THE HINDU EDITORIAL : NOVEMBER 22, 2018
THE HINDU EDITORIAL : NOVEMBER 22, 2018
Dear Banking Aspirants,
THE HINDU EDITORIAL – November 22, 2018, is one of the must-read section for the competitive exams like IBPS Clerk 2018, Canara Bank PO – PGDBF 2018 and IBPS SO 2018. These topics are widely expected to be asked in the reading comprehension, Cloze Test or Error Detection in the forthcoming exams. So gear up your Exam preparation and learn new words daily.
A) War without end? On the attack on Kabul
The horrific attack in Kabul must prompt greater momentum in peace talks
The attack on a religious gathering in Kabul that killed 55 people, including several scholars and clerics, is another signal of Afghanistan’s descent into chaos. The clerics had gathered to mark the birth anniversary of Prophet Mohammed when the suicide bomber blew himself up. The Taliban denied responsibility and blamed the attack on “seditious circles”, alluding to the Islamic State. Given the manner of the attack, it could well be responsible. In June, the IS had claimed an attack on another gathering of clerics. In Afghanistan the group has carried out a series of attacks on Shia religious gatherings and mosques. Hardline Sunnis consider venerating the Prophet’s birthday sacrilegious, making the clerical gathering a target for extremists such as the IS. But beyond the specific reasons behind the attack, the fact that a major religious gathering in the Afghan capital can be so easily assaulted by terrorists is worrying. Despite repeated promises by the government, the security situation has deteriorated, and markedly. Afghan forces face a war on two fronts. One is with the Taliban, which is mostly attacking government offices and soldiers. The other is with the IS, which is targeting civilians, minorities and clerics. It is almost certain, after 17 years of war, that the government cannot stabilise the country using force.
This stalemate has prompted the Afghan government and its international backers to look for ways other than war to find a solution to the conflict. The U.S. has already appointed a special envoy to Afghanistan, Zalmay Khalilzad. He has held talks with Taliban representatives in Doha. Russia has also stepped into the peace process by hosting an international conference in Moscow, in which both Taliban and Afghan representatives participated. These attempts are actually exploring the possibility of a peace deal between the Taliban and the Afghan government to end the insurgency. It is not going to be easy. The Taliban insists on international troops being withdrawn from Afghanistan as a precondition and wants changes in the Afghan Constitution. The government wants the Taliban to accept the Constitution, while the Americans say a troops pullout is not a matter of discussion with the Taliban. Still, the Taliban has made it clear that it is ready for talks, which is in itself a change given the group’s approach towards the conflict. It had, for the first time, agreed to a brief ceasefire with government forces around Id earlier this year. The reason is that the Taliban realises that it cannot win the war, at least not as long as the U.S. supports the government. It is also facing heat from the IS. The question is whether the government can seize the moment, strengthen its own counter-insurgency measures and negotiate from a position of strength, with backing from international actors. It’s indeed a tall ask.
B) The RBI concedes a vital principle
Its openness to the board discussing all policy decisions may well be a paradigm shift
The angel was in the detail of the terse press note that the Reserve Bank of India (RBI) issued after the meeting of its board of directors on November 19. Every one of the four decisions taken, including three decisions related to regulation, was ascribed to the board. The note also mentions that the constitution of a committee to examine the economic capital framework of the RBI, which was one of the decisions taken, will be jointly determined by the RBI and the Government of India.
These announcements constitute a significant departure from what has appeared to be the position of the RBI thus far: policy decisions, especially those relating to regulation, are the exclusive province of RBI management. Any departure from this position amounts to an infringement of the RBI’s autonomy.
The government and some of the current nominee directors on the RBI board have contended that all policy decisions must be deliberated by the board. The outcomes of the November 19 meeting suggest that the RBI has conceded this vital principle. This augurs well for the relationship between the government and the RBI management hereafter. Indeed, it may well constitute a paradigm shift in the functioning of the RBI.
A grey area
The precise relationship between the RBI board and the RBI management is something of a grey area. Various experts have made the point that the RBI Act vests all powers in the board and, concurrently, it vests those very powers in the RBI Governor. Whether the board can issue directions to the RBI Governor in the event of a difference of opinion between the two is not clear; some experts reject the suggestion outright.
Many contend that the RBI board has played an advisory role in the past and should continue to do so. Well, corporate boards too play an advisory role for the most part even though they enjoy full powers in the running of the corporation. They tend to leave most decisions to management. However, corporate boards do step in and play a more active role where management is found wanting.
Surely, this applies to the RBI board as well? It can be nobody’s case that the statute has conferred powers on the RBI board that were never meant to be exercised. Let us accept that these powers should be exercised rarely. Let us grant that the RBI board must play a largely advisory role. Even so, it is legitimate to expect that all policy matters would be deliberated by the board. The RBI management may or may not accept the inputs of the board. But the board must have its say. This is elementary corporate governance. In accepting this principle, the November 19 meeting of the RBI board marks a big step forward.
Raiding the reserves?
Let us turn now to the decisions taken at the meeting. How much capital the RBI needs has been hotly contested in recent years. The government’s position is that the RBI’s reserves are in excess of reserves typically held by central banks elsewhere. Some commentators have described the government’s position as an attempt to ‘raid the reserves’ of the RBI to fund its fiscal deficit. The suggestion seems to be that the RBI has cash which the government wants to steal for its own purposes.
This is a crude mis-characterisation of the position. The RBI’s reserves fall into two categories: revaluation reserves (which have mostly to do with the change in the rupee value of the RBI’s holdings of gold and foreign currencies) and contingent reserves (which represent plough back of a portion of the surplus earned by the RBI every year, the remaining portion being transferred to government as dividend).
Contingent reserves are intended for risks related to the RBI’s balance sheet. Let us suppose that these should not be touched. Revaluation reserves are an accounting entry. The RBI can reduce some of the revaluation reserves on the liability side and extinguish an equivalent value of government securities on the asset side. The latter step would lower the stock of debt owed by the government. This would provide headroom for the government to raise debt for meeting its future expenditure (including recapitalisation of public sector banks).
So, yes, reducing reserves enables the government to spend — but not by stealing the RBI’s cash! It’s an idea that merits consideration. Whether reducing reserves from their current level via the accounting entries indicated above is appropriate for the RBI is for the proposed committee to judge.
Flow of bank credit
The other outcomes at the RBI board meeting have to do with increasing the flow of bank credit and easing the problems of borrowers, especially small and medium enterprises (SMEs).
Banks are subject to capital adequacy requirements — that is, they have to hold a minimum of capital against every rupee of loans they make. The RBI’s requirement of capital adequacy is one percentage point higher than that of the internationally accepted Basel norms laid down by the Bank for International Settlements. The government would like to align Indian banks’ requirements with the Basel norms as that would reduce the demands for capital made on it by public sector banks (PSBs).
The RBI did not yield on this point at the recent meeting. However, it has agreed to defer an increase in the capital requirement of banks of 0.625% under another head by one year. This does give the government some breathing space in respect of additional infusion of capital into PSBs.
The RBI has also agreed to consider the government’s suggestion for easing the norms for Prompt Corrective Action (PCA) for banks. The PCA imposes restrictions of various kinds on banks, including restrictions on lending for the weakest banks. The idea is that banks that are very weak should not create problems for themselves by making more loans. They should focus on getting their balance sheet right by reducing costs, selling some of their non-core assets and the like.
This is fine in principle. However, if many banks face lending restrictions for a prolonged period, it could create serious problems for the economy. Large corporates could get into distress because of their linkages with distressed SMEs. So can the healthier banks that are exposed to these corporates. To use the jargon, a PCA regime has significant negative externalities. A relaxation in PCA norms, by translating into higher credit flows, could relieve stress in the broader economy. This also applies to the decision, approved at the meeting, to allow restructuring of SME assets of up to ₹25 crore.
The strident demand to enhance flows to non-banking financial companies (NBFCs), which was heard ahead of the meeting, finds no mention in the press note. It appears that the difficulties in rolling over NBFC debt that followed the collapse of Infrastructure Leasing and Financial Services (IL&FS), a leading NBFC, have abated somewhat. Evidently, the RBI was able to make a persuasive case on this point at the meeting.
It is the broader message of the November 19 meeting that is reassuring. As a public institution whose actions have enormous welfare implications, the RBI management cannot rule by fiat. Its actions must flow from a consultative process. It must explain and justify its actions. It must be seen to be accountable. The RBI board could be an important mechanism for ensuring that these conditions are met.
Meaning : an act of moving downwards, dropping, or falling(n).
Tamil Meaning : வம்சாவளி
Synonyms : fall
Antonyms : upgrade
Example : “the plane had gone into a steep descent”
Meaning : complete disorder and confusion(n).
Tamil Meaning : குழப்பம்
Synonyms : disorder
Antonyms : order
Example : “snow caused chaos in the region”
Meaning : (of wind) move creating an air current.(v)
Synonyms : gust
Example : “a cold breeze was blowing in off the sea”
Meaning : suggest or call attention to indirectly; hint at(v).
Tamil Meaning : குறிப்பாகத் தெரிவிக்கும்
Synonyms : referring
Antonyms : advertising
Example : “she had a way of alluding to Jean but never saying her name”
Meaning : involving or committing sacrilege(adj).
Tamil Meaning : அவமதிப்பாகவும்
Synonyms : impious
Antonyms : devout
Example : “a sacrilegious act”
Meaning : regard with great respect; revere(v).
Tamil Meaning : பூஜித்து
Synonyms : revere , worship
Antonyms : despise
Example : “Philip of Beverley was venerated as a saint”
Meaning : make a physical attack on(v).
Tamil Meaning : தாக்குதல்
Synonyms : attack
Antonyms : defend
Example : “he pleaded guilty to assaulting a police officer”
Meaning : become progressively worse.
Tamil Meaning : மோசமடைந்ததால்
Synonyms : decayed
Antonyms : improved
Example : “relations between the countries had deteriorated sharply”
Meaning : a position counting as a draw, in which a player is not in check but cannot move except into check(n).
Tamil Meaning : இக்கட்டான நிலை
Synonyms : deadlock
Antonyms : progress
Example : “last time I played him it ended up in stalemate”
Meaning : a person, institution, or country that supports someone or something, especially financially.
Tamil Meaning : ஆதரவாளர்கள்
Synonyms : investors
Antonyms : critics
Example : “he was the principal backer of the company”
Meaning : a messenger or representative, especially one on a diplomatic mission(n).
Tamil Meaning : தூதுவர்
Synonyms : emissary
Antonyms : receiver
Example : “the UN special envoy to Yugoslavia”
Meaning : an active revolt or uprising(n).
Tamil Meaning : கிளர்ச்சி
Synonyms : rebellion
Antonyms : compliance
Example : “rebels are waging an armed insurgency to topple the monarchy”
Meaning : used to emphasize a statement or response confirming something already suggested.
Tamil Meaning : உண்மையில்
Synonyms : really
Antonyms : conversely
Example : “it was not expected to last long, and indeed it took less than three weeks”
Meaning : sparing in the use of words; abrupt(adj).
Tamil Meaning : ஒழுங்கான
Synonyms : brief
Antonyms : verbose
Example : “a terse statement”
Meaning : regard something as being due to (a cause).
Tamil Meaning : பிறவிசார்
Synonyms : assigned
Antonyms : relieved
Example : “he ascribed Jane’s short temper to her upset stomach”
Meaning : the action of breaking the terms of a law, agreement, etc.; violation(n).
Tamil Meaning : மீறல்
Synonyms : violation
Antonyms : infraction
Example : “copyright infringement”
Meaning : struggle to surmount (a difficulty).
Tamil Meaning : வாதிட்டார்
Synonyms : argued
Antonyms : agreed
Example : “she had to contend with his uncertain temper”
Meaning : admit or agree that something is true after first denying or resisting it.
Tamil Meaning : ஒப்பு
Synonyms : approved
Antonyms : confronted
Example : “I had to concede that I’d overreacted”
Meaning : of an event or circumstance) portend a good or bad outcome(v).
Tamil Meaning : நல்லதிற்கு
Synonyms : foretokens
Example : “the end of the cold war seemed to augur well”
Meaning : a typical example or pattern of something; a pattern or model.(n)
Tamil Meaning : முன்னுதாரணம்
Synonyms : model
Example : “society’s paradigm of the ‘ideal woman’”
Meaning : wholly and completely.
Tamil Meaning : அப்பட்டமான
Synonyms : downright
Antonyms : incomplete
Example : “logging has been banned outright”
Meaning : grant (a title, degree, benefit, or right)(v).
Tamil Meaning : வழங்க
Synonyms : give
Antonyms : taking
Example : “the Minister may have exceeded the powers conferred on him by Parliament”
Meaning : a written law passed by a legislative body(n).
Tamil Meaning : சட்ட
Synonyms : decree
Antonyms : refrain
Example : “the Act consolidated statutes dealing with non-fatal offences”
Meaning : engage in competition to attain (a position of power).(v)
Tamil Meaning : போட்டியிட்ட
Synonyms : disputed
Antonyms : opted
Example : “she declared her intention to contest the presidency”
Meaning : subject to chance(adj).
Synonyms : fortuitous
Antonyms : certain
Example : “the contingent nature of the job”
Meaning : the state of being legally responsible for something(n).
Tamil Meaning : பொறுப்பு
Synonyms : obligation
Antonyms : privilege
Example : “once you contact the card protection scheme your liability for any loss ends”
Meaning :put off (an action or event) to a later time; postpone(v).
Tamil Meaning : ஒத்திவைக்க
Synonyms : postpone
Antonyms : hasten
Example : “they deferred the decision until February”
Meaning : a drink, remedy, or extract prepared by soaking tea leaves or herbs in liquid(n).
Tamil Meaning : உட்செலுத்துதல்
Synonyms : extract
Antonyms : decompose
Example : “a strong rosemary infusion”
Meaning : extreme anxiety, sorrow, or pain.
Tamil Meaning : துயரத்தில்
Synonyms : trouble
Antonyms : comfort
Example : “to his distress he saw that she was trembling”
Meaning : a government, especially an authoritarian one.
Tamil Meaning : ஆட்சி
Synonyms : dynasty
Antonyms : disorder
Example : “ideological opponents of the regime”
Meaning : (of a sound) loud and harsh; grating(adj).
Tamil Meaning : கடுமையானதாகவே
Synonyms : harsh
Antonyms : gentle
Example :”his voice had become increasingly strident”
Meaning : (of something unpleasant or severe) become less intense or widespread.
Tamil Meaning : முடிவிற்கு வந்தது
Synonyms : decreased
Antonyms : enlarged
Example : “the storm suddenly abated”
Meaning : good at persuading someone to do or believe something through reasoning or the use of temptation(adj).
Tamil Meaning : வசப்படுத்தும்
Synonyms : convincing
Antonyms : feeble
Example : “an informative and persuasive speech”
Meaning : a formal authorization or proposition; a decree.
Tamil Meaning : அரசு நிர்ணய
Synonyms : dictum
Antonyms : request
Example : “the reforms left most prices fixed by government fiat”
Meaning : intended to give professional advice or recommendations(adj).
Tamil Meaning : ஆலோசனை
Synonyms : advisory
Antonyms : uninformative
Example : “a process of consultative review”
Meaning : force (an unwelcome decision or ruling) on someone(V).
Tamil Meaning : விதிக்கிறது
Synonyms : enforces
Antonyms : cancels
Example : “the decision was theirs and was not imposed on them by others”
Meaning : an amount of something left over when requirements have been met; an excess of production or supply.
Synonyms : excess
Antonyms : lack
Example : “exports of food surpluses”
Meaning : an excess of expenditure or liabilities over income or assets in a given period.
Tamil Meaning : பற்றாக்குறை
Synonyms : shortage
Antonyms : plenty
Example : “an annual operating deficit”
Meaning : done consciously and intentionally.
Tamil Meaning : வேண்டுமென்றே
Synonyms : ponder
Antonyms : abrupt
Example : “a deliberate attempt to provoke conflict”
Meaning : obtain or bring about by discussion(v).
Tamil Meaning : பேச்சுவார்த்தை
Synonyms : bargain
Antonyms : disclaim
Example : “he negotiated a new contract with the sellers”
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Other Important Notification: Released In October 2018