One country One law : Need of the hour

Recently, we have witnessed lot of curiosity and misplaced controversy over imposition of long awaited Uniform Civil Code, courtesy, Article 370 of the Indian Constitutions.

Article 370 drafted in Indian constitution provide ‘temporary’ special status to Jammu & Kashmir which specifies that Indian Parliament needs to be on same page with State Government in all matters except Foreign affairs, Defence, Communication and ancillary i.e. residents of Jammu and Kashmir governed by another set of laws including those related to citizenship, ownership of property, fundamental rights and many more as compare to rest of Indians. In the era of Liberalisation and Globalisation, with vast range of opportunities, business houses are not able to set up their plants in J&K because of some law written in 1947 which do not allow any outsider (one does not hail from J&K ) to own any kind of property in Jammu & Kashmir. Women lose their every single right they had, once married to some outsider (non Kashmiri).

Cap of special status was granted to Jammu & Kashmir in 1947, in utterly different scenario from now.  After independence, Jammu & Kashmir had some peculiar circumstances which stand out the State to gained considerable autonomy in the Constitution. But post 65 years of independence, ‘temporary’ status seems elevated to ‘permanent’. Today, under completely different circumstances/scenarios, lawmakers should take some harsh decision for amendment of certain laws which were drafted back then and which are providing hindrance in integral growth of the State, if cannot abrogate the article at once. And gradually should work toward dilution of this politically motivated controversial topic.

However, Uniform Civil Code states uniform law governing issues related to property and in personal matters like marriage, divorce, adoption and inheritance. In laymen term, there are different laws in India for different communities for the above mentioned issues (like divorce, marriage, property etc.). There are different laws governing the inheritance or divorce or marriage in Hindus then from Muslims or Christians. There were many instances in past when Supreme Court urged States to move toward the implementation of Uniform Civil Code.

The Uniform Civil Code brings all the prevailing different personal laws under single umbrella, which will be applicable to every citizen of India irrespective of its caste and religion.

There is a myth prevailing among all communities which are opposing imposition of Uniform civil code and favouring Article 370 that this will leads to withdrawal of all the benefits they are getting on the basis of their caste, religion or the due the some region they hail from. I believe on one side most of us demands for equal treatment (towards OBCs, SC/STs or towards Hindu, Muslim or Christian) in Secular India. We demands for equal rights and opportunities as other Indians enjoying. While on other, we are against every move taken by government on this front.

No one has gained from Article 370 except some odd 50 families. Political pundits are often misguiding the people of Jammu and Kashmir for their own benefits. However, imposition of Uniform civil code was made difficult by regional parties who work for their own good. Though, both issues (Abrogation of Article 370 and imposition of Uniform civil code) are different in nature but both envision “one country one law”.

Eyes on new government

Lok Sabha election which held in long nine phase has efficaciously concluded, and sealed the fate of number of aspirants in fray. Statistics from election commission has recorded highest voter turnout ever of 66.4% this Lok Sabha season. This year enthusiasm shown by people of India, the largest democracy, in scorching summer is commendable job in itself, this year turnout has surpasses the election mark of 64.2% in 1984, post assassination of our former Prime Minister Indira Gandhi.

Ahead of India’s mammoth electoral exercise come to an end election commission is all set to count 550 million votes sealed in electronic voting machines across the nation and will reveals the candidate chosen by people of India for the top post. Post ninth and last phase of voting on 12^th May, many exit polls has already predicted clear and easy victory for BJP lead NDA with its tally between the range of 230- 320 seats and has predicted worst performance ever for Congress, a party which has ruled this country for six decades post independence.

There had been lot of talks about Right to information, women empowerment, and food security bill from congress vice president Rahul Gandhi and his aides throughout their election campaigns. However, they didn’t perform up to the expectation of people and fall miles short to the magical figure of 272. What lead Congress or Rahul Gandhi to this crisis? There must have been something drastically went wrong this time, either they didn’t communicate properly to their vote bank regarding the achievements of UPA II or it could be irk of people for multiple scams, corruption and long lasting high inflation during UPA II reign which bring outgoing government to ashes courtesy - post election exit polls.

While the other side, BJP and its allies are enjoying the Congress pitfalls and used them as an opportunity, along with all the marketing jargons used in their election campaigning for creating brand MODI and above all the hardcore, determined and passionate efforts put in by Gujarat CM and PM nominee Narendra Modi, who spokes about development and economic growth of this country, kept aside the RSS ideology of Hindutav, is working out well and helping their ship floating this season.  

Curtains are about to rise within next few hours which shed off the prevailing smog in atmosphere and provide certainty to the people mandate. When new government is about to form in next few days, it is need of the hour to closely observe how the new government will fulfil its promises, the promises it has made to the people of this country or it is just another political party who talks no truth but pouring their pockets.

Financial distress: Growing NPAs

Gross NPAs of commercial banks have been on upward trajectory in past two years as the economy has grown at its slowest pace in more than a decade. Loans and advances swelled to Rs.1.79 trillion by the end of December 2012 from Rs.1.32 trillion at the quarter ended in March 2012, and to Rs.2.43 trillion at the end of the December 2013 quarter.  Rs.85 trillion of Indian banking industry is stressed by the consistently increasing Non Performing Assets (NPAs).

Loans and advances provided by banks to its customer for any pre stated activities, say investments, are Assets to the bank. The loan turns as NPA when instalment of principle amount or interest component is not paid for 90 days from the due date. Thus Bad loans are the assets that cease to generate income for the bank.

One can justify this rise in level of NPAs through number of reasons like: 

1.   Lethargic procedure of sanctioning and disbursement of the loan: For instance say, a manufacturing company has outlined the framework to step up new plants by forecasting growth in near future but lethargic documentation for sanctioning and disbursement could take months of time in completion of documentation process which delays the investment, result in slipping the opportunity of generating profit in heydays.
2. Economic slowdown: Investment made by speculators in mega projects during boom phase of 2004–08 are not providing any fruitful results because of global slowdown and pushing borrowers in critical situations where they are not able to repay their dues.
3. Time taken by Government in approval of projects: Due to extensive corruption in government bodies, stringent government policies and most importantly “the willingness of government” was not able to clear suspicion or uncertainty over many projects which could have been resolved easily. Environment clearance is the major hurdle before major projects whose completion is time bound in nature, resulting in defaulter in repayment of their finance. 
4.  Willful defaulters: As per the RBI guidelines, willful defaulters are the ones who defaulted in meeting its repayment of their obligations to the lenders even when it has the capacity to honour such obligation or the ones who defaulted in meeting its repayment of their obligations to the lenders and has not utilized the finance for the specific purpose for which it was availed of but diverted the funds to some other deeds. 
5.  Priority sector lending (PSL): One of the reasons of continuously rising NPAs could be the obligations needs to meet by commercial banks especially public sector banks (PSBs). Sanctioning loans and advances to priority sector result in long list of NPAs. PSL mainly refer to the section of society which do not get sufficient finance on time which primarily comprises of weaker sections of society like farmers and small scale industries mainly due to few reasons mentioned below:

• Lack of Credit Worthiness of the individual/firm to repay the debt
• Lack of collateral security of the individual/firm borrower
• Lack of adequate documents needed to be qualifies to get a loan

Solution and some preventive measure Government and Banks should adopt in order to bring down the sky touching NPAs:

1. Relaxation in rules and regulations: Need to relax stringent rules and speed up the process clearance of projects which result in completion of mega projects in India in a time-bound manner which is an urgent need of hour to bring down NPAs in near future and to achieve the desired economic growth.
2. Regular follow up: RBI had outlined action plan to tackle NPAs which help banks to identify the stressed amount long before it turns into NPAs by creating Special Mention Accounts (SMA). The account should be categorised as SMA 1 if overdue remains for 30 days & SMA 2 if remains overdue more than 30 days to 89 days. This helps in early identification of potential defaulter hence, efforts for recovery of due within the time to be done. Regular follow up and notices should be sent to borrower.
3.  Asset Restructuring Companies (ARCs): ARCs are specialised entities which pick up stressed assets of banks and financial institutions at a discount and make recovery. And aid banks and financial institute to off load bad assets from their books of account and allow them to focus of recovery plans. RBI should encourage establishment of ARCs which facilitate other financial institutes in written off their bad loans from their balance sheet and allow them to focus toward constructive objective

India is a growing economy, hence investments are the need of hour to maintain growth trajectory. And NPAs are modern banking’s Achilles heel with some bad investment or investments toward PSL which cannot be avoided but if certain adequate set of rules and guidelines are formulated and ease some stringent norms
or should lay down measures to encourage ARCs, which encourage investments, will tame this monster and keep NPAs within the limit, would help banks and financial institutes to focus on recovery plans.

New Bank Licences: Silver line in dark clouds

After scrutinising the applications for new bank licences on various aspects, last week Bimal Jalan panel has submitted its report to the Reserve Bank of India (RBI). Yes, this year RBI is planning to issue few new licences to some new players in Indian Financial system. The Central bank issued guidelines regarding licensing of new banks last year. This is the first attempt of licensing in last one decade since Yes Bank and Kotak Mahindra bank were entitled with suffix “Bank” against their name in 2003-04.

Banking system is core of any economy and banks its backbone. Strengthening this sector by providing new licences gives an edge over the existing one. As many as 25 players are in fray of banking licences which includes public sector player like India post and IDFC and private sector Anil Ambani group and Aditya Birla group. Few NBFCs (Bajaj Finance, Muthoot Finance etc) are also competing for new licences.

Public player like India post have greater chances of entitled with banks because of its strong nationwide distribution channel specifically in rural India and having experience in administrating a saving bank scheme and accepting PPF deposits.

Probability of NBFCs getting licences is also high, as these are already in financial business. If NBFCs are given preference to run a bank, then rural and semi urban consumer will be the ones who get maximum benefit because of their already existing network in rural areas. As NBFCs cannot take deposits their cost of funds are high as compared to banks. But when NBFCs are awarded with banking licence their cost of fund will plunge to the comparable cost prevailing in market.

As more players enter the banking space, intense competition among banks might benefit consumers. Banks will focus on reducing operational cost to maintain their market share or to consume market of others which in turn will result in charging low interest rates to consumer in long run. This competitive environment in banking system not only bring down the interest rates but also innovate the whole banking system with new people coming in with their new idea, new thinking style and with new strategies which make system work more efficiently.

India has population of over 1.2 billion of which only 35 percent of population has their bank account. To penetrate more in market, RBI made it mandatory for banks to open “One ATM in rural area with every three in urban area” and bank licences to new players will perform the task of catalyst in reaching out to remaining 65 percent of population which ultimately support the primary objective of penetrating the untouched market to greater extent.

The step taken by RBI is seen as “Silver line in dark clouds (which is hovering on Indian Banking System)” to strengthen Indian Banking system. This gives hope to many economists or to experts regarding expanding reach of Indian banks which make every penny countable and support untouched market to grow if implementation is done properly rather than mere hype.