KAS DAILY CURRENT AFFAIRS – 6th March 2020

KAS DAILY CURRENT AFFAIRS – 6th March 2020

KAS DAILY CURRENT AFFAIRS – 6th March 2020

Daily Current Affairs 06 Mar 2020

 

Paper III -Economy and Planning – Structure of Indian Banking and Non-Banking Financial Institutions and reforms

Banking Crisis in India

In News:

Recently, RBI put private lender YES Bank on moratorium till April 7 and also superseded the board of the bank and appointed an administrator. It also capped the bank’s deposit withdrawal at Rs.50,000.

Issues with Banking Sector Stability in India

  1. Non-performing assets (NPAs) are one of the key issues. Many banks who have extended loans to enterprises have struggled to reclaim them. This has resulted in deteriorating balance sheets of many banks including YES bank which recently came under RBI hammering.
  2. Poor governance of Banks are another issue. Governance boards of many banks tend to allow ever-greening of loans extended and also are reluctant to conduct assess quality reviews.
  3. Low capacity utilisation in Indian economy. Resulting in low returns for corporate investors who have borrowed from banks. This has in turn resulted in NPAs.
  4. Lack of robust methodologies for risk analysis of loan portfolios.
  5. Lack of ownership neutrality of regulation. Indian banks are categorised as Public sector & Public sector and regulatory hand of RBI is limited for PSBs.
  6. Inadequate development in capital markets and other long term credit options. Investments with high incubation period are also dependant on banks for credit. In developed countries, long term financing funds are available for projects of longer incubation.

Why Banking Stability is important?

  1. In India, much of the credit needs of corporate sector is financed by banks. Stability of these entities are very important for the corporate economy.
  2. Bank deposits are the most important and widely used safe investment option by most Indians. Banking collapse can result in loss of money to many depositors and possibly will have political implications.
  3. Stable banking system is the benchmark for the credit rating of an economy.
  4. Banks employs lakhs of working individuals, whose stability will affect their lives.

Way Forward

  1. The issue of NPAs can be prevented by frequent asset quality reviews and timely actions such as restructuring, selling of debts to asset reconstruction companies etc.
  2. The recent proposal of to extent the scope of insolvency & bankruptcy code to financial intermediaries is a move in the right direction to early resolutions
  3. Robust reporting & transparency norms for Bank boards can improve governance.
  4. Development of capital markets & long term funds for infrastructure projects.

 

Paper III -Economy and Planning – Energy and Power

Bharat Stage VI Emission Norms

In News:

In a bid to bring down pollution levels, the Central government has announced that from April 1, 2020, all vehicles sold in India should comply with Bharat Stage-VI, or BS-VI emission standards.

What is Bharat Stage VI Emission Norms?

The Bharat Stage emission standards are the legal limits on the amount of air pollutants like carbon monoxide and particulate matter that a vehicle in India can emit. These standards are targeted at making improvements in three areas – emission control, fuel efficiency and engine design.

Why Bharat Stage VI Emission norms?

  1. India is currently operating on the BS-IV emission norms. In India, vehicular emissions are a major source of pollution and greenhouse gases which brings climate change.
  2. Sulphur content in fuel is a major cause for concern. Sulphur dioxide released by fuel burning is a major pollutant that affects health as well.
  3. Given this scenario, BS-VI fuel’s sulphur content is much lower than BS-IV fuel. It is reduced to 10 mg/kg max in BS-VI from 50 mg/kg under BS-IV.
  4. This reduction makes it possible to equip vehicles with better catalytic converters that capture pollutants.
  5. BS VI is said to be the world’s cleanest fuel.

Challenges in Implementing BS VI Norms

  1. BS-VI fuel is expected to be costlier that BS-IV fuel. Vehicles that are compliant with BS-VI will also be more expensive.
  2. Many Automobile companies say that April 1, 2020 is too earlier to implement BS VI as they still have large inventories of vehicle which comply with BS IV norms.
  3. Implementing BS VI vehicles will be a challenge due to the current crisis in Automobile sector resulted from a demand squeeze. The added cost of BS VI vehicles will further reduce demand for vehicles.

Way Forward

  1. Cleaner fuel norms are important to reduce pollution load and also tackling climate change. But Govt must undertake wider stakeholder consultations to ensure smooth adoption of new norms.
  2. Electric vehicles are good alternatives for internal combustion engines. Strengthening charging infrastructure will increase demand for this sector.
  3. Currently Vehicular fuels are not included in GST, resulting in huge costs. They must be included in the ambit of GST.

 

Paper III -Economy and Planning – Energy and Power

Global Oil Prices & India

In News:

World oil prices, already slumping on coronavirus fears, extended losses to more than 5% on Friday.

Reasons for Oil prices slump

  1. Oil prices are influenced by demand-supply dynamics. Recently, demand of Oil has been reduced considerably across the globe due to economic slowdown in China & elsewhere owing to Coronavirus epidemic.
  2. Also Russia has denied OPEC’s proposal to cut production ignorer to prevent further slump in oil prices.

Impact of Oil Prices on Indian Economy

  1. India has an 82.8% import dependence for crude oil and 45.3% for natural gas/LNG.
  2. The net foreign exchange outgo is 63.305 billion US$ in the financial year 2017-18 on account of crude oil imports.
  3. This scenario makes international oil prices to influence Indian economy considerably. That is, when oil price increases, India will have to shed more from its foreign exchange earning to buy oil at higher prices. When the price decrease, it is good for Indian economy as India has to spend lesser to buy Oil from outside.
  4. Also high oil price will reduce competitiveness of Indian economy as it increases the input costs of manufacturing and other economic activities.
  5. High oil price has socio-political implication also. Indian commons are highly dependent on Oil prices.

Way Forward

  1. Diversifying source of Crude Oil import is a way to mitigate sudden increase in Oil prices largely due to cartel formations such as OPEC. Sourcing Oil from countries such as Iran will mitigate sudden price fluctuations.
  2. Intensifying domestic crude oil exploration and production which is still very low and do not cater even 10% to Indian economy.
  3. Faster adoption to alternative sources such as electric vehicles and renewable energy sources such as wind and solar.

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