Editorial Notes

Editorial Notes 17th October 2016

Global Tuberculosis Report 2016; Capital Adequacy Ratio (CAR); Payments Banks; Genetically Modified Crops; Food Security.
By IT's Editorial Notes Team
October 17, 2016


Polity & Governance

  • WHO releases Global Tuberculosis Report 2016


  • How many payments banks will come up finally?
  • No one asks the farmer
  • Missing stock is harming our food security


Polity & Governance

GS (M) Paper-2: “Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources, issues relating to poverty and hunger.”

WHO releases Global Tuberculosis Report 2016

The World Health Organisation (WHO) has released the Global Tuberculosis Report 2016.


Highlights of the report:

  • While efforts to respond to TB saved more than 3 million lives in 2015, however TB burden is actually higher than previously estimated, reflecting survey data from India.
  • Six countries accounted for 60 percent of the total burden, with India bearing the brunt, followed by Indonesia, China, Nigeria, Pakistan and South Africa.
  • In addition, the rate of reduction in TB cases remained static at 1.5 percent from 2014 to 2015. This needs to accelerate to 4–5% by 2020 as per World Health Assembly-approved End TB Strategy.
  • Multidrug-resistant TB (MDR-TB) remains a public health crisis.
  • Three countries carry the major burden of MDR-TB – India, China, and the Russian Federation – which together account for nearly half of all cases globally.
  • Around 84% of the financing available in low- and middle-income countries in 2016 was from domestic sources, this was mostly accounted by BRICS (Brazil, Russia, India, China and South Africa).
  • Other low- and middle- income countries continue to rely heavily on international donor financing, with more than 75% coming from The Global Fund to Fight AIDS, TB and Malaria.
  • India had reported only 56% of its TB burden in 2014 and 59 percent in 2015.
  • Since India accounts for more than one quarter of the world’s TB cases and deaths, the revisions in the estimates have had a major impact on global estimates.


  • Within the context of the Sustainable Development Goals, various governments have agreed on targets to end the tuberculosis (TB) epidemic both at the World Health Assembly and at the United Nations General Assembly.
  • The targets include 90% reduction in TB deaths and an 80% reduction in TB cases by 2030 compared with 2015.
[Ref: The Hindu]



GS (M) Paper-3: “Inclusive growth and issues arising from it.”

How many payments banks will come up finally?


  • Both payments banks and small finance banks will be required to maintain a capital adequacy ratio (CAR) of 15% with Tier I (consisting of equity and reserves) and Tier II (long term debt, among other things) ratios equally split at 7.5% each.
  • This is far higher than the CAR of the so-called universal banks, which can dabble in many banking activities that payments banks and small finance banks are not allowed to.


What is Capital Adequacy Ratio (CAR)?

  • CAR is a measure of financial strength expressed as the ratio of capital to risk-weighted assets.
  • In accordance with the Basel III norms, RBI wants banks operating in India to maintain a minimum CAR of 10.25% by March 2017 and 11.5% by March 2019.
  • The two new universal banks which started operations last year—IDFC Bank Ltd and Bandhan Bank Ltd—are also required to maintain a CAR that is less than the level specified for the two sets of new banks, 13% for the first three years.

Why does RBI want the new banks, particularly payments banks, to maintain such a high CAR?

  • To protect depositors in case a bank goes bust and maintain stability in the financial system.
  • CAR gives banks a cushion to absorb a reasonable amount of losses if too many loans go bad.
  • Discourages banks from making excessively risky loans and investments.

Limitations of Payment Banks:

  • Payments banks are expected to provide small savings accounts and payments/remittance services to migrant labourers, low-income households, small businesses and other unorganized sector entities, and expand financial inclusion.
  • They can’t give loans, except to their own employees;
  • 75% of their deposits are to be invested in risk-free government securities and the rest in other banks’ deposits.
  • They can open only savings and current accounts, and that too up to Rs1 lakh, an amount which is protected by an insurance cover in case a bank goes belly up.

Matter of concern for payment Banks:

  • Payments banks will have to spend tons of money to create the right infrastructure to be in the business. The RBI is apprehensive that the payments banks will end up burning too much capital in building their franchises.
  • The regulator is more concerned about the operational risks that such banks will face than the credit risks.

RBI guidelines for payments bank:

In 2014, RBI released the final guidelines for the payments banks (based on the recommendations of the Committee, headed by Nachiket Mor),

  • The RBI is pretty clear that the role of the payments bank will not stretch beyond that of a banking correspondent of a regular bank beside the fee-based remittance business.
  • The payments banks will be able to open accounts with digital signatures, reducing the need for physical access points, and they can employ their group companies and business partners as business correspondents to sell their products.
  • The RBI’s final guidelines say an employee of a payments bank should be available for a sufficient duration, at a fixed location known to customers at the district level, to attend to customer grievances and support agent supervision.
  • This fixed location may also be used to conduct the banking business of the payments bank and it will be considered as a physical access point. One-fourth of such access points are to be in rural pockets.
  • Overall, a payments bank can be a business correspondent of a regular bank and, at the same time, it also can employ business correspondents to source deposits.

Tough Journey for Payments Banks:

  • 41 entities joined the queue, seeking licences. Eleven of them were given in-principle licences, three of which have already backed out. It will not be surprised if a few more of the remaining eight decide to quit as running a payments bank will not be a cakewalk.
  • It needs to be seen how many remain in the fray till the end and actually set up payments banks. Besides, such banks can also make money using the so-called float or the idle money that remains with them for hours or days while remitting funds but no one probably has got the hang of the right business model as yet.
  • Of the eight that are putting the final touches on their business plans, four are in the telecom space. They have a captive subscriber base and, if nothing else, the payments bank activities will help them create stickiness for their telecom customers.
  • For others, it will be a difficult task—setting up a payments bank and making money, even after five years.
[Ref: LiveMint]


GS (M) Paper-3: “food security”

No one asks the farmer


  • Fifty years ago, Union Minister for Food and Agriculture Chidambaram Subramaniam took the decision to import 18,000 tonnes of seeds of Lerma Rojo 64A and Sonora 64 wheat from Mexico.
  • Simultaneously, a multiplication programme was initiated, and between 1965-66 and 1967-68, & India’s wheat production rose from 10.4 million tonnes (mt) to over 16.5 mt, crossing 20 mt in the next two years. Thus, was born the Green Revolution.


Journey of GM Mexico wheat:

  • Subramaniam encountered a flood of criticism from Planning commission, Senior scientists, when he proposed what was the largest import of seeds ever undertaken in world history.
  • Indian farmers, many held, wouldn’t accept the Mexican semi-dwarf wheats, as they might yield less bhusa (straw).
  • The new wheat strains bred by Norman E. Borlaug ended up producing more grain as well as bhusa per hectare than the traditional tall, lodging-prone cultivators.
  • Subramaniam has the backing from Indira Gandhi. She succeeded Lal Bahadur Shastri — who was equally supportive — as prime minister.

GM Bt cotton:

  • Many years later, Atal Bihari Vajpayee showed similar decisiveness when his government — on March 26, 2002 — approved the commercial cultivation of Monsanto’s genetically modified (GM) Bt cotton.
  • Just as Borlaug’s varieties doubled India’s wheat output in four years — annual grain imports had earlier topped 10 mt — Bt cotton almost trebled domestic production from 136 lakh bales (lb) to 398 lb between 2002-03 and 2013-14, and the country turned from a net importer of roughly 17 lb to a net exporter of over 105 lb.

In this way, Indian farmers planted the subversive semi-dwarf wheats and Bt cotton without anybody holding a gun to their heads.

GM Mustard and the issues:

  • Today, we are in a somewhat analogous situation with regard to the commercialisation of GM mustard.
  • The opposition argument, that product developed not by a multinational or international research institution, but by scientists at Delhi University’s Centre for Genetic Manipulation of Crop Plants (CGMCP).
  • Opposition Argument: the GM mustard hybrid incorporates three alien genes — barnase, barstar and bar — rendering it inherently unsafe for human and animal health.
  • Counter: These genes have already been deployed in canola, which belongs to the same Brassicaceae plant family as mustard. India imports 3,50,000 tonnes of canola oil every year, a lot of it GM, and three mt of soyabean oil, which is entirely GM. How is it that GM technology is fine in imported videshi oil, but not if employed for desi mustard oil? What kind of swadeshi/Make in India policy is this that allows edible oil worth $10.5 billion to be imported annually, but prevents the country’s own farmers from growing GM mustard hybrids with the potential to yield more?
  • Arguments: barnase-barstar-bar technology was originally developed by a German company Bayer AG, and the CGMCP scientists had done nothing new.
  • Counter: The CGMCP scientists have indigenous publicly-bred GM mustard and modified the barnase-barstar-bar technology, originally used in canola, to create a robust and viable hybridisation system in mustard. These scientists have been able to obtain six foreign patents — three from the US and one each from Europe, Canada and Australia — for their work in transgenic mustard breeding. French activist-molecular biologist Gilles-Eric Seralini, who believes mustard can “fix nitrogen” (brassicas are not legumes)
  • Arguments: The bar gene, which makes the plant resistant to the application of the herbicide glufosinate. Herbicides, should not be permitted because they displace farm labourers engaged in manual weeding.
  • Counter: By that logic, shouldn’t we also ban washing machines or metro trains, since these reduce employment opportunities for domestic helps and rickshaw pullers?

Farmers on least priority:

  • In this debate about GM crops, the one person whose views seem to matter the least is the farmer himself.
  • A farmer, we know very well, will not say whether a new hybrid/variety is good or bad until he has planted them and seen the results.
  • Unfortunately, an environment has been created today where farmer is being denied the chance to make an informed judgement by those who don’t really farm for a living.


The GM mustard issue should be seen by putting national interest first and let farmers decide, as scientist have already given the green node for that, so decision to approve it must be done fast.

[Ref: Indian Express]


GS (M) Paper-3: “food security”

Missing stock is harming our food security


  • The RBI recently approved a proposal of around Rs30,000 crore of food credit given to Punjab state agencies, allowing for the conversion of cash credit into a 20-year loan at a lower interest rate.
  • The central bank also sanctioned a cash credit limit of Rs26,000 crore for this year’s procurement by state agencies.
  • The fact that food security of the entire country is dependent on Punjab’s agricultural performance may have prompted the RBI to adopt this liberal stance.


Will window-dressing cash credit of missing stock set a bad precedent for other agrarian states that are heading towards a similar predicament?

  • In the case of food credit, the procedure involves lending to the corporation, procurement of grains, storage in state godowns and monitoring of stocks by the state government.
  • The cash credit given to procure grains should thus meet the amount of hypothecated stocks, when this does not happen, there is a clear case of discrepancy or missing stocks.
  • Missing stock worth around Rs20,000 crore was discovered in Punjab’s food purchases, this year.
  • A 2014 investigation by the CAG uncovered the scam in Punjab where 3,319 trucks hired for paddy transport by the FCI and other nodal agencies, 3,232 were non-existent and 15 were vehicles other than trucks.
  • Further in the report, Rs843 crore of losses was incurred due to the inefficiency of the Punjab State Warehousing Corporation because of:
    1. Delayed availing of loan from the NBARD
    2. Delayed handing over of godowns to the FCI
    3. Non-adoption of FCI’s storage and preservation norms
    4. Inadequate control over milling activities and failure to recover transportation charges.

Better supply management:

  • The issue is not restricted to the state of Punjab. The situation prevails across the country and requires redressal at a fundamental level—better supply management.
  • This is as essential for controlling inflation as it is for food security.
  • Over the years India has achieved enough, even surplus, production levels. The problem, therefore, lies in preserving this output for future use.
  • According to the FAO, around 40% of the food produced in India is wasted and this includes vegetables, fruits, meat, milk, cereals and pulses.
  • Wastage from the public distribution system(PDS), which is meant for ensuring food security in the country, makes up almost half of the total.
  • India ranked a lowly 97th of 118 nations in the recently released Global Hunger Index, spoilage and pilferage are not things the country can afford.


  • Warehousing and storage problems will need to be addressed separately.
  • The concept of a Negotiable Warehouse Receipts system, as proposed by the Shanta Kumar Committee for restructuring FCI, which allows farmers to deposit their produce in registered warehouses for an advance and sell it later when market prices are high.
  • Strict adherence to quality standards and norms should be made mandatory for the registered warehouses, private or otherwise.
  •  A combination of private and public agencies is essential to handle the vast and diverse agricultural output in the country.
  • Meanwhile, the FCI, which has been failing repeatedly in its initial objectives, should be streamlined and allowed to focus on states’ surplus produce meant for distribution in other states. Most of the produce meant for a state’s own consumption should be left to the state agencies.
  • Provisions must also be made to liquidate stocks as and when they exceed buffer stocks to minimize wastage.
  • Efforts should be made to revamp the food processing sector in India to reduce the perishability of food items.
  • The setting up of mega food parks and cold storage chains as part of the Make In India project, and 100% FDI through the FIPB route in the marketing of food produced and manufactured in India is welcome in this context.


  • A robust food-supply chain, which can make value additions through better storage, distribution and processing, will ensure that the agricultural sector remains competitive, transparent and profitable. This may perhaps also change banks’ negative perceptions of the sector.
[Ref: LiveMint]


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