IASToppers 2nd August 2016
Current Affairs Analysis

2nd August 2016 Current Affairs Analysis

'On Tap' Licensing; Masala Bonds; Competition Commission of India; OSIRIS-REx Mission; Mount Halti; etc.
By IT's Current Affairs Analysis Team
August 02, 2016

Contents

Social Issues

  • Delhi has maximum diabetes patients in country, says ASSOCHAM study

Economy

  • On-tap bank licence not for big corporates
  • LS clears Bill for speedy recovery of bad loans
  • HDFC issues world’s first Masala bond listing in LSE
  • Competition Commission penalizes state drug association and Lupin

Art & Culture

  • Remains of Kurumba period discovered

Science & Technology

  • NASA to explore asteroid Bennu during its close encounter with Earth

Also in News

  • Norway considers a birthday gift for Finland

 

Social Issues

Delhi has maximum diabetes patients in country, says ASSOCHAM study

According to the study – “Diabetes on the Rise in India”, Delhi is leading the diabetes pack, followed by Mumbai, Ahmedabad, Bengaluru, Chennai.

IASToppers diabetes

  • The study was released by The Associated Chambers of Commerce of India (ASSOCHAM).

What’s the reason?

  • According to the study, Delhiites consume high amount of oil/ghee/butter in various cooked products. This has evidently increased the number of obesity and hypertension cases, giving a rise to number of diabetics.

Key facts:

  • According to the study, about 42.5% of Delhi population suffers from diabetes.
  • The study has also found that if change of lifestyle and food habits are not made, 125 million Indians are likely to become patients of diabetes by 2035.
  • There are an estimated 85 million people in India who are suffering from pre-diabetes, a condition in which the patients have high blood glucose level but are not in the diabetes range. These people are at high risk of getting diabetes.
[Ref: The Hindu]

 

Economy

On-tap bank licence not for big corporates

Reserve Bank of India (RBI) has taken one of the key reform steps in the country’s banking sector by announcing final norms for ‘on tap licensing’ or continuous licensing.

reserve-bank-of-india

What is ‘on tap’ licensing?

  • In simple words, ‘on tap’ licensing means bank licensing process will no longer be a once-in-a-decade affair. It will be an ongoing process.
  • Under the ‘on tap’ licensing, the licensing window will be open on-tap, and the applications could be submitted to the RBI at any point of time.

Key features of the guidelines:

In the final guidelines on on-tap licensing,

‘Fit and Proper’ criteria:

  • The central bank has allowed individuals with 10 years of experience in banking and finance, as well as business groups with 10 years’ track record to promote universal banks.

Large industrial houses:

  • For large industrial houses, with more than Rs. 5,000 crore in total assets to be eligible for a licence, their income from non-financial businesses should not account for 40% or more in terms of total assets/in terms of gross income. However, they are allowed to pick up 10 per cent stake in banks.

NBFCs:

  • The existing non-banking financial companies (NBFCs) that are controlled by residents and have a successful track record for at least 10 years will also be eligible.
  • However, an NBFC, which is a part of the group where the non-financial business of the group accounts for 40% or more in terms of total assets/gross income, is not eligible.

Banking requirements:

  • The bank should have a minimum capital of Rs.500 crore and should list on the stock exchanges within six years of commencing operations.
  • The bank shall open at least 25 per cent of its branches in unbanked, rural centres.
  • The bank should also maintain a capital adequacy ratio of 13 per cent in the first three years of operation as compared to 9 per cent in existing banks.

NOFHC:

  • Setting up of a non-operative financial holding company (NOFHC) has not been made mandatory for individuals and standalone promoting entities that do not have any other group entities. For others, the RBI has mandated that at least 51 per cent stake in the NOFHC should be owned by the promoter group.
  • After setting up the bank, the NOFHC will not be allowed to set up any financial services entity for three years
[Ref: The Hindu]

 

LS clears Bill for speedy recovery of bad loans

The Lok Sabha has passed The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016. 

debt recovery

  • The bill seeks to amend the debt recovery laws with an overall objective of improving the ease of doing business.

The bill seeks to amend:

The Bill seeks to amend four laws –

  1. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002,
  2. The Recovery of Debts due to Banks and Financial Institutions Act, 1993,
  3. The Indian Stamp Act, 1899 and
  4. The Depositories Act, 1996.

What are the salient features of the Bill?

Amendments to the SARFAESI Act: 

  • The SARFAESI Act allows secured creditors to take possession over a collateral, against which a loan had been provided, upon a default in repayment. This process is undertaken with the assistance of the District Magistrate, and does not require the intervention of courts or tribunals. The Bill provides that this process will have to be completed within 30 days by the District Magistrate.
  • In addition, the Bill empowers the District Magistrate to assist banks in taking over the management of a company, in case the company is unable to repay loans. This will be done in case the banks convert their outstanding debt into equity shares, and consequently hold a stake of 51% or more in the company.

Central Registry:

  • The Act creates a central registry to maintain records of transactions related to secured assets.
  • The Bill creates a central database to integrate records of property registered under various registration systems with this central registry. This includes integration of registrations made under Companies Act, 2013, Registration Act, 1908 and Motor Vehicles Act, 1988.

Secured Creditors:

  • The Bill provides that secured creditors will not be able to take possession over the collateral unless it is registered with the central registry.
  • Further, these creditors, after registration of security interest, will have priority over others in repayment of dues.

Power for RBI:

  • The Act empowers the Reserve Bank of India (RBI) to examine the statements and any information of Asset Reconstruction Companies related to their business.
  • The Bill further empowers the RBI to carry out audit and inspection of these companies. The RBI may penalise a company if the company fails to comply with any directions issued by it.

Amendments to the RDDBFI Act:

  • The RDDBFI Act established Debt Recovery Tribunals and Debt Recovery Appellate Tribunals.
  • The Bill increases the retirement age of Presiding Officers of Debt Recovery Tribunals from 62 years to 65 years.
  • Further, it increases the retirement age of Chairpersons of Appellate Tribunals from 65 years to 67 years.
  • It also makes Presiding Officers and Chairpersons eligible for reappointment to their positions.
[Ref: BS, PRSIndia]

 

HDFC issues world’s first Masala bond listing in LSE

Housing Development Finance Corporation (HDFC), India’s largest private sector mortgage lender raised Rs. 30 billion ($450 mn) by issuing the world’s first ever “Masala” or rupee-denominated bond outside India in London Stock Exchange (LSE).

  • The event is considered a landmark as it will boost economic ties between India and the UK post Brexit.
  • The listing follows Prime Minister Narendra Modi’s announcement of USD 1 billion dollar equivalent of Masala bond issuance in the UK, made during his visit to London in 2015.

What are Masala Bonds?

  • Masala bond is a term used to refer to a financial instrument through which Indian entities can raise money from overseas markets in the rupee, not foreign currency.

IASToppers Masala Bond

Background:

  • The International Finance Corporation (IFC), the investment arm of the World Bank, in November 2014, issued a Rs. 1,000 crore bond to fund infrastructure projects in India.
  • These bonds were listed on the London Stock Exchange (LSE). IFC then named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine.

Features of the Masala Bond:

  • Analysts say that if the masala bonds take off it could lower India Inc’s the cost of capital over a period of time, which remains one of the highest in Asia. Also, inflows from these financial instruments could also support the rupee.
  • They are issued to foreign investors and settled in US dollars. Hence the currency risk lies with the investor and not the issuer, unlike external commercial borrowings (ECBs), where Indian companies raise money in foreign currency loans.
  • While ECBs help companies take advantage of the lower interest rates in international markets, the cost of hedging the currency risk can be significant.
  • If unhedged, adverse exchange rate movements can come back to bite the borrower. But in the case of Masala bonds, the cost of borrowing can work out much lower.

About the International Finance Corporation (IFC):

The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private sector development in developing countries.International Finance Corporation

  • It is a member of the World Bank Group and is headquartered in Washington, D.C., United States.
  • It was established in 1956 as the private sector arm of the World Bank Group to advance economic development by investing in strictly for-profit and commercial projects that purport to reduce poverty and promote development.
  • The IFC is owned and governed by its member countries, but has its own executive leadership and staff that conduct its normal business operations.
  • It is a corporation whose shareholders are member governments that provide paid-in capital and which have the right to vote on its matters.

Functions of the IFC:

  • It offers an array of debt and equity financing services and helps companies face their risk exposures, while refraining from participating in a management capacity.
  • The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible.
  • It advises governments on building infrastructure and partnerships to further support private sector development.
[Ref: The Hindu]

 

Competition Commission penalizes state drug association and Lupin

Karnataka Chemists and Druggist Association (KCDA) and Lupin, India’s third largest drug maker, have been penalized by the Competition Commission of India (CCI) for indulging in practices against the provisions of the Competition Act 2002.

  • The CCI’s investigation found KCDA indulging in the anti-competitive practice of mandating No Objection Certificate (NOC) before the appointment of new stockists by pharma companies, which has the effect of limiting and controlling the supply of drugs in the market.

About the Competition Commission of India:

Competition Commission of India is a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India.

IASToppers Competition Commission of India

  • CCI consists of a Chairperson and 6 Members appointed by the Central Government.
  • It is the duty of the Commission to:
  1. Eliminate practices having adverse effect on competition,
  2. Promote and sustain competition,
  3. Protect the interests of consumers and
  4. Ensure freedom of trade in the markets of India.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

About The Competition Act, 2002:

  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws.
  • The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.
[Ref: ToI]

 

Art & Culture

Remains of Kurumba period discovered

Red ware pottery, microlithic tools and other remains of Kurumba lineage were discovered at Kurumbankottai in Villupuram district, Tamil Nadu. 

  • The excavation led to the discovery of two different natures of soil and levels at Kurumbankottai — indicating that the region might have been ruled by Kurumbas, the pre-Pallava chiefs.
[Ref: The Hindu]

 

Science & Technology

NASA to explore asteroid Bennu during its close encounter with Earth

A near-Earth asteroid that is coming towards our planet after being dislodged by a gravitational pull can indeed strike us and cause massive destruction, but according to experts, it has only a one in 2,700 chances of hitting.

  • Although there are very low chances for impact for Bennu, a large near-Earth asteroid to hit earth’s orbit in 2135, the consequences for the same could prove catastrophic. The impact would cause a mass extinction.

Bennu, a large near-Earth asteroid

About the OSIRIS-REx Mission:

The Origins, Spectral Interpretation, Resource Identification, Security, Regolith Explorer (OSIRIS REx) is a planned NASA asteroid study and sample return mission.

OSIRIS REx

  • The launch is planned for September 8 2016.
  • The mission is to study asteroid 101955 Bennu, a carbonaceous asteroid (formerly designated 1999 RQ36) and in 2023 to return to Earth a sample for detailed analysis.
  • Material returned is expected to enable scientists to learn more about the time before the formation and evolution of the Solar System, initial stages of planet formation, and the source of organic compounds which led to the formation of life.
[Ref: The Hindu, Wiki]

 

Also in News

Norway considers a birthday gift for Finland

Norway is pondering an unusual birthday gift for its neighbour Finland, an Arctic mountain peak.

Details:

  • Mount Halti is the highest mountain in Finland, but its 4,478-foot summit is in Norway.
  • To help commemorate the 100th anniversary of Finland’s declaration of independence from Russia on Dec. 6, 1917, a group of Norwegians is urging the government to move a point on its border with Finland some 490 feet to the north and 650 feet to the east.
  • Halti’s peak would become the highest point in Finland, surpassing a spur of the mountain that tops out at 4,344 feet.

norvigia_vouno_1

Norway’s highest:

Norway’s highest peak, Galdhopiggen, has an elevation of 8,100 feet, making it nearly twice as high as Mount Halti, which is not even among the top 200 of Norway’s highest peaks.

[Ref: The Hindu]

 

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