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A welfare test for Aadhaar: (Indian Express, Editorial)


  • The Aadhaar ecosystem needs to pass a stringent welfare test much more crucially than the privacy test.

What is the significance of UIDAI?

  • The Unique Identification Authority of India (UIDAI) is a statutory authority established under the provisions of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016
  • UIDAI was created with the objective to issue Unique Identification numbers (UID), named as “Aadhaar”, to all residents of India that is
  • robust enough to eliminate duplicate and fake identities, and
  • can be verified and authenticated in an easy, cost-effective way.

What are the various features of Right to Privacy?

  • Privacy is a constitutionally protected right emerging primarily from the guarantee of life and liberty in Article 21 of the Constitution.
  • It includes the preservation of personal intimacies, sanctity of family life, marriage, procreation, the home and sexual orientation.
  • Privacy connotes a right to be left alone. It safeguards individual autonomy and recognizes one’s ability to control vital aspects of his/her life.
  • Privacy is not an absolute right, but any invasion must be based on legality, need and proportionality.
  • Informational privacy is a facet of this right. Dangers to this can originate from both state and non-state actors.

Implications on Aadhaar:

  • Aadhar initiative requires collection of personal data from residents of India, and this has resulted in controversy regarding its potential to be missed. This is so because:
  • It requires collection of biometric details like scanning and finger prints which are essentially crucial details and could be misused.
  • Cyber space is a vulnerable space and is prone to threat.
  • Cyber security architecture is not very strong in India.
  • Aadhaar lacks statutory back up and is also running on an executive order, which has also raised questions.
  • The SC ruling will impact daily lives of the people since it has implications for matters ranging from collection and sharing of personal data to the government’s move to make Aadhaar mandatory for benefits of social welfare scheme.

What is Aadhaar?

  • The Aadhaar is the name of the Unique Identification Number that the Unique Identification Authority of India (UIDAI) issues to every resident of India.
  • It is a twelve digit number which is linked the resident’s demographic and biometric information.
  • The data is collected by the Unique Identification Authority of India (UIDAI), a statutory authority established in January 2009 by the Government of India, under the Ministry of Electronics and Information Technology, under the provisions of the Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016

Petitioners have challenged the Aadhaar scheme on the following grounds:

  • Expressing the fear that the data being collected by private agencies may be misused.
  • Questioning the proposal to link Aadhaar with PAN cards and phone number.
  • Making the unique ID number mandatory for availing government benefit.
  • The petitioners are challenging the nature of information collected, which includes biometrics and its alleged unlimited use by government agencies.

What is the need of Aadhaar?

  • The Aadhaar Project is an attempt to aid in real time verification.
  • The objective of the scheme is to issue a unique identification number which can beauthenticated and verified online.
  • A large part of the Indian population had no IDs or relied on IDs like ration cards and Voter Cards.
  • This necessitated the need for a single digital ID which could be verified anytime, anywhere in India.
  • The Aadhaar would also facilitate the access to host of governmental benefits and services.
  • For the effective enforcement of individual rights it became necessary to have a unique identification number.
  • A clear registration and recognition of the individual identity with the state is necessary to implement their rights, to employment, education, food etc.
  • Aadhaar project has been linked to some public subsidy and unemployment benefit schemes like the domestic LPG scheme and MGNREGS. In these Direct Benefit Transfer schemes, the subsidy money is directly transferred to a bank account which is Aadhaar-linked.
  • On 29 July 2011, the Ministry of Petroleum and Natural Gas signed a memorandum of understanding with UIDAI. The Ministry had hoped the ID system would help them eliminate loss of the subsidised kerosene and LPG. In May 2012, the government announced that it will begin issuing Aadhaar-linked MGNREGS cards On 26 November 2012, a pilot project was launched in 51 district.

What is needed to be done in context of Right to Privacy and Aadhaar?

  • In view of the increased security required specifically for territorial privacy and data privacy, there should be a provision added to the Constitution of India.
  • A provision that deals with multiple dimensions of privacy such as personal, territorial, communication and data/information.
  • Such a provision would bring clarity as to the extent of the right to privacy.
  • There is a dire need for a comprehensive privacy legislation which would ensure the protection of personal and sensitive data of people.
  • There is also the need for an established regulatory body.

What is the way ahead?

  • It will be crucial to discuss and debate any such design with all stakeholders and not push anything down from the top.
  • We have to ensure, with or without Aadhaar, that people do not go hungry in this country.
  • An effective design of using digital identity in PDS is not possible without a thorough understanding of the ground realities.

Unsafe boilers: (The Hindu, Editorial)


  • The recent boiler explosion at NTPC’s Unchahar power plant in Rae Bareli brings up the importance of inspections and protocols for hazardous industrial operations.
  • It has cost at least 32 lives and caused severe injuries to many of the personnel.


  • High pressure boilers are hazardous pieces of equipment, which are strictly regulated with special laws.
  • The Uttar Pradesh government failed miserably in meeting its objective of the Indian Broilers Act for the accident was entirely preventable.
  • Because boilers are designed to provide warnings as soon as dangerous pressure builds up and trigger automatic safety devices at a critical point.

What is boiler?

  • A boiler is simply an enclosed vessel which boils water and ultimately turns it into steam which is used for heating of rooms and heavy fuel oils on the ships.
  • The boilers are fitted with different safeties as the steam pressure is upto 8 bars in most cases.
  • Boiler are of two types:
  • STB (Smoke tube Boiler) or donkey boiler
  • WTB (Water tube Boiler) or High pressure boiler
  • On board a vessel, STB or WTB may be used as per the requirement.

What are its usage?

  • WTB: vessel that are steam driven (steam turbine) or Tanker fitted with IGG (inert gas generator)
  • STB: these are fitted on vessel with Internal Combustion Engine,and maybe used for COPT(Cargo Oil Pump Turbine)

Use of Boiler on board a vessel:

  • For heating purpose, Fuel oil, Lube Oil, Water, etc.
  • Maintain minimum positive pressure of Inert Gas in Tankers tanks.
  • For propulsion, in case of steam ship, like Titanic.
  • Production Of electricity by turbo alternator.

The Indian Boilers Act-1923:

  • The Indian Boilers Act-1923 was enacted with the objective to provide mainly for the safety of life and Property of persons from the danger of explosions of steam boilers and for achieving uniformity in registration and inspection during operation and maintenance of boilers in India.

Salient features:

  • Every boiler owner is required to make an application to the Chief Inspector of Boilers for the inspection of the boiler along with the treasury challan of the requisite fees as per requirements of Indian Boilers Act-1923.
  • Under Indian Boilers Act-1923 Indian Boilers Regulation-1950 has been framed. This Regulation deals with the materials, procedure & inspection techniques to be adopted for the manufacture of boilers & boiler mountings & fittings.
  • The boiler is inspected by the Inspectorate as per the procedure laid under IBR -1950 and if found satisfactory, a Certificate is issued for operation for a maximum period of 12 months.
  • The boilers which are not found satisfactory during the inspection are repaired as per the procedure laid under Indian Boilers Regulation-1950 & are re-inspected as explained above.
  • The Boilers which are transferred to NCT of Delhi are also inspected in the similar fashion after their records are obtained from the parent state.
  • The Boilers are also casually visited by the Inspectorate from time to time to check the validity of their certificates, safe and efficient operation.

What is the way ahead?

  • The boilers should undergo periodic inspections to ensure that all its features are working and intact.
  • Periodic inquiry into the quality of the equipment and the fuel is also to be made.
  • A rigorous approach to accident reporting must be taken into consideration.
  • Inefficiency and corruption and the typical response of governments has been to relax crucial safety checks which needs to be prevented.
  • It is also important to have a transparent regulatory mechanism for hazardous industrial activity.

The Japanese pivot: (The Hindu, Editorial)


  • Japanese Prime Minister Shinzo Abe has become staunch supporter of Donald Trump deepening their ties with Trump’s first official trip to Asia from November 5 – 17 to Japan.

Significance of the visit

  • It will underscore the close alliance between Japan and the U.S. at a time of shifting geopolitical sands in Japan’s neighbourhood.
  • This visit provides an opportunity for a coherent exposition of what the U.S. intends for the region.

Confusing signals

  • In the past, Trump has sent out inconsistent signals, which have been confusing for Japanese.
  • On the campaign trail Trump fingered the U.S. trade deficit with Japan, which stands at more than $68 billion as an example of American industrial weakness.
  • Trump suggested that Tokyo pick up a greater proportion of the bill for the U.S. military facilities it hosts. And he also pulled the U.S. out of the Trans-Pacific Partnership (TPP) trade deal, causing a loss of face to Mr. Abe who had expended considerable political capital in committing Japan to it.
  • Mr. Trump has reiterated strong support for the U.S.-Japan alliance and his harsh rhetoric on Pyongyang’s weapons testing is in consonance with Mr. Abe’s own aggressive position.

Dealing with North Korea

  • The ironic challenge that has emerged for Mr. Abe is to rein in Mr. Trump’s enthusiasm for standing up to North Korea.
  • Trump has engaged in a rhetorical duel with North Korea’s leader, calling him “Rocket Man” in a speech to the United Nations General Assembly and warning that the U.S. was ready to “totally destroy” the country.

Multiple partnership

  • Japan is acutely aware of its limitations when acting alone, and is actively seeking multiple partnerships.
  • Tokyo is not only trying to revive the TPP, even without U.S. participation, but has also recently suggested a quadrilateral top-level dialogue between Japan, the U.S., India and Australia to promote open trade and security cooperation.

What makes India- Japan Bi-lateral ties strong?

Economic Relations:


  • In the Financial Year 2015-16, India-Japan trade reached US$ 14.51 billion, showing a decrease of 6.47% from 2014-15
  • India’s export to Japan for 2015-16 was US$ 4.66 billion
  • India’s Import from Japan for 2015-16 was US$ 9.85 billion
  • India’s primary exports to Japan have been petroleum products, chemicals, elements, compounds, non-metallic mineral ware, fish & fish preparations, metalliferous ores & scrap, clothing & accessories, iron & steel products, textile yarn, fabrics etc and
  • India’s primary imports from Japan are machinery, transport equipment, iron and steel, electronic goods, organic chemicals, machine tools, etc
  • India-Japan Comprehensive Trade agreement was signed in 2011
  • The agreement covered goods and services, free movement of visitors and workers, investments, intellectual property rights, and custom procedures. It also sought to abolish tariffs on over 94% of goods India and Japan were trading in, over a period of 10 years.


  • Japan is the fourth largest foreign investor in India
  • The presence of Japanese companies in India has also been increasing steadily
  • During Indian Prime Minister’s visit to Japan in 2015, leaders of both the countries had agreed to the goal of doubling Japan’s direct investment as well as number of Japanese companies working in India by 2019.
  • India has set up a ‘Japan Plus’ office at the ministry of commerce and industry to serve one-stop window to resolve problems faced by Japanese companies in India.
  • India had announced “visa on arrival” scheme for all Japanese travellers, including for business purposes, effective from March 1, 2016


  • Delhi Metro Project has been efficiently executed with Japanese assistance.
  • In June 2017, Japan’s Kawasaki Heavy Industries had entered into an agreement with Bharat Heavy Electricals for technical collaboration on the manufacture of steel metro coaches.
  • JICA has been working with state governments on urbanization and smart city projects
  • JICA has taken up a ‘Comprehensive Traffic and Transportation Study’ for Andhra Pradesh Capital Region.
  • It has also approved a loan of Rs. 4,200 crore for Amravati Metro Project

India- Japan Civil Nuclear Deal

  • The agreement came into effect from July 2017.
  • The agreement has allowed US and French nuclear firms who have alliances with Japanese companies to supply nuclear reactors, fuel and technology to India.

Defence Cooperation

  • Defence has emerged as an area of partnership between India and Japan
  • In the 2017 India-Japan annual defence ministerial dialogue in Tokyo, India and Japan exchanged views and ideas with the aim to further strengthen defence and security cooperation under the framework of the ‘Japan-India Special Strategic and Global Partnership’
  • Japan and India have agreed to collaborate closely in defence production, including on dual-use technologies
  • They have also agreed to commence technical discussions for research collaboration in the areas of Unmanned Ground Vehicles and Robotics.
  • The recent Malabar Naval Exercise among US, India and Japanese Maritime Self Defence Forces has also strengthened the military ties.

Way ahead

  • The introduction of bullet trains is expected to boost India- Japan bilateral ties.
  • The Mumbai –Ahmadabad Bullet train deal has geostrategic significance for both India and Japan as both the countries share common concerns about China.
  • Recently, defence has also emerged as a major area of cooperation.

‘Article 35A is not part of the Constitution of India’: (The Hindu)


  • Article 35A, is being contested in the Supreme Court through a number of petitions that it “is not part of the Indian Constitution”.

What is the argument?

  • There is an argument projected that the President has no powers to amend the Constitution.
  • But the fact of the matter is that Article 35A is not part of the Constitution of India.
  • It’s a part of the Constitution only applicable to J&K which has a difference.
  • So there is no requirement of Parliament amending it.
  • Moreover, Parliament as such had no powers to add any article of the J&K Constitution except to Article 370. “Every Article has been made applicable to J&K through Article 370.
  • In Article 370, the President has been given powers to amend, alter or modify any article viz-a-viz J&K, with exceptions and modifications”

What is Article 35A?

  • Article 35A is a provision incorporated in the Constitution giving the Jammu and Kashmir Legislature a unrestricted authority to decide who all are ‘permanent residents’ of the State and confer on them special rights and privileges in public sector jobs, acquisition of property in the State, scholarships and other public aid and welfare.
  • The provision mandates that no act of the legislature coming under it can be challenged for violating the Constitution or any other law of the land.

How did it come about?

  • Article 35A was incorporated into the Constitution in 1954 by an order of the then President Rajendra Prasad on the advice of the Jawaharlal Nehru Cabinet.
  • The Presidential Order was issued under Article 370 (1) (d) of the Constitution.
  • This provision allows the President to make certain “exceptions and modifications” to the Constitution for the benefit of ‘State subjects’ of Jammu and Kashmir.
  • So Article 35A was added to the Constitution as a testimony of the special consideration the Indian government accorded to the ‘permanent residents’ of Jammu and Kashmir.

Role and Function of President of India:

Executive Functions:

  • Head of the Union: The President is the head of the Union Executive.
  • The executive power of the Union to be exercised by the President is extended to the matters with respect to which Parliament has power to make laws and to conclude treaty and agreement.
  • Appointments: As head of the executive, the President appoints the Governors of States, the Judges of the Supreme Court and the High Courts, the Auditor General of India and many other high officials, such as the members of Finance Commission, Election commission, Union Public commission etc.
  • Appointment of the Prime Minister and other Ministers: The President also appoints the Prime Minister and with his advice the other Ministers of the Union Council of Ministers.
  • Can ask to prove Majority in Lok Sabha: Union Council of Ministers normally remains in office for five years, unless dissolved earlier for any reason.
  • The President must be satisfied that the Council of Ministers enjoys the confidence of the majority of the Lok Sabha.
  • Supreme Commander: As head of State, the President is the supreme Commander of the Armed Forces of India and is entitled to declare war or conclude a treaty.

Power to Promulgate Ordinances

  • Except when both Houses of Parliament are in session, the President may promulgate such Ordinances as the circumstances appear to him to require (Article 123).
  • Such an ordinance can have the same force and effect of an Act of Parliament.

Legislative Powers and Functions

  • President is a part of Parliament: The Union Legislature or Parliament consists of the President and two Houses of Parliament.
  • The President is, therefore, an integral part of Union Legislature.
  • Summons and Addresses Parliament: The President may address either or both House of Parliament.
  • Nomination: The President nominates a number of members in both Houses.
  • The chief purpose of the nomination is to ensure adequate representation in Parliament of all sections of population which many not always be achieved through elections.
  • Bill passed by a State Legislature: A bill passed by a State Legislature may also be reserved for the consideration of the President by the Governor of that State.

Financial Powers and Functions

  • The President causes the annual budget of the Union Government to be laid before Parliament every year.
  • No proposal for spending money or raising revenues for purposes of government can be introduced in Parliament without previous permission of the President.

The rise and rise of Xi Jinpings


  • The 19th National Congress of the Communist Party of China showcased the primacy of President Xi Jinping. The event focused on his vision and his status thus, restoring its global leadership role on full display.

Significant importance of Me. Xi ruling

  • While this self-elevation, Mr. Xi will become the principal mediator of China’s future directions over the next five years and possibly beyond.
  • With Mr. Xi steadily accumulating controls of authority and eliminating rivals, there has been a shift towards personalized rule in his first term and now at the Party Congress. The erosion of checks that it involves has attendant risks for China.
  • Mr. Xi has been included in the new line-up of the PBSC. This has kept open the possibility of him staying on as the paramount leader or the power behind the throne well beyond 2022.
  • His preference for maintaining a strong state and party role in the economy with minimal privatization of state-owned assets and firm control over social and financial risks is unlikely to change in the wake of the Congress.
  • He is also positioning China as a defender of globalization, it comes with a strong dose of mercantilism.
  • For India, one key outcome of the party meeting is the articulation of China’s increasingly explicit great power ambitions.
  • The preoccupation with building up global combat capabilities to safeguard China’s overseas interests also figures prominently in Mr. Xi’s vision.
  • Mr. Xi has set the goal of completing modernization of the armed forces by 2035 and transforming the PLA into a world-class military by 2050.
  • China is likely to intensify its efforts to shape its periphery and forge a “world community of shared destiny” centred around it. With the U.S. in temporary retreat and the West distracted by internal challenges, China considers this to be a period of strategic opportunity to take its great power project to the next level in the new era that Mr. Xi has envisioned.

The BRI gauntlet

  • Mr. Xi’s Belt and Road Initiative (BRI) is the key instrument embedded in the party constitution. There is nothing to suggest that China is inclined to address India’s concerns about the BRI.
  • In a development possibly linked to China’s enhanced global agenda, for the first time since 2003, the Politburo includes a diplomat, State Councillor Yang Jiechi, as the Chinese special representative for boundary talks with India.
  • It may also be noted that since his 2014 visit to India, President Xi has emerged as the principal Chinese interlocutor for Prime Minister Narendra Modi.

Way ahead

A more assertive China will be one of the most critical factors shaping India’s external environment, apart from engendering new challenges in the management of bilateral relations, more so as the footprints of the two re-emergent countries will increasingly overlap.

India – China


  • India – China relations have undergone dramatic changes over the past five decades, ranging from the 1950‘s with a deep hostility in the 1960‘s and 1970‘s to a rapprochement in the 1980‘s and a readjustment since the demise of Soviet Union.
  • The modern relationship began in 1950 when India was among the first countries to end formal ties with the Republic of China and recognize the PRC as the legitimate government of Mainland China. China and India are the two most populous countries and fastest growing major economies in the world.
  • India and China are playing an increasingly important role in the world economy. A better relationship would boost trade ties, investments and employment in the two countries, and even augment global growth.

India – China Policies

  • With the independence of the Republic of India and the formation of the People’s Republic of China (PRC) in the year 1949, one of the policies for the Indian government was that of maintaining cordial relations with China
  • When China announced that it would be occupying Tibet, India sent a letter of protest proposing negotiations on the Tibet issue.
  • China was even more active in deploying troops on the Aksai Chin border than India.
  • India was so concerned about its relations with China that it did not even attend a conference for the conclusion of a peace treaty with Japan because China was not invited.
  • India even strove to become China’s representative in matters related to world since China had been isolated from many issues
  • In 1954, China and India concluded the Five Principles of Peaceful Coexistence, Panchsheel, under which, India acknowledged Chinese rule in Tibet.
  • It was at this time when former Prime Minister of India, Jawaharlal Nehru promoted the slogan “Hindi-Chini bhai-bhai”
  • In July 1954, Nehru wrote a memo directing a revision in the maps of India to show definite boundaries on all frontiers; however, Chinese maps showed some 120,000 square kilometres of Indian territory as Chinese. On being questioned, Zhou Enlai, the first Premier of People’s Republic of China, responded that there were errors in the maps
  • Top People’s Republic of China leader, Mao Zedong felt humiliated by the reception Dalai Lama obtained in India when he fled there in March 1959.
  • China’s perception of India as a threat to its rule of Tibet became one of the most prominent reasons for the Sino-Indian War
  • In October 1959, India realized that it was not ready for war after a clash between the two armies at Kongka Pass, in which nine Indian policemen were killed; the country assumed responsibility for the border and pulled back patrols from disputed areas
  • Various conflicts and military incidents between India and China flared up throughout the summer of 1962
  • On July 10, 1962, around 350 Chinese troops surrounded.

Commercial relations

  • Trade volume between the two countries in the beginning of the century, year 2000, stood at US$ 3 billion.
  • In 2008, bilateral trade reached US$ 51.8 billion with China replacing the United States as India’s largest “Goods trading partner.”
  • In 2011 bilateral trade reached an all-time high of US$ 73.9 billion.
  • In 2016, India’s top exports to China included diamonds, cotton yarn, iron ore, copper and organic chemicals.
  • In 2016, China exports of electrical machinery and equipment saw an increase of 26.83%to US$ 16.98 billion.
  • India was the largest export destination of Fertilizers exports from China.
  • There are three border trade points between India and China viz. Nathu La Pass (Sikkim), Shipki La Pass (Himachal Pradesh) and Lipulekh Pass (Uttarakhand).


  • According to data released by China’s Ministry of Commerce, the Chinese investment in India in Jan-Mar 2017 were to the tune of US$ 73 million.
  • Cumulative Investment in India till March 2017 stood at US$ 4.91 billion.
  • According to data released by China’s Ministry of Commerce, the cumulative Indian investment in China till March 2017 reached US$705 million.

Economic Relations

  • India-China economic relations constitute an important element of the strategic and cooperative partnership between the two countries.
  • Several institutional mechanisms have been established for enhancing and strengthening economic cooperation between the two countries.
  • In accordance with the MoU signed during Chinese Premier Wen Jiabao’s visit to India in April 2005, the two sides have since successfully held eight Financial Dialogues in April 2006, December 2007, January 2009, September 2010, November 2011, September 2013, December 2014 and August 2016 respectively.

Recent developments

  • Two developments could lead to even greater momentum for Sino-Indian economic integration.
  • Larger companies in both countries are increasingly acquiring third-country companies that already have a presence in China and India.
  • China hopes for better ties with India in future by resolving differences over India’s admission into elite Nuclear Suppliers Group and listing of JeM chief Masood Azhar as terrorist by the UN as the two nations signed off their most engaging year bogged down by the twin issues.
  • The year 2017 has seen a steady development of China-India relations, with the two countries marching towards the goal of building a more closely-knit partnership.


34 power projects among loan defaulters


Finance Ministry refuses to give names to Parliamentary committee looking into NPAs


  • The Finance Ministry refused to list out 34 power projects that defaulted on bank loans worth crores of rupees to a parliamentary panel on Energy recently.
  • The Standing Committee on Energy, which was discussing non-performing assets (NPA) in the power sector, hauled the government over coals for the “casual” briefing by officials of the Department of Financial Services, the RBI and the banks that financed these power projects.
  • Earlier, the Reserve Bank of India had refused to divulge the names of the loan defaulters.
  • Last year, in connection with a PIL petition filed by the NGO, the Centre for Public Interest Litigation, the Reserve Bank of India had submitted a list of 57 defaulters who owe banks Rs 85000 crore , in a sealed cover to the Supreme Court.
  • The RBI, in May this year, again refused to entertain an RTI application demanding the names of loan defaulters.
  • At previous meeting of the committee, the Department of Financial Services had said that at least 34 power projects came under the category of non-performing assets.
  • The Standing Committee has now asked the officials to bring in the list at the next meeting.

About Parliamentary committees:

  • The Parliamentary committees are established to study and deal with various matters that cannot be directly handled by the legislature due to their volume.
  • They monitor the functioning of the executive branch.
  • The Parliamentary committees are of two kinds- Standing Committees and Ad hoc Committees. The former are created on an adhoc basis as the need arises and they are dissolved after they complete the task assigned to them.
  • Standing   committees is a committee consisting of Members of Parliament. It is a permanent and regular committee which is constituted from time to time according to the provisions of an Act of Parliament or Rules of Procedure and Conduct of Business.  These standing committees are elected or appointed every year, or periodically by the Chairman of the Rajya Sabha or the Speaker of the Lok Sabha or as a result of consultation between them.

What are Non-Performing Assets?

  • A loan or lease that is not meeting its stated principal and interest payments.
  • A loan is an asset for a bank as the interest payments and the repayment of the principal amount create a stream of cash flows.
  • Banks usually treat assets as non-performing if they are not serviced for some time. If payment has not been made as of its due date then the loan gets classified as past due.
  • Once a payment becomes really late the loan gets classified as non-performing. A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.

Types of NPA’s:

Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets:-

  • Substandard assets: An assets which has remained NPA for a period less than or equal to 12 months.
  • Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.
  • Loss assets: As per RBI, “Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.”

What are the reasons for growth?

1-      Governance Issues:

  • Diversion of funds by companies for purposes other than for which loans were taken.
  • Due diligence not done in initial disbursement of loans.
  • Inefficiencies in post disbursement monitoring of the problem.
  • Restructuring of loans done by banks earlier to avoid provisioning.  Post crackdown by RBI, banks are forced to clear their asset books  which has led to sudden spurt in NPAs
  • During the time of economic boom, overt optimism shown by corporates was taken on face value by banks and adequate background check was not done in advancing loan
  • In the absence of adequate governance mechanism, double leveraging by corporates, as pointed out by RBI’s Financial Stability Report.

2-   Economic Reasons

  • Economic downturn seen since 2008 has been a reason for increasing bad loan.
  • Global demand is still low due to which exports across all sector has shown a declining trend for a long.
  • In the case of sectors like electricity, the poor financial condition of most SEBs is the problem; in areas like steel, the collapse in global prices suggests that a lot more loans will get stressed in the months ahead.
  • Economic Survey 2015 mentioned over leveraging by corporate as one of the reasons behind rising bad loan.
  • Another factor that can contribute to the low level of expertise in many big public sector banks is the constant rotation of duties among officers and the apparent lack of training in lending principles for the loan officers
  • Poor recovery and use of coercive techniques by banks in recovering loans

3-   Political reasons

  •  Policy Paralysis seen during the previous government  affected several PPP projects and key economic decisions were delayed which affected the macroeconomic stability leading to poorer corporate performance.
  • Crony capitalism is also to be blamed.
  • Under political pressure banks are compelled to provide loans for certain sectors which are mostly stressed.

4-   Resolution issues

  • In the absence of a proper bankruptcy law, corporate faced exit barriers which led to piling up of bad loans
  • Corporates often take the legal route which is time consuming leading to problems for the banks

Impacts of NPAs:

  • The higher is the amount of non-performing assets (NPA)  the weaker will be the bank’s revenue stream.
  • Indian Banking sector has been facing the NPA issue due to the mismanagement in the loan distribution carried by the Public sector banks.
  • As the NPAs of the banks will rise, it will bring a scarcity of funds in the Indian security markets. Few banks will be willing to lend if they are not sure of the recovery of their money.
  • The shareholders of the banks will lose of money as banks themselves will find it tough to survive in the market.
  • This will lead to a crisis situation in the market.
  • The price of loans, interest rates will shoot up badly. Shooting of interest rates will directly impact the investors who wish to take loans for setting up infrastructural, industrial projects etc.
  • It will also impact the retail consumers, who will have to shell out a higher interest rate for a loan.
  • All these factors hurt the overall demand in the Indian economy.
  • Finally, it will lead to lower growth and higher inflation because of the higher cost of capital.

Suggestions by RBI to tackle NPA:

  • Banks need to be more conventional in yielding loans to sectors that have a history of being found as contributors in NPAs.
  • The loan sanctioning process of banks needs to be harsher and well beyond the conventional practices of analysis of financial statements and history of promoters.
  • A suitable agenda to attract and reassure quality professionals to join the discipline of insolvency professionals is vital.
  • Any plan to alleviate the current scenario especially relating to the Debt recovery tribunals must be given urgency, to ease the burden on NCLT
  • If the public sector has to compete in the fierce financial markets, they have to create and nurture a good cadre of officers in various disciplines.
  • As per the RBI directive, banks will now have to agree to a common approach for restructuring or recovery of each non-performing loan (NPL).
  • The common approach will be the one adopted by the lead bank, along with a few more banks so as to meet the thresholds of 60% of lenders by value and 50% by number.
  • This approach assumes that the interests of all banks need to be aligned with or subsumed within the interest of the lead bank.
  • There is an urgent need to develop specialized skills in the area of appraisal, monitoring and recovery to ensure the quality of credit portfolio.
  • Banks should be equipped with latest credit risk management techniques to protect the bank funds and minimize insolvency issues.
  • Banks should explore the possibilities to develop credit derivative markets to avoid these risks.
  • Timely follow up is the key to keep the quality of assets intact and enables the bank to recover the interest/installments in time.
  • Selection of right borrowers, viable economic activity, adequate finance and timely disbursement, end use of funds and timely recovery of loans should be the focus areas so as to prevent or minimize the incidence of fresh NPAs.

Government initiatives to tackle NPAs:

1-   Promulgation of Banking Regulation (Amendment) Ordinance: It helps in the following ways:

  • It empowers the RBI to direct Banks to initiate insolvency resolution, wherever such need arises.
  • It also give advise to baking agencies on ways of tackling with its stressed asset problems.
  • It aims to check this menace in a time bound manner and helps in timely recovery of the stressed assets.

2-   Incorporation of SARFAESI ACT: The Securitization and Reconstruction of Financial assets and Enforcement of Security Interest Act 2002 empowers the banking systems to auction residential or commercial properties (except agricultural land) to recover their loans.

3-      Debt Recovery Acts: These laws established debt recovery tribunals with the power to recover debts of Banks and Financial Institutions.

4-      Concept of Bad Banks: In this concept the banking institutions sell their bad loans to an intermediary and thus they write off their bad loan and intermediary has to recover the loan from the defaulter.

5-   Mediation for loan recovery: This concept was introduced so that genuine defaulter, who are unable to pay off their loans, but are not able to put forward their situations with the banking authorities, hire a mediator, who discusses this with the banking officer and come to a solution.

6-   Strategic Debt Restructuring (SDR): Creditors could take over the assets of the firms and sell them to new owners.

7-   Sustainable Structuring of Stressed Assets (S4A): An independent agency hired by the banks will decide on how much of the stressed debt of a company is sustainable

8-      The government recently passed an ordinance to amend certain sections of the Banking Regulation Act, 1949: This allow the banking companies to resolve the issue related to stressed assets by initiating the insolvency proceedings whenever required. This is in addition to the recently promulgated  Insolvency and Bankruptcy Code, 2016 which provides for time bound resolutions of stressed assets.

9-      Government promulgated the Banking Regulation(Amendment) Ordinance, 2017 with the following features:

  • It was passed to deal with stressed assets, particularly those in consortium or multiple banking arrangements.
  • It authorize the RBI to direct banking companies to resolve the issue related to specific stressed assets, by initiating insolvency resolution process wherever required.

Pak. faces flak over terror funding: (The Hindu)


  • India raised the issue at the International Cooperation Review Group (ICRG) in Argentina forcing Financial Action Task Force to demand compliance report from Pakistan during the next session in February 2018

What is ICRG?

  • International Co-operation Review Group (ICRG) analyses high-risk jurisdictions and recommended specific action to address the ML/FT risks emanating from them.
  • The FATF’s primary role is to set global AML/CFT standards and ensure the effective implementation of these standards in all jurisdictions
  • The FATF took the additional step of calling upon its members and urging all jurisdictions to apply counter-measures to protect their financial sectors from money laundering and terrorist financing risks emanating from them.

What is Financial Action Force?

  • The Financial Action Task Force (FATF) is an intergovernmental body established in 1989 by the Ministers of its Member jurisdictions.  
  • The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.  
  • The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

What happened?

  • India scored a major victory at the Financial Action Task Force that looks into terror financing that held its plenary in Buenos Aires this week.
  • Pakistan has been asked to report on action taken against designated terror groups such as the Lashkar-e-Taiba and its off-shoots Jamaat-ud Dawa and Falah-i-Insaniyat.
  • Pakistan’s Central Bank, the State Bank of Pakistan (SBP), has been asked specifically to report on its work in shutting off the finances to the groups.
  • India had raised the funding of the groups and leaders like 26/11 mastermind Hafiz Saeed, who openly addressed rallies and raised funds in Pakistan as well as LeT commander Zaki-Ur Rahman Lakhvi

Prelims Related News

DRDO successfully tests guided bomb:


  • The Defence Research and Development Organisation (DRDO) has successfully tested an indigenously developed light weight glide bomb, Smart Anti Airfield Weapon (SAAW) like airfields.

About the missile

  • The guided bomb released from an Indian Air Force (IAF) aircraft and guided through precision navigation system
  • The missile reached the targets at greater than 70 km range with high accuracies.
  • The tests were conducted at Chandipur in Odisha.

About DRDO

  • Defence Research & Development Organisation (DRDO) works under Department of Defence Research and Development of Ministry of Defence.
  • DRDO working towards enhancing self-reliance in Defence Systems and undertakes design & development leading to production of world class weapon systems and equipment in accordance with the expressed needs and the qualitative requirements laid down by the three services.
  • DRDO is working in various areas of military technology which include aeronautics, armaments, combat vehicles, electronics, instrumentation engineering systems, missiles, materials, naval systems, advanced computing, simulation and life sciences.
  • DRDO while striving to meet the Cutting edge weapons technology requirements provides ample spinoff benefits to the society at large thereby contributing to the nation building.

Jnanpith Award for Krishna Sobti


Noted writer of Hindi literature Krishna Sobti will be conferred with the country’s highest literary honour, Jnanpith Award this year in 2017 for her path-breaking contribution to Indian literature.

Krishna Sobti:

  • She will be overall eight women to win this prestigious award
  • Krishna Sobti She was born on 18 February 1925 in Gujrat Punjab, British India (now in Pakistan).
  • She also has written under the name Hashmat and has published Hum Hashmat, a compilation of pen portraits of writers and friends
  • She is known for enriching Hindi literature by experimenting with new styles and forms of writing and also by minting several words in Hindi.
  • Her writings have dealt with plethora of issues ranging from partition, relationships between man and woman, changing dynamics of Indian society and slow Deterioration of human values.
  • In 1980, Sobti was conferred with the Sahitya Akademi Award for her novel Zindaginama. In 1996, she was also awarded with the Sahitya Akademi Fellowship,

Her contributions:

  • Some of her celebrated works include Mitro Marjani, Daar Se Bichhudi, Zindaginama, Badalom ke Ghere, Ai Ladki, Dil-o-Danish and Gujarat Pakistan Se Gujarat Hindustan.
  • Several of her works have been translated into other Indian languages and also in English, Swedish and Russian.

Jnanpith Award:

  • Jnanpith Award Jnanpith Award is India’s highest literary honour.
  • Jnanpith Award is given every year to an author for his/her outstanding contribution to Indian literature.
  • Its name has been taken from Sanskrit words Jnana and Pitha which means knowledge- -seat.
  • It was instituted in 1961 by Bharatiya Jnanpith trust founded by the Sahu Shanti Prasad Jain family that owns the Times of India newspaper group.
  • It is bestowed upon any Indian citizen who writes in any 22 official languages of India mentioned in VIII Schedule of Constitution of India and English.
  • Prior to 1982, the award was only given for a single work by a writer. But after 1982, the award is given for lifetime contribution to Indian literature.
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