The HINDU Notes – 05th November 2019 - VISION

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Tuesday, November 05, 2019

The HINDU Notes – 05th November 2019






📰 India storms out of RCEP, says trade deal hurts Indian farmers

India storms out of RCEP, says trade deal hurts Indian farmers
India had made a strong case for an outcome which is favourable to all countries and all sectors.

•Seven years after India joined negotiations for the 16-nation ASEAN (Association for South East Asian Nations)-led RCEP (Regional Comprehensive Economic Partnership) or Free Trade Agreement, Prime Minister Narendra Modi announced on Monday that India was dropping out of the agreement, citing its negative effects on “farmers, MSMEs and dairy sector”.

•“The present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join RCEP Agreement,” Prime Minister Modi told leaders of the other 15 nations at the RCEP summit in Bangkok.

•The summit included China, Japan, Australia, New Zealand, South Korea, and the 10-nation ASEAN grouping.

•“When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the talisman of Gandhiji nor my own conscience permit me to join RCEP,” Mr. Modi added, referring to the stakes of Indian farmers, traders, professionals and industrialists, all of whom have protested against the government’s decision to go ahead with the negotiations in the last few months.

•Later in the evening, a joint leaders’ statement indicated that despite India’s “unresolved” outstanding issues, other countries were prepared to go ahead with the RCEP agreement.

•“We noted 15 (of 16) RCEP Participating Countries have concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020,” the statement issued at the end of the summit said.

•“India’s final decision will depend on satisfactory resolution of these issues,” the joint statement said.

•When asked whether India might consider joining RCEP at a later date, an MEA official said, “Not as the agreement stands today.”

•Sources said Indian officials, who had hoped for consensus on pushing the timelines on an agreement to next year, reacted angrily to the joint statement, and stormy scenes were reportedly witnessed over the wording of the statement.

•Officials present at the meetings said India had tried to negotiate “in good faith” but felt that their views “were not being accommodated”. They also accused the other nations of attempting to “gang up” in an attempt to force India to toe the line on issues like safeguards against flooding of Chinese goods, allowing Indian labour mobility to other countries for services, and agricultural and dairy tariffs. Since 2012, there have been 28 rounds of negotiations that went right down to the wire over the weekend at the RCEP ministerial meeting, which ended inconclusively for India.

•According to a government note, the outstanding issues included major trade deficits with all the countries in RCEP, lack of assurances on market access, and RCEP negotiators’ insistence on keeping 2014 as the base year for tariff reductions. The note, which was circulated to the media shortly before Mr. Modi went up on the dais to make his announcement, also said India was in the process of reviewing its Free trade Agreements with Japan, Korea and the ASEAN grouping, and discussing trade agreements with Europe and the U.S., while criticising the previous UPA government for “poor negotiations” in the past.

•The note called agreements like RCEP “in reality FTAs by stealth” with countries with whom India has a “huge trade imbalance” — a veiled attack against China with which India has a $53 billion deficit.

•The government denied reports that it had made any “last minute demands” at the ASEAN and East Asian Summits on RCEP.

•“Overall we are clear that a mutually beneficial RCEP, in which all sides gain reasonably, is in the interests of India and of all partners in the negotiation,” government sources said later in the afternoon. A few hours later, however, the mood had considerably changed, and India decided to walk out of the RCEP agreement altogether.

•RCEP negotiations were meant to create the world’s biggest free trade region that represented half the world’s population and one-third of the global GDP.

•The decision to join RCEP met with stiff resistance in India, however, from most industry and farmers’ bodies. The All India Kisan Sangharsh Coordination Committee (AIKSCC), which represents about 10 lakh farmers, had called for an all-India protest on Monday against joining. Separately, the Confederation of All India Traders, which represents about seven crore traders, made several representations to the Commerce Ministry to keep steel and allied services, and dairy out of the purview of the RCEP agreement.

•However, while certain industries such as steel, agriculture, and dairy have been vocally against India joining RCEP, the Confederation of Indian Industry in a report on Monday said the naysayers had only taken the limited view of curbing imports from China and have not looked at the opportunities for export growth that India could exploit by joining RCEP.

📰 India, Russia to conclude mutual logistics agreement

All set to be signed during Rajnath’s Moscow visit

•India and Russia are expected to conclude a mutual logistics agreement and review the setting up of joint ventures for manufacturing spares for Russian defence platforms in India during the visit of Defence Minister Rajnath Singh to Moscow from November 5 to 7, official sources said.

•“The Agreement on Reciprocal Logistics Support (ARLS) is expected to be signed,” diplomatic sources said, indicating that all issues have been resolved.

Year-long discussions

•Moscow sent a draft ARLS early last year and discussions have been on since. Earlier, it was expected to be signed during the meeting between Prime Minister Narendra Modi and President Vladimir Putin in September on the sidelines of the Eastern Economic Forum (EEF) in Vladivostok, but was held back.

•Logistics agreements are administrative arrangements facilitating access to military facilities for exchange of fuel and provisions on mutual agreement when the Indian military is operating abroad.

•Mr. Singh will co-chair the 19th India-Russia Inter-Governmental Commission on Military and Military Technical Cooperation with his Russian counterpart, General Sergei Shoigu. Another major issue on the agenda will be the purchase of the S-400 air-defence missile systems, over which the U.S. is continuing a tough stance with respect to waiver from sanctions under the Countering America’s Adversaries Through Sanctions Act. The deliveries are expected to begin by 2020-end, 24 months after the signing of the contract, and that is when the sanctions are expected to kick in.

•A 50-member industry delegation is accompanying Mr. Singh to Russia, the Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement. “The objective of the delegation is to explore ways to jointly manufacture spares and components with Russian original equipment manufacturers (OEM) under ‘Make in India’.”

•The delegation to Russia is a follow-up of the Inter-Governmental Agreement (IGA) signed on September 4 by India and Russia to “operationalize a mechanism for collaboration on joint manufacturing of spare parts, components, aggregates and other products for the maintenance of Russian-origin arms and defence equipment in India under the ‘Make in India’ programme through the transfer of technology and setting up of joint ventures.”

High-level visits

•There have been a flurry of high-level visits between the two countries surrounding the EEF in which energy cooperation in Russia’s Far East was in focus. As a follow-up of the forum, Minister for Petroleum and Natural Gas and Steel Dharmendra Pradhan was in Russia and Japan from October 22 to 26, during which “possible areas of collaboration in other sectors like coking coal, and shipping routes” were discussed.

📰 A rights-based framework to theorise poverty

Debates on deprivation need to be grounded in the language of equality, opportunity and justice

•A rather interesting debate has followed the awarding of the Nobel Prize in Economics to Esther Duflo, Abhijit Banerjee and Michael Kerner. Critics have argued that the method followed by the three avoids big questions about income inequality and redistribution. The question from the perspective of political theory is, perhaps, bigger — what is the moral status of the global poor in poverty reduction schemes? Do the poor have names, faces, aspirations, dreams, projects and sensibilities? Or are they destined to be anonymous and faceless?

•About thirty years ago, prominent philosophers based in Western universities sparked off what came to be known as the ‘global justice debate’. The argument caught imaginations across the world. Seldom had people seen such missionary zeal ignited in young minds studying in philosophy departments. Everyone wanted to do something about global poverty and the global poor.

An exclusionary debate

•Ironically, the global justice debate was extremely exclusionary — it divided the world into the ‘distant needy’ in the global south; and the affluent people living in the West who owed the global poor for various reasons, ranging from compassion, guilt, charity and philanthropy to injustice wreaked by global institutions, like the World Trade Organization, dominated by Western powers.

•Nowhere did we find a mention of colonialism as a factor that was responsible for poverty. Unlike the 1970s dependency debate, scholars of the ‘third world’ were excluded by definitional fiat from a debate pitched as ‘universal’ and ‘global’. The West owed ‘our poor’, but we had no obligation to the poor of the first world. In these philosophically complex theories, the global poor continued to be ‘anonymous’; they were inert, mere recipients of concern and, sometimes, charity doled out by the West. Poverty was cause for some anxiety, the moral status of the global poor was not of interest.

•Recollect the 2005 campaign organised by global civil society: ‘Make Poverty History’. The campaign harnessed celebrities like Bob Geldof, Bono, and Brad Pitt to add glamour to the agenda. The media was deployed to tell a tale of how ‘we’ could change ‘their’ lives through symbolic gestures, such as wearing white bands, signifying solidarity. Sceptics remarked that the campaign showcased less of poverty and more of those who wanted to make a difference. The poor remained on the margins. ‘Third world’ activists were outraged; the campaign had staged the pornography of poverty.

•In other circles, these campaigns caught on because they did not offend anyone. There was no demand for economic redistribution, creative use of political power or progressive taxation. They conformed to ‘sufficientarian’ philosophy: give the poor enough to eat. How does it matter whether they are given an opportunity to be equal to the rest or not?

•But poverty cannot be abstracted from society; it is a product of and a signifier of a deeply unjust and unequal society. P is poor because she does not have the resources to go to school, read, indulge in hobbies, watch a movie, go out with her friends and plan a career like other girls. P, note, is not only poor, she is unequal to others because she is unable to do the things they do.

•The poor are not only deprived of access to material benefits, they are socially marginalised, reduced to vote banks by political parties, humiliated and subjected to intense disrespect. To be poor is to be robbed of the opportunity to participate in social, economic and cultural transactions from a plane of equality. Poverty is not only about poverty; it is also about inequality. Researchers and policymakers have to take this aspect of poverty head on. Can we do something about poverty without taking on an oppressive society? If we cannot do so, poverty will continue to be produced and reproduced by an exploitative society, as an integral part of this society.

Rising up in revolt

•More significantly, how can we ignore that on momentous occasions, the poor have acted not as passive, inert subjects but as agents? We would do well to remember that the debate on global poverty accelerated in the 1990s. By then, the first phase of the globalisation project propelled by doctrines of free trade and unregulated markets had run into trouble in countries like Mexico, Thailand, Japan, Russia and Brazil; impoverished thousands; and generated rage and discontent. Since the 1980s, countries in South America and in Sub-Saharan Africa had been rocked by what came to be known as ‘anti-IMF riots’. Now, activists proceeded to target multilateral institutions identified as responsible for the generalised misery of the global south.

•A major shift in the rhetoric and strategy of global institutions was in response to aggressive and sustained campaigns like the ‘50 years [of the World Bank] is enough’ in the concrete and virtual spaces of global civil society. In many cases, the global poor fought alongside activists against terrible outcomes of globalisation.

•Across the global south, grass-roots organisations have struggled to implement ‘social protection’ schemes, and give the poor rights to the land upon which they have constructed rude shanty towns. The poor have standing as political agents because they have struggled for some social provisioning, bargained with political parties, and shown solidarity with other groups.

•“The heart of the capital”, wrote Graham Greene in The Comedians, “is a shanty town”. Note how the shanty town defines the modern city; how, for instance, in Mumbai, multi-storied shacks interrogate planning and architecture, how they subvert the notion of the planned city, and how they transform urban landscapes. We do not have to romanticise the shanty town like Raj Kapoor did in Shree 420. The shanty town has a dark culture best exemplified by Amitabh Bachchan’s character in Deewaar. But we should be able to appreciate the grit of the inhabitants. They construct the city but the heartless city has no place for them. They make their own place through struggle. They know that justice has to be wrested from imperfectly just states.





People with rights

•How can we, then, theorise the moral status of the poor? One way this can be done is by imagining human beings as bearers of the right to a fair share in the collective resources of society. If these resources have been disproportionately monopolised by upper-class groups, and if others have been historically subjected to injustice, disadvantaged persons have the right to demand that they be granted their rightful share. There is a difference between people approaching the system as victims and people fighting for their rights. A fair share in the resources of the society can be conceptualised as ownership of enough resources to allow human beings a reasonable chance of living decent lives. The wider objective of redistributive justice is that persons should participate in society, politics, and the market as equals.

•Finally, at some point, we have to ask whether our task as democrats ends with the proposition that people should not be poor. Should we disclaim any further responsibility for the historically disadvantaged after providing them with minimum material needs? Should we not move constantly towards a shared vision of an egalitarian democracy where people can live fulfilling lives, instead of remaining mired in notions of minimal reparation or remedies?

📰 SC asks Punjab, Haryana, U.P. to end stubble burning immediately

Will hold the entire State administrative and police mechanism responsible if even one instance of stubble burning occurs in future, it warns.

•In a bid to save Delhi from the choking air pollution, the Supreme Court on Monday asked the governments of Punjab, Haryana and Uttar Pradesh to immediately stop their farmers from stubble burning. and warned that their entire administrative and police hierarchy, from the Chief Secretary to the sarpanch to the local policeman, will be held responsible even if one instance of stubble burning occurs in the future.

•“There cannot be a mass exodus from Delhi... People have to live in Delhi, which is the national capital. People cannot be just evacuated from here... No room inside a house is safe in Delhi. Even inside the house it is polluted. Can we survive like this? How long can we survive on air purifiers. We are losing precious years of our lives... It is writ large that various State governments, civic bodies have failed to discharge their liabilities. It is time to fix liability... This is a shocking state of affairs,” an exasperated Bench of Justices Arun Mishra and Deepak Gupta said.

•“Who is responsible for stubble burning? State governments are responsible! They are only interested in electioneering. They have to be made liable in tort. We are making a mockery of everything,” a visibly anguished Justice Mishra said.

•“We will haul up the State administration from bottom to top. People are dying, this just cannot happen in a civilised country. The sad thing in this country is that people in power are only interested in gimmicks...” he stated.

•The judge addressed counsel for Punjab and Haryana governments, “every year stubble burning is happening? If you people were responsible, this would not have happened. Today the situation is grim”.

•The court said any instance of stubble burning from now on would be penalised. It made the local and civic bodies as “personally responsibe” as the errant farmer who puts fire to his crop residue. The dense smoke from the fires travelled to Delhi and hovered over the national capital. It had been identified as a major pollutant.

Hefty penalty

•The court ordered the Chief Secretaries of the three neighbouring States of Delhi to be present in court on Wednesday to explain why the governments and civic bodies should not be punished under tort law and be made to pay a hefty penalty for stubble fires seen so far this season. The court said the 'Polluter Pays Principle' does apply to the State and the local bodies.

•The court ordered the respective high-level committees of the three States to meet on Monday (November 4) on the issue of extinguishing the existing stubble fires and report back to the court on November 6

•In a hearing that went on for almost the whole day, the Bench summoned experts from the Indian Institute of Technology and the Joint Secretary of the Union Ministry of Environment to conduct an open court brainstorming session on how to “forthwith” reduce pollution choking Delhi.

Slew of directions

•The court passed a slew of directions meant to immediately reduce pollution in Delhi National Capital Region (NCR). The immediate measures to control pollution include ban on construction and demolition activities. Any violation would cost Rs. 1 lakh in fine. The Bench further banned the burning of garbage in open dumps. Non-compliance would mean would Rs. 5000 in penalty.

•The court also banned the use of diesel generators in Delhi NCR for the time being. It said any industry in Delhi NCR found to use coal as fuel, despite the ban by Supreme Court, would be hauled up for contempt of court.

•“This kind of pollution cannot happen in a civilised country? Is this how we live? State machinery is not doing anything... The Centre and the States are passing the buck from one to another . Delhi is choking and you are not doing anything,” Justice Mishra said.

📰 ‘Visibly elusive’ Bengal tree frog gets recorded as new species

Specimens of Brown Blotched Bengal Tree Frog were not discovered from deep jungles but from residential areas in two districts of West Bengal.

•Six herpetologists from Assam, West Bengal and Malaysia have recorded a new species of tree frog that had eluded the world of science despite thriving in residential areas.

•Their study establishing the mid-sized tree frog as the 26th species under the genus Polypedates has been published in the latest edition of Zootaxa, a peer-reviewed scientific mega journal for animal taxonomists. Polypedates is a genus of tree frog found throughout South and Southeast Asia.

•The new species has been named Brown Blotched Bengal Tree Frog (Polypedates bengalensis). The name is derived from a series of six to nine dark brown blotches that extend laterally from behind the frog’s eye to the vent. The frog’s body colour is yellowish-brown to greenish-brown.

•“This frog is a classic case of an amphibian being elusive while in plain human sight for ages. Specimens of this frog were not discovered from deep jungles but from residential areas in two districts of West Bengal,” Guwahati-based herpetologist Jayaditya Purkayastha, who runs the Help Earth NGO, told The Hindu.

•He is one of the six authors of the study. The others are Madhurima Das from Assam, Kingshuk Mondal, Shibajee Mitra, and Anirban Chaudhuri from West Bengal and Universiti Malaysia Sarawak teacher Indraneil Das.

•What triggered the study was a photograph of the frog Mr. Mitra had sent Mr. Purkayastha via social media in the winter of 2016 for identification. The photo was from a residential area in Badu, North 24 Parganas district of West Bengal.

•“Through an initial literature review, it became evident that this interesting find may be new to science,” Mr. Purkayastha said. The frog was virtually forgotten until Mr. Mondal found more specimens from Khordanahala in South 24 Parganas district in mid-2018.

•Mr. Chaudhuri coordinated the initiative of studying the new species in Kolkata. After all the measurements – the males varied from 47.9-53.6 mm in size and a single female was 72 mm – and other data collections were done, the herpetologists concluded that the frog belonged to the genus Polypedates.

•A genetic identity investigation by Ms. Das established the frog as a new species in this genus while the Malaysia-based Mr. Das, an authority on herpetofauna in Asia, took care of the team’s data limitations.

•The male frogs were seen perched on vegetation, including bamboo, banana and taro leaves, and were calling from a height of 1.2-1.8 m above ground, over stagnant waters bodies that were mostly rainwater pools.

📰 Clearing the air: On Delhi's air pollution

Tackling Delhi’s pollution needs tough, unpopular measures well ahead of winter

•Delhi is once again in the grip of its annual, winter pollution crisis. The city’s tryst with air pollution crises isn’t new. The rising prominence of particulate matter (PM) from various sources has long been a public health scourge. What differentiates the prevalent PM crisis from earlier ones is the public’s ability to monitor pollution levels for themselves. The measurement of pollution, which used to be the domain of weather agencies or pollution control boards, can now be done with consumer appliances. However, increased public awareness and social media angst haven’t translated into meaningful public action. The Graded Response Action Plan (GRAP) in Delhi, which provides for a ratcheting slew of measures — from stopping construction work to halting private vehicles — isn’t effective when air quality reaches its nadir. It recommends action only after pollutants soar. A Task Force — which comprises top officials of Delhi and the Centre — advises the Environmental Pollution Control Authority, which is in charge of enforcing the GRAP. Rarely does it recommend tough pre-emptive action and when it does, there’s no real pressure on municipal bodies and police to ensure that polluters are punished.

•There is a sense of resignation among both the Centre and the Delhi government about tackling the pollution crisis. Meteorology and Delhi’s geography render the city vulnerable to a certain amount of winter pollution, particularly when wind speeds drop to less than 10 kmph. However, preventing local sources of pollution from worsening air quality will require both the State and the Centre to implement unpopular decisions. This would include an outright ban on two wheelers, three wheelers and cars when air quality starts to deteriorate, a halt on construction, shutting down power plants in the vicinity of Delhi and a substantial spike in parking rates. And, of course, getting the farmers of Punjab and Haryana to not burn stubble at all. Even if this confluence of miracles were to occur, it wouldn’t guarantee blue skies on a windless day and, therefore, political brownie points. This makes it convenient for governments to engage in theatre such as having Ministers bicycle to work and blaming farmers for burning rice chaff. The Delhi government and the Centre routinely cite pollution figures averaged for the entire year to claim success of some piecemeal measure or the other but hide the lows of October and November. Tackling Delhi’s winter air requires tough steps that need to be in place at least a couple of months before the plummet. At the very least it requires a truly empowered, independent agency that can implement measures while negotiating the tricky relationship between the Centre and Delhi. Else, beyond the momentary outrage, the fight against pollution will remain on a prayer, and the wind.

📰 Fusing traditional medicine with the modern

Taking cues from the Chinese experience, India can integrate the education, research and practice of both systems

•Revival of the Indian systems of medicine, which comprises Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy (AYUSH), served as one of the sub-themes of the cultural nationalistic reassertion in the early 20th century against the imperialistic British reign. Little wonder then that there are high hopes that the Narendra Modi government and its seeming nationalistic ardour will spell good times for the perennially neglected alternative medicine sector, especially Ayurveda. Much in line with the expectations, a number of initiatives to promote AYUSH have been recently announced. This includes: creating AYUSH wings in defence and railway hospitals; giving soft loans and subsidies for the establishment of private AYUSH hospitals and clinics; and building institutes of excellence in teaching and research in AYUSH. Also, 12,500 dedicated AYUSH health and wellness centres are planned to be set up under the Ayushman Bharat mission. Here, two important areas presenting significant policy concerns and implications can be identified.

•One persistent tendency in our key strategies to mainstream AYUSH medicine has been to regard that the problem lies simply in there being ‘less’ of AYUSH. Hence, integration of AYUSH into the health-care system has been largely conflated with having more number of AYUSH facilities or having them in place where there aren’t any.

A fraught relationship

•It is common knowledge that AYUSH’s relationship with modern medicine has been fraught with multiple issues — including quackery by AYUSH practitioners; ridicule of AYUSH treatments and procedures by many; and mindless cosmeticisation and export promotion of AYUSH products. However, has little by way of a concrete harmonising strategy has been devised to address these concerns. These issues are reflective of a sharp status gap between modern medicine and AYUSH that is highly detrimental for the optimal deployment of AYUSH resources. Merely expanding AYUSH’s framework will only expand the present list of problems.

•True integration would require a concerted strategy for facilitating meaningful cross-learning and collaboration between the modern and traditional systems on equal terms. This is the only way to address the subservient status of AYUSH and to foster its legitimate inclusion into mainstream health care. The Chinese experience of integrating Traditional Chinese Medicine with Western medicine makes for a good example. An Indian parallel could envision the integration of education, research, and practice of both systems at all levels. This can include training of AYUSH practitioners in modern medicine through curriculum changes and vice versa. However, this would entail substantial groundwork with respect to the prerequisites of such integration: namely, building a strong traditional medicine evidence corpus; delineating the relative strengths, weaknesses, and role of each system; negotiating the philosophical and conceptual divergences between systems; standardising and regulating AYUSH practices and qualifications; and addressing the unique issues associated with research into AYUSH techniques.

•It is interesting to note that while China embarked upon the path in the 1950s, a solid road map to address the above challenges still fails to transcend political rhetoric in India.

•Recently, the National Medical Commission Act, 2019 was passed in the face of much opposition from the orthodox medical community, apparently signifying political will. While an earlier proposal for a bridge course for AYUSH graduates was shelved, there is no reason why the opposition to integration of traditional and modern systems cannot be nullified, particularly in view of the vast potential of AYUSH to contribute to universal health-care in India.

•Historically, attempts at integration have been foiled by parties from both within and outside the AYUSH sector. In keeping with the recommendations of the Chopra Committee (1948), baby steps were taken to integrate the teaching of traditional and modern systems of medicines, proposals that were later scrapped. While the AYUSH lobby feared a loss of identity following such integration, the allopathic lobby alleged that standards of medical care would be diluted.

•This kind of isolationist approach goes against the cherished ideal of modern medicine to embrace concepts that are backed by evidence. In the case of traditional medicine, an isolationist attitude could deter scientific scrutiny and block some potential value addition. An integrated framework should create a middle path — fusing the two systems, while still permitting some autonomy for each. Accordingly, a medium- and long-term plan for seamless integration should be developed expeditiously in view of the massive drive for achieving universal health care already under way in the country.

📰 Enhancing insurance coverage for bank deposits

Denying people the right over their hard-earned money is a colossal hazard for the financial system

•When word got out about the Reserve Bank of India (RBI)’s capping of withdrawals from the Punjab and Maharashtra Cooperative (PMC) Bank at ₹1,000, it did not take long for tragic stories to start pouring in. The death count had risen to three by the time the HDIL angle was discovered. With the Non-Performing Assets (NPA) situation not improving in most banks, the advent of another major crisis brought into focus, once again, the deposit insurance cover provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI.

•Most people agree that the insurance limit of ₹1 lakh, set in 1993, needs to be raised to a higher amount, with some suggestions being made to raise it to ₹15 lakh, which will cover 90% of the accounts completely.

•But the discussion around deposit insurance must extend beyond the amount of coverage. The lack of DICGC coverage for deposits at NBFCs (many of whom the RBI regulates) and primary cooperative societies is one such aspect. These entities often serve vulnerable sections and their depositors must not be left in the lurch in case of a crisis. Further, customers who want more coverage than the statutory cover on their deposits should be able to purchase this by paying additional premium. This option should be extended directly to banks that wish to increase the coverage of deposits to above the statutory requirements.

Freeze in withdrawal

•Another deficiency in the current DICGC cover is that the ₹1 lakh insurance amount only needs to be released if a bank goes belly up. Without liquidation of the bank, no liability accrues on the insurance company to pay such a claim. The flaw in this scheme is obvious today — the ‘freezes’ in withdrawal directed by the RBI essentially cut the depositor’s access to his money. Hence, during such periods, at least the statutory amount should be released. This will go a long way in preventing bank runs, which could be triggered when customers get alarmed about the ability of banks to repay their deposits.

•Currently the DICGC charges a flat 0.1% insurance premium on the deposits of banks. However, as suggested by an RBI panel in 2015, premium should be based on differential risk based on the lending practices of the bank, among other things. An SBI report states that 93% of the premium collected by the DICGC in 2018-19 came from commercial banks (public sector: 75%, private sector: 18%), but over 94% of the claims settled (ever since the inception of the DICGC) have been those of cooperative banks. Clearly, poor governance in cooperative banks has been cross-subsidised by the better-performing commercial banks. The DICGC must draw inspiration from standard insurance practices and charge higher premiums from banks with a past history of higher claims, so that public sector banks (PSBs) — which have made zero claims so far — need not foot the bill for someone else’s mistake. This will also provide a level-playing field for PSBs which are often disadvantaged due to tight government control and inflexibility.

Bringing in private insurers

•Another possibility that needs to be analysed is that of bringing private sector insurers and re-insurers into the deposit insurance segment, which could drive down premium prices. In FY19, the DICGC collected ₹12,043 crore as premium and settled ₹37 crore worth claims. Clearly, this is a lucrative area for private players who can bring in more accurate risk-based pricing of these policies. And since underwriting such policies entails significant risk-bearing on which the country’s economy thrives, it needs to be reinsured by credible entities even beyond traditional re-insurers like Lloyd’s of London.

•Compared to other BRICS nations, India today has the lowest deposit insurance cover to per capita income ratio, at 0.9 times. Denying people the right over their hard-earned money is a colossal hazard for the financial system, which runs on the trust of depositors. Already, trust in banks could be waning — in FY18, growth in bank deposits fell to a five-decade low. If the government is serious about formal financial inclusion, the stated objective of flagship schemes like the Pradhan Mantri Jan Dhan Yojana, it must realise that an immediate availability of funds is as important as the insurance coverage of funds to increase the confidence of citizens in the banking system. Hence, it must take purposeful strides in expanding and rectifying the deposit insurance scheme as a safety net of the financial system.




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