it.

( Also, watch this video on introducing the answer – will help save lot of time )

Tell your mind that the first few questions shouldn’t exceed 2 pages.

Or 15 minutes. Do not write 3 page answers to first 5 questions in 90 minutes and one page answers in the rest. That won’t cut it. Write uniform length answers – as far as possible. Let it not appear that you have only half attempted the last questions because of lack of time.

Its better to have 2 page answers in each question rather than to have 3 page answers in first 10 questions and half page answers in another 5 questions and leaving out 5 questions.

After every 30 minutes, leave the question you are currently on,

and move to the next question. Lets face it. If you are slow, and don’t want to leave 6+ questions, you may have to do this. for questions where you have competed one page, you wind it up after every 30 minutes in under 2-3 minutes, so that you don’t miss out on easy questions which may be at the end.

By winding up I mean, writing the exact points asked and forgoing pleasantries.

Don’t write more when you know less.

Its common to see candidates write more in questions they know less. To convince the examiner that they don’t know less.

For example, there is a question in culture you have no clue about.

Write what you know and move on. I could see in the ForumIAS Open Test, that brilliant candidates ended up writing longer answers in tough questions that they had no clue about. Don’t do that. Don’t be those brilliant candidate.

Write what is asked, not what you know

This is repeatative. And obvious. And probably wastes your time at this juncture. I mean you know this.

But this is the single biggest reason to explain the discrepancy between your awesome paper and poor marks – and best paper getting least marks.

UPSC marking has evolved from time to time. There was a time when long answers were rewarded. Then there came a time, when long answers were seen to be penalised. In last 2-3 years, it has been most rewarding to write point wise and not deviate form the topic. Relevance to the question asked is the most important criteria these years.

So focus on what is asked. Read again what the question asks. Read twice, maybe – but read well.

And if at all, you know something really well which is brilliant, and badly want to tell the examiner , but you know that this isnt what has been asked – here is what to do  – put that in a small diagram or a flow chart. Thats all.

Motivate yourself. Get into the zone.

No matter what I tell you, the coming week isn’t going to be just another day. Not because of the significance of the exam – but because of the whole schedule. You wake up at 6 AM and rush to the center, especially guys with Rohini / Noida Center. This isn’t what you had been doing for the last few weeks or  months.

Which is why I told you to do an Open Test and get used to it. At least once.

Keep yourself motivated and hydrated.

If you have written n number of Mains and think that “is saal bhi kuchh hona jana hai nahi“, try being afraid. Fear is the biggest motivator.

If you are already afraid ( which is different from anxious, there is a difference ), keep calm and focus.

And if you are anxious, read on.

Make List of Things to Do – Stop the flipping mind

The next few days – spread over the examination, cannot be days of random activities. They have to be a set of pre-defined activities. Especially if you are anxious. Make a list of To Do things – for the next day or even a week – and just follow along. Strike through when you have achieved something. I cannot emphasise more on the significance of this.

This is especially true if you have some parts of the syllabus left – especially the optional subjects. Keep a list of things to do – including last minute revisions,so that you do not forget the important things because of lack of time.

This helps in two ways

  • First, it helps you focus on the important things. Without a To Do List, you are likely to flip from one book to another- or one www to another
  • Second, you can really ensure covering small topics, which you may have left for last minute – especially some of those topics, that you think do need a last minute revision. Last minute revision helps especially in the Optionals. So don’t be misguided by someone who says don’t do last minute studies – at least for the Optionals.

Lastly,

When people said Civil Services tough, this was what they were talking about. Spending a week under pressure, trying not to feel the pressure and doing your best. Studying was the easier thing to do, perhaps. Living these days look much tougher.

Remember, this is the last leg of your journey. While I know this is the time, when you feel the need to sleep, rest and get distracted with  poker, TV series and what not – more than usual times – note that you will have plenty of time for all of this once the exam is over.

This exam will bring the best out in you, only if you are willing to give your best. I cannot emphasise more.

Most adversities are opportunities. It is just that we don’t know at that time.

So hold on – and run the last lap – as best as you can – and success will be yours.

And for those of our friends, for whom poetry is inspiration , here are a few lines

प्रासादों के कनकाभ शिखर,
होते कबूतरों के ही घर,
महलों में गरुड़ ना होता है,
कंचन पर कभी न सोता है.
रहता वह कहीं पहाड़ों में,
शैलों की फटी दरारों में.

अमृत क्लेश का पिए बिना,
आताप अंधड़ में जिए बिना,
वह पुरुष नही कहला सकता,
विघ्नों को नही हिला सकता.

“उड़ते जो झंझावतों में,
पीते सो वारी प्रपातो में,
सारा आकाश अयन जिनका,
विषधर भुजंग भोजन जिनका,
वे ही फानिबंध छुड़ाते हैं,
धरती का हृदय जुड़ाते हैं|

Here is wishing all our ForumIAS Friends who are writing Mains this year, the very best!

May this be your last Mains 🙂

Until Next time,

With ❤ ,

Neyawn

Categories
Mains Marathon Notice Board

Mains Marathon Update : Plan Details To be Uploaded Soon



UPDATE: Plan Details would be released tomorrow (2nd December).


Dear Friends,

Thank you for your tremendous Response to the Mains Marathon Survey. We have received over a hundred emails from you – each one wanting something different.

Based on your response, we have formulated a plan with the express goals of

  • Covering all relevant Current Affairs Questions from GS Paper 2, 3 and 1 through daily set of Questions on Current Affairs
  • Covering the UPSC General Studies ( Mains ) Syllabus at least once before the Prelims Examination through weekly Tests

The idea is to come up with a realistic and implementable plan for Civil Services Examination 2017 Preparation, which can be actually executed by candidates and yet be complete. This will require doing away with unnecessary content, questions and books, and a higher degree of exam orientatedness.

The goal will be to provide maximum coverage of the syllabus through a minimum set of questions – as many of you are working candidates or complete freshers and ensure that your preparation time is rapidly reduced by the efforts we put in, in designing the plan and posting content / questions.

Again, the plan should be such that people should be able to prepare for Mains, without compromising on Prelims. A lot of you said that existing Q & A plans compromise Prelims preparation for Mains – and while one may secure good marks in Mains if one followed existing plans, one may not secure a place in the Mains Examination hall itself by following existing plans.

We will be updating the Plan by evening 7 PM or before. Rest assured, we have you at the center of all our initiatives.

What you can do for now

Request 1 : Candidates are expected to cover Current Affairs from November 15 onwards for this initiative. A close reading of Must Read News Articles of last 15 days ( in case you have NOT done the newspaper daily)  or the 9 PM Brief will help you build the base for the Marathon. Its a long journey, you will want you to cover in minimum time. Stay focused. The first Set of questions will pour in on Monday.

Request 2: Please sign up for automatic updates from the Portal. If you have received this message in this format ( click ), then you do not need to do anything. But if you did not receive the email in the above format , then please sign up for receiving updated by clicking here.

 

Categories
Newspaper

Must Read News Articles – December 1


Archives


must-read


The Hindu


Front Page / NATIONAL


National anthem must be played before screening of films: The Supreme Court ordered all cinema halls across the country to play the national anthem before the screening of films and that all present must “stand up in respect” till the anthem ended. It said the practice would “instill a feeling within one a sense of committed patriotism and nationalism.

Airlines seek stay on levy, HC issues notice: The Delhi High Court notices to the Centre, the Airports Authority of India and the Directorate General of Civil Aviation as the Federation of Indian Airlines (FAI) sought a stay on the government’s notification on levy of Rs.7,5000 to Rs.8,500 per flight to create a Regional Connectivity Fund (RCF).

‘Delhi government worried about everything except environment’: The National Green Tribunal expressed displeasure over the Delhi government and the municipal corporations’ failure to come to a consensus over the total quantum of waste generated in the Capital.

Afghanistan, India hope to corner Pakistan: India is hoping to corner Pakistan on the issue of “cross-border terrorism” at the Heart of Asia conference in Amritsar this weekend.

Route all wages via bank accounts:Govt.: The Centre has asked all employers and contractors to ensure that wages are paid to all employees, including casual and contract workers, through cheques or electronic transfers into a bank account.

Cap on Jan Dhan withdrawal: The Reserve Bank of India (RBI) has decided to limit cash withdrawals from Jan Dhan accounts at Rs. 10,000 per month to avoid misuse.


Editorial/OPINION


Provocation at Nagrota: The attack comes just two months after militants stormed an Army camp in Uri, resulting in the death of 19 soldiers.

India’s missing girl children: It is a cruel irony of a fast-growing India that there are fewer and fewer girls as a ratio of total births, as a result of complex factors that include parental preference.

Reeling out patriotism: The Supreme Court’s ruling on the national anthem is yet another instance of the movies being a soft target for tokenistic measures.


ECONOMY


Agriculture spurs GDP growth to 7.3%: GDP growth accelerated in the second quarter of this financial year to 7.3 per cent on the back of a stronger performance in the agriculture sector.

Trade costs of India remain high: UN body: The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said that the international and intra-regional trade costs of India remained higher compared with the trade costs of best-performing economies in Asia and the Pacific, although a declining trend has been observed since 2009.


ART AND CULTURE


Cuban rumba and Ugandan music now on UNESCO’s heritage list: Cuba’s sensual rumba dance and Belgium’s thriving beer culture brought new effervescence to UNESCO’s coveted list of “intangible” heritage.


Indian Express


How to sow a reform: Some ways to relieve the pain of demonetization in rural India.


Live Mint


What does the currency ban mean for banks?: They may not be in a position to significantly increase lending and their capital base may get worse.