Mains Marathon

Answered: Mains Marathon – UPSC Mains Current Affairs Questions – April 21

1.What are Non-Performing Assets (NPAs)? Suggest some ways to reduce Non-Performing Assets in banks. (GS 3)

Non performing assets:-

  • Non-performing asset is a loan on which the borrower has stopped paying interest and/or principal
  • According to RBI, terms loans on which interest or installment of principal remain overdue for a period of more than 90 days from the end of a particular quarter is called a Non-performing Asset.
  • For the first half of the 2016-’17 financial year, bad loans constituted more than 9% of total advances.
  • The problem is most acute in public sector banks, where NPAs were nearly 12% of total advances for the first half of the just-concluded financial year. India’s public sector banks had about Rs 6 lakh crores in non-performing assets as of December.


  • Strict credit appraisal:
    • Banks should stop giving money to unworthy people. Strict credit monitoring is the need of hour.
  • Proper followup after disbursal:-
    • An alternative loan monitoring system should be developed. Send an external audit party independent of borrower to check stock and debtors on regular intervals.
  • Sell NPAs:
    • Selling NPAs is an another measure which can be adopted by banks.
  • One time settlement:
    • Keeping the public interest in mind, banks should provide an one time settlement scheme, it can save banks both time and money.
  • Unnecessary litigations can also be avoided. Recovery camps should be organized on regular basis.
  • Stock audit by external professional s atleast once a year for large borrower accounts is also essential.

The government has finally recognised that stressed assets “have reached unacceptably high levels”. And with the current ordinance, the RBI is in a stronger position to find a permanent solution to India’s NPA crisis.

  1. What is the need of having Wholesale and long-term finance (WLTF) banks? Also, discuss the problems associated with WLTF banks. (GS 3)


  • RBI has released a discussion paper on a proposal to set up ‘differentiated banks’ in the form of wholesale and long-term finance banks to fund large projects.
  • The Reserve Bank of India (RBI) on Friday proposed to float wholesale and long-term finance (WLTF) banks that would fund long-term high-value projects something similar to the development finance institutions (DFIs) of the past.

Need of having wholesale and long term finance banks:-

  • In an effort to introduce new ideas and develop niches to ensure that more segments are covered.
  • Focus primarily on lending to the infrastructure sector and small, medium and corporate businesses.
  • They will also securitize assets for banks and financial institutions which do priority-sector lending.
  • RBI’s proposal comes at the time when the banking sector is saddled with stressed assets worth Rs7 trillion, overall credit growth is languishing at around 4.5% and bank credit to industry is shrinking at a rate of 5% year-on-year.
  • Due to asset quality impacts on banks’ balance sheets, there is an overall declining trend in bank credit, primarily towards services sector, industrial segments, and small and medium enterprises.
  • Considering the existing landscape of banking and non-banking services in the country, it is felt that there is a need to explore the possibilities of permitting other types of differentiated banks to facilitate progression to a more mature and deeper financial sector.
  • Specialisation in the field of long term financing is needed to properly evaluate the risks attached and lending rate therefore.
  • There are less explored areas of borrowing money i.e. corporate debt market, masala bonds etc. WLTF banks can use these instruments.
  • Huge infrastructure deficit needing long term funds.

Problems associated with WLTF banks:-

  • However, to put small and medium enterprises and infrastructure portfolios together, perhaps, is not a bright idea.
  • The existing and established universal banks may not necessarily take the reform with excitement. They are presently evolving approaches to ensure payment banks do not run away with their fee income or customer base.
  • Borrowing by WLTF banks may become an issue as it has to keep rate low, repayment duration long and has to compete with existing banks and other avenues of investment.
  • Government support may be needed, which may lead to excess government interference.
  • Only few entities can come forward as need of capital will be high for WLTF banks.
  • Regulation: SLR, CRR would impact their margins.

Way forward:-

  • Avoid government participation for more operational freedom of these banks
  • Licences should be provided to only those who are in a position to bring in capital to both meet regulatory requirements and run the business on a sustainable basis
  • Allow these banks to compete directly with bond market and exempt them from CRR and SLR.

  1. “Innovation distinguishes between a leader and a follower.” Discuss. (GS 4)


  • In today’s world, people face financial, political and societal ambiguity and change.
  • It is essential, here, for companies, governments, and other organizations to find new and innovative solutions to upcoming problems and glitches.
  • Innovation is a critical part of leadership. Innovation may not be required for all leadership situations, but it is an important decision which a leader should be able to make, irrespective of its necessity.
  • Without proper leadership, many new and innovative products have died while on the road to success. So, finding the proper leader to lead an innovation is one important key factor to realize the success that an innovation deserves.
  • The leader must know when to simply take the tested ways, and when to introduce new and innovative ideas and products.
  • Trying innovative approaches to implement the government schemes will show the strength of leadership by an administrator.
  • If not all, successful innovators are successful leaders too. Innovation leads to market leadership, one grand example being the Apple iPad.
  • If leaders are not willing to look for innovative solutions, they may simply be left behind.
  • If people follow in another company’s footsteps, you will never make any noticeable impact. Think about companies that have innovated something so revolutionary, that it has been woven into our lexicon. “Goggle” “Kleenex” “Tivo”, etc.
  • Not all leadership situations may require innovation, but leaders must at least be able to decide if innovation is necessary. Timing is an important part of leadership. The leader must assess the needs in a given situation and then act at the appropriate moment.
  • Learning to lead innovation may be as important as the innovation itself. Without recognizing the need for proper leadership many an idea or product has simply died on the road to successFinding the proper leader may just be the key to success in your innovation.
  • It is not that follower doesn’t innovate but his innovations are small ones and may be useful to himself or don’t know the potential of his idea.

leadership qualities like vision, anticipation, innovation etc need to be inculcated in civil servants, as they carry the responsibility to reform the governance system.


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