Dec-2011-National

NATIONAL AFFAIRS

RBI unveils draft Basel III norms
In order to strengthen risk management mechanism, the Reserve Bank has issued draft guideline envisaging that the equity capital of a bank should not be less than 5.5% of risk-weighted loans.

Besides, it also recommends Tier 1 capital comprising pure equity and statutory and capital reserves must be at least 7% and total capital must be at least 9% of RWAs. RBI has also suggested setting up of the capital conservation buffer in the form of Common Equity of 2.5% of RWAs. It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017.

However, the capital conservation buffer requirement is proposed to be implemented between March 31,2014 and March 31,2017. The instruments which no longer qualify as regulatory capital instruments will be phased out during the period beginning from January 1, 2013 to March 31, 2022. The central bank has invited comments and feedback on the draft guidelines, including implementation schedule by February 15, 2012.

Though the Indian banking sector was comfortably placed to implement Basel III regulations, some banks might need additional capital.

Currently, RBI follows Basel II norms under which Tier I component is not only pure equity capital but Perpetual Non-cumulative Preference Shares (PNCPS), Innovative Perpetual Debt Instruments and capital reserves. Banks are required to maintain a minimum Capital to Risk weighted Assets Ratio (CRAR) of 9% within which Tier 1 capital should be at least 6% of risk weighted assets.

Under the existing capital adequacy guidelines based on Basel II framework, total regulatory capital is comprised of Tier 1 capital (core capital) and Tier 2 capital (supplementary capital).

Lokpal Bill passed by Lok Sabha; Rajya Sabha leaves it in limbo
Eleven hours after an often stormy debate, the Lok Sabha passed the Lokpal & Lokayukta Bill, 2011 on December 27, 2011, after incorporating several amendments. But the UPA suffered a setback, and a major embarassment, when the government failed to muster two-thirds majority of the Members present and voting in the House, which turned down the proposal to confer Constitutional status to the Lokpal.

The proposal to have the Lokpal as a Constitutional body, like the Election Commission or the Comptroller & Auditor General (CAG), was first mooted by Congress general secretary Rahul Gandhi.

There was considerable confusion as the House dealt with the amendments clause by clause and as each amendment was put to vote. The most important of them related to the government ceding ground to the opposition, and some of its allies, and providing for specific approval by State governments before notification of the Lokayukta.

The government also agreed to remove the six-month ceiling on investigation and the provision which required the Chairman of the Rajya Sabha and the Speaker of the Lok Sabha to submit reports to the Lokpal. By yet another amendment, it was resolved to keep the defence forces out of the purview of the Lokpal.

However, several amendments moved by the Opposition, including one to bring corporate bodies under the purview of the Lokpal, were rejected.

The Opposition parties, and also some UPA constituents, criticised the provision for ‘reservation’ in the Lokpal and called upon the government to ensure that the Bill does not force the States to adopt and enforce a Lokayukta Act on the lines of the Lokpal Bill. The government argued that the States had the option of improving upon the Act and that the Central Act would just be an enabling Act.

On December 29, however, the Parliament lost the historic opportunity to enact the Lok Pal law when an embarrassed government was forced to beat a hasty retreat in the Rajya Sabha, lacking the numbers to push through the Lokpal and Lokayukta Bill. A total of 185 amendments were moved by different parties and what weighed in the minds of UPA managers was that if the amendments were carried the legislation then would have to go back to the Lok Sabha. If the Lower House was to reject the amendments, it would have necessitated a joint session of the Parliament.

Whistleblowers’ Protection Bill
On December 27, 2011, Lok Sabha passed the Whistleblowers’ Protection Bill which seeks to provide for setting up a regular mechanism to encourage persons to disclose information on corruption or wilful misuse of power by public servants, including ministers.

The Bill also seeks to provide “adequate protection to persons reporting corruption or wilful misuse of discretion that causes demonstrable loss to the government or commission of a criminal offence by a public servant”. While the measure sets out the procedure to inquire into the disclosures and provides adequate safeguards against victimisation of whistleblowers, it also seeks to provide punishment for false or frivolous complaints.

A major amendment cleared by the Union Cabinet is the inclusion of ministers, MPs, defence services, intelligence agencies, bank officials and PSUs under the ambit of the Bill. The Special Protection Group (SPG) has been kept out of the ambit of the Bill.

The definition of “disclosure” has also been amended to include wilful misuse of power or wilful misuse of discretion that leads to demonstrable loss to the government or demonstrable gain to the public servant or any third party.

The definition of competent authority to which a complaint can be made has also been expanded. For complaint against a Union Minister, the competent authority is the Prime Minister and for MPs, it’s the LS Speaker.

Citizens’ Charter Bill
The Citizens’ Charter Bill, called the “Right of Citizens for Time-bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011”, was introduced in the Lok Sabha on December 20, 2011.

It envisages the Right to Service under which every individual citizen shall have the right to time-bound delivery of goods and provision of services and redress of grievances.

It also provides for publication of the Citizens’ Charter and Grievances Redressal Officer by Public Authorities whereby:
—Every public authority shall publish, within six months of the commencement of this Act, a Citizens’ Charter specifying therein all the category of goods supplied and services rendered by it, the time within which such goods shall be supplied or services rendered.
—The details of all the goods supplied and services rendered by the public authority and the name of person or agency through which such goods are supplied or services rendered and timings during which such goods are supplied or services rendered.
—The conditions under which a person becomes entitled to goods or services and the class of persons who are entitled to receive such goods and avail services.
—The complaints redress mechanism, including the time within which the complaint should be disposed of and the officer of the public authority to whom such complaint may be made.
—The names and addresses of individuals responsible for the delivery of goods or rendering of services.

Union Cabinet clears Food Bill
Brushing aside fears of food scarcity and inflation, the Union Cabinet, on December 18, 2011, cleared the much-awaited National Food Security Bill, taking the Manmohan Singh government a step closer to fulfilling the promise made to the “Aam Admi” in the Congress manifesto for the 2009 Lok Sabha election.

Under the proposed landmark law, the government would provide rice at Rs 3 per kg and wheat at Rs 2 per kg to all people living below the poverty line (BPL) across the country.

The law is aimed at providing access to food to 75 per cent of the rural population and 50 per cent of the urban households by subsidising foodgrains sold to them.

Under the proposal, coarse grains would be made available to them at Re 1 per kg. In all, 63.5 per cent of the country’s population would be legally entitled to subsidised foodgrains under the scheme.

The subsidy would involve Rs 3.5 lakh crore—Rs 1.1 lakh crore for the agriculture sector and Rs 95,000 crore for the poor people covered under the scheme.

About 2.25 crore pregnant women and lactating mothers are also expected to benefit from the legislation that proposes to give Rs 1,000 per month for six months as maternity benefit. Maternity benefits that are available only in 52 districts will be extended across the country.

Aiming to empower women, the Bill also proposes that the ration card will be issued to the eldest female member of the family.

There is a provision of meals to special group such as destitute, homeless, person living in starvation and disaster affected persons.

The proposed Bill also holds great promises for children. Children in the lower and upper primary classes would be entitled to mid-day meals as per the prescribed nutritional norms.

Fears have been expressed that the new Bill, as and when enacted, will fuel both shortages and inflation. The fears are not misplaced because in August 2011, the foodgrain stock with the government was 61.27 million tonnes, short of what will be required to implement the scheme. The annual procurement of foodgrains by the government stands at 54 million tonnes and will have to be raised to at least 62 million tonnes, if the scheme is to be implemented.

The scheme was also opposed by several States, which apprehend food scarcity and higher food inflation as and when the Bill becomes the law. They had also objected to the discrepancy between the proposed central scheme and the existing Antyodaya Anna Yojana (AAA) under which the poor are entitled to 35 kg rice at Rs 2 per kg. The Centre sought to go round the issue by raising the entitlement of everyone to 35 kg under the new, legal entitlement.

India’s infant mortality rate down
Child survival strategies are beginning to pay dividends with India, for the first time ever, reporting a consecutive drop of three points in Infant Mortality Rate (IMR) for the second year in a row.

The country’s latest IMR is 47 as against 50 in 2009, indicating a reduced mortality of three infants per 1000 live births. If this rate of drop is sustained, India could achieve the target of bringing down infant deaths to 30 by 2015, as planned.

The highlights of 2010 Sample Registration System (SRS) data, released by the Registrar General of India, is: greater reduction in rural IMR (four points) as against urban IMR (3 points); massive improvements in problem States, with Himachal Pradesh and Madhya Pradesh leading the national IMR declines by reporting the highest reduction of 5 points each in IMR in the respective States.

Overall, rural IMR came down from 55 to 51 while urban IMR dropped from 34 to 31, nationally.

The heartening news is that almost all States managed to report IMR reductions, particularly in rural IMR, indicating better delivery of child related health services in villages.

Nine States reported a 4 point drop in IMR. These include Bihar, Odisha, Punjab, Tripura, Rajasthan, Tamil Nadu, Meghalaya and Sikkim.

Andhra, Assam, Chhattisgarh, Haryana, Karnataka, Maharashtra, Delhi, Nagaland, Uttrakhand and Chandigarh saw a decline of 3 points in IMR between 2009 and 2010.

Jharkhand, UP, West Bengal, Jammu and Kashmir, Manipur and Andaman and Nicobar Islands fared the worst nationally, with only 2 point drop in infant death rates. In Lakshadweep and Puducherry the IMR remained unchanged.

Visit of Prime Minister of Japan
Prime Minister of Japan, Yoshihiko Noda visited India on December 28, 2011. He held wide-ranging talks with Prime Minister Manmohan Singh on bilateral issues as well as international developments.

In a significant departure from its long-standing policy, Japan today said it was not insisting on India signing the CTBT as a prerequisite for nuclear cooperation between the two countries and indicated it was open to hold talks with New Delhi on exporting military technology to India.

The prospects of reviving civil nuclear cooperation figured prominently in talks between the two PMs.

A joint communiqué issued at the end of talks said the two PMs decided to enhance the earlier bilateral currency swap arrangement from $ 3 to 15 billion. They hoped that this enhancement would further strengthen financial cooperation, contribute to ensuring financial market stability and further develop growing economic and trade ties between the two countries.

Manmohan Singh said the two countries have also begun negotiations on a social security agreement, and would hold the first ministerial level economic dialogue in 2012.

India and Japan have already held three round of civil nuclear negotiations, but the talks stalled after the March 11, 2011, Fukushima radiation disaster, fuelling security concerns in that country.

Prime Minister Manmohan Singh’s visit to Russia
India and Russia signed a slew of agreements in the fields of military, energy and trade during Prime Minister Manmohan Singh’s three-day visit to Moscow from December 15, 2011.

His visit came in the midst of a political unrest in Russia over allegations of rigging in the recent Parliamentary elections. The Russian leadership was keen to go ahead with the visit for the annual India-Russia Summit lest its postponement sends wrong signals to the world.

New Delhi and Moscow discussed ongoing defence projects such as the leasing of the Russia nuclear-powered submarine to Indian Navy for 10 years beginning 2012, joint development of the fifth-generation fighter aircraft and multi-role transport aircraft, and refit of the Admiral Gorshkov aircraft carrier that is to be delivered to Indian Navy in December 2012.

The two countries also finalised means to achieve the target of $20 billion annual bilateral trade, which now hovers at $10 billion, before 2015.

UPA government approves 4.5% minorities quota within OBC pie
With an eye on the coming Assembly polls in Uttar Pradesh, Punjab and three other States, the UPA regime, on December 22, 2011, approved 4.5 per cent reservation for the minorities within the 27 per cent quota for Other Backward Classes (OBCs) in government jobs and educational institutions.

The move is expected to benefit the students belonging to the minority communities in getting admission in top institutions, like the IITs, IIMs and AIIMS.

The castes/communities of the minorities, which are included in the central list of OBCs notified State-wise from time to time by the Ministry of Social Justice and Empowerment would be covered under this sub-quota. The suggestions for reservation for the minorities had been made by the National Commission for Religious and Linguistic Minorities.