THE HINDU EDITORIAL – June 23, 2017
a) The clean-up begins
Armed with the powers, a little over a month ago, to get lenders and defaulting borrowers to sit down and address the messy task of cleaning up toxic bad debts, the Reserve Bank of India (RBI) has decided to crack the whip. The central bank’s decision to act on the advice of its Internal Advisory Committee and direct lenders to initiate insolvency proceedings against 12 corporate borrowers — each owing in excess of ₹5,000 crore — has come not a day too soon. With gross non-performing assets (NPAs) at about ₹7 lakh crore, a regulatory intervention was imperative not only to safeguard the health of the banking system but also to ward off any wider impact on the economy. RBI Governor Urjit Patel underscored the importance of tackling the bad loans problem as recently as during the June 6-7 meeting of the Monetary Policy Committee when he said: “The quiescent investment cycle remains a key macroeconomic concern. It is, therefore, imperative to ensure resolution of stressed assets of banks and timely recapitalisation [of public sector lenders].” While the RBI has not divulged the names of the defaulting dozen, reports suggest they are largely made up of steelmakers and infrastructure companies. That steel companies were among the worst-hit in the wake of the global downturn in commodity prices and depressed demand in recent years is widely known; to that extent the sector’s presence in the list comes as no surprise. The onus now shifts to the lender consortiums to expedite the insolvency process under the new Insolvency and Bankruptcy Code (IBC). The enabling architecture is now in place to speedily bring a defaulting borrower’s operations under the purview of an insolvency professional, once the National Company Law Tribunal has accepted the creditors’ application for initiating insolvency proceedings against the debtor. But the actual timeframe in which the resolution is going to occur remains to be seen, given that the IBC is still in its infancy. While the code has been drafted to bring under its ambit existing laws related to insolvency and bankruptcy, thereby curtailing the options available to a borrower who wishes to mount a legal challenge, the proof of the pudding as always will be in the eating. The fate of this long-overdue attempt at resolving the banking sector’s NPA crisis will ultimately be determined by how quickly the lender consortia are able to initiate the implementation of a resolution plan that retains the defaulting company as a going concern — there are, after all, thousands of direct and indirect jobs at stake here. Or, in the absence of approval for such a plan, start taking steps to liquidate assets.
b) Game of thrones
The rapid rise of Mohammed bin Salman, from one among many princes in the al-Saud royal family to the Crown Prince of Saudi Arabia within a span of two years, is an unprecedented development in the history of the Kingdom. Little-known outside the palace until January 2015 when his father, Salman bin Abdulaziz, became the monarch, Prince Mohammed has since been the face of Saudi Arabia overseas and of reforms at home. Appointed Deputy Crown Prince by his father, Prince Mohammed often overshadowed the then powerful Crown Prince, Mohammed bin Nayef. He was directly in charge of the Kingdom’s foreign policy and rolled out an ambitious economic reform agenda last year. Throughout, he had the support of the octogenarian King, even as the Crown Prince, reportedly upset with his cousin sidestepping him, kept a low pro- le. On Wednesday, King Salman put an end to all speculation on the succession by ousting Prince Nayef, his nephew, and appointing his son the new Crown Prince. This has practically removed all hurdles for the 31-yearold to ascend the throne once his father retires or dies. With King Salman largely conned to the Palace owing to health reasons and Prince Nayef forcibly retired, the new Crown Prince has already become the de facto ruler of Saudi Arabia. Many regard him as a reformer. He has repeatedly talked about ending Saudi Arabia’s “addiction to oil”. The Vision 2030 plan launched by the Prince last year seeks to end the country’s dependence on oil, reform its finances and encourage private enterprise. He has also talked about women’s rights. At the same time, many others perceive him as a reckless, impulsive royal whose unrealistic ambitions and quest for power could endanger not just the Kingdom but the entire Gulf region. A look at Saudi Arabia’s foreign policy under King Salman lends credence to this criticism. Prince Mohammed was the architect of Riyadh’s bombing campaign in Yemen in the name of fighting Shia Houthi rebels. The Saudi version is that the Houthis are Iran’s proxies, and letting them consolidate themselves in the Kingdom’s backyard will hurt its interests. For over two years Saudi Arabia has been bombing Yemen with impunity, triggering a humanitarian crisis in one of the poorest countries in the Arab world, but without attaining the stated objective of defeating the Houthis. The Houthis are still in San’a, Yemen’s capital. Riyadh has also taken a tougher anti-Tehran line in recent years with Prince Mohammed determined to make sure that “the battle is for them in Iran”. This aggressive foreign policy line was evident in Riyadh’s decision to impose a blockade on Qatar as well. Prince Mohammed’s domestic reform credentials are also yet to be established, as his plans to reorganise the oil economy remain on paper, while social reforms are nowhere near the government’s agenda. Against such a background, the Prince’s elevation will only prompt Saudi Arabia to turn more hawkish on regional policy, while reforms take a back seat. This is bad news for an already volatile region.
WORDS / VOCABULARY
Meaning: Not having enough money to pay debts, buy goods, etc.
Example: The club was facing insolvency.
Synonyms: Bankruptcy, Failure
Meaning: Of vital importance; crucial.
Example: Immediate action was imperative.
Synonyms: Vital, Crucial
Antonyms: Unimportant, Optional
Meaning: In a state or period of inactivity or dormancy.
Example: Strikes were headed by groups of workers who had previously been quiescent.
Synonyms: Inactive, Inert
Meaning: Make known (private or sensitive information).
Example: I am too much of a gentleman to divulge her age.
Synonyms: Disclose, Reveal
Meaning: An association, typically of several companies.
Example: A consortium of textile manufacturers.
Synonyms: Collective, Agency
Meaning: The limit of someone’s responsibility, interest, or activity.
Example: This case falls outside the purview of this particular court.
Synonyms: Reach, Realm
Meaning: The final part of a meal, when a sweet dish is eaten.
Example: I thought we’d have trifle for pudding.
Synonyms: Dessert, Sweet
Meaning: Never done or known before.
Example: The government took the unprecedented step of releasing confidential correspondence.
Synonyms: Unequalled, Unmatched
Antonyms: Normal, Common
Meaning: Having or showing a strong desire and determination to succeed.
Example: A ruthlessly ambitious woman.
Synonyms: Aspiring, Determined
Antonyms: Timid, Retiring
Meaning: A person who is between 80 and 89 years old.
Example: The elderly.
Meaning: The activity of guessing possible answers to a question without having enough information to be certain.
Example: Speculation about his future plans is rife.
Synonyms: Conjecture, Supposition
Meaning: To come to an opinion about something, or have a belief about something.
Example: How do the French perceive the British?
Synonyms: Discern, Recognize
Meaning: Showing behaviour in which you do things suddenly without any planning and without considering the effects they may have.
Example: Don’t be so impulsive – think before you act.
Synonyms: Hasty, Passionate
Meaning: Having a wrong idea of what is likely to happen or of what you can really do; not based on facts.
Example: I think these sales forecasts are unrealistic, considering how slow sales are at present.
Synonyms: Impractical, Unworkable
Antonyms: Realistic, Pragmatic
Meaning: The belief that something is true.
Example: I’m not prepared to give credence to anonymous complaints.
Synonyms: Acceptance, Belief
Meaning: Freedom from punishment or from the unpleasant results of something that has been done.
Example: Criminal gangs are terrorizing the city with apparent impunity.
Synonyms: Immunity, Indemnity
Antonyms: Liability, Responsibility
Meaning: Determined to win or succeed and using forceful action to win or to achieve success.
Example: Both players won their first-round matches in aggressive style.
Synonyms: Competitive, Assertive
Antonyms: Friendly, Peacful
Meaning: Supporting the use of force in political relationships rather than discussion or other more peaceful solutions.
Example: The president is hawkish on foreign policy.
Synonyms: Intrusive, Advancing
Meaning: A member of a p olitical party in a parliament or in the legislature whose job is to make certain that other party members are present at voting time and also to make certain that they vote in a particular way.
Example: Hargreaves is the MP who got into trouble with his party’s chief whip for opposing the tax reform.
Synonyms: Pull, Pluck
20) De facto
Meaning: Existing in fact, although perhaps not intended, legal, or accepted.
Example: The city is rapidly becoming the de facto centre of the financial world.
Synonyms: Actual, Existent
Antonyms: De jure