UPSC Essentials | Key terms of past week with MCQs

Uniform Civil Code

WHY IN NEWS?

— The 22nd Law Commission of India Wednesday (June 14) sought the views of religious organisations and the public on the issue of a Uniform Civil Code (UCC).

— The Commission is chaired by former Karnataka High Court Chief Justice Ritu Raj Awasthi.

— This comes eight months after the Centre told the Supreme Court that the Constitution obligated the State to have a UCC for its citizens, saying that people of different religions and denominations following different property and matrimonial laws was an “affront to the nation’s unity”.

— It had also submitted that the matter would be placed before the 22nd Law Commission.

KEY TAKEAWAYS:

— A UCC would provide for one law for the entire country, applicable to all religious communities, in their personal matters such as marriage, divorce, inheritance, adoption etc.

— Currently, Indian personal law is fairly complex, with each religion adhering to its own specific laws. Separate laws govern Hindus including Sikhs, Jains and Buddhist, Muslims, Christians, and followers of other religions.

— Faizan Mustafa, expert of constitutional law, earlier wrote for The Indian Express, “Moreover, there is diversity even within communities. All Hindus of the country are not governed by one law, nor are all Muslims or all Christians. For instance, in the Northeast, there are more than 200 tribes with their own varied customary laws. The Constitution itself protects local customs in Nagaland. Similar protections are enjoyed by Meghalaya and Mizoram. Even reformed Hindu law, in spite of codification, protects customary practices.

— The exception to this rule is the state of Goa, where all religions have a common law regarding marriages, divorces, and adoption.

What does the Constitution say about a UCC?

— Article 44 of the Constitution lays down that the state shall endeavour to secure a UCC for citizens throughout the territory of India.

— Article 44 is among the Directive Principles of State Policy. Directive Principles are not enforceable by court, but are supposed to inform and guide governance.

— “However, in some senses, Article 44 is unique in this manner. While Article 44 uses the words “state shall endeavour”, other Articles in the ‘Directive Principles’ chapter use words such as “in particular strive”; “shall in particular direct its policy”; “shall be obligation of the state” etc. Furthermore, the phrase “by suitable legislation” is absent in Article 44. All this implies that the duty of the state is greater in other directive principles than in Article 44,” Mustafa wrote.

Why is there no uniform code for personal law?

—Article 25 lays down an individual’s fundamental right to religion; Article 26(b) upholds the right of each religious denomination or any section thereof to “manage its own affairs in matters of religion”; Article 29 defines the right to conserve distinctive culture.

— An individual’s freedom of religion under Article 25 is subject to “public order, health, morality” and other provisions relating to fundamental rights, but a group’s freedom under Article 26 has not been subjected to other fundamental rights.

JUST FYI:

What did the 21st Law Commission say on the matter?

— Underlining that the Uniform Civil Code is “neither necessary nor desirable at this stage”, the 21st Law Commission of India, in 2018, argued for reform of family laws of every religion through amendments and codification of certain aspects so as to make them gender-just.

— In its ‘Consultation Paper on Family Law Reforms’, the Law Commission took a stand in favour of “equality ‘within communities’ between men and women” (personal law reform), “rather than ‘equality between’ communities” (UCC).

— “Cultural diversity cannot be compromised to the extent that our urge for uniformity itself becomes a reason for threat to the territorial integrity of the nation,” the paper said, emphasising that celebration of the diversity of Indian culture must not disprivilege specific groups. It further noted that “women must be guaranteed their freedom of faith without any compromise on their right to equality” as it would be unfair to make women choose between one or the other.

— The current Law Commission’s directive on the issue, while not making any recommendations, again raises the matter.

(Source| Law Commission seeks views on Uniform Civil Code: What is the UCC, the debate around it by Explained)

Point to ponder: Uniform Civil Code must be nationwide, and involve the abolition of all regressive laws. Discuss.

1. MCQ:

Consider the following statements:

1. Article 44 of the Constitution lays down that the state shall endeavour to secure a Uniform Civil Code for citizens throughout the territory of India.

2. Underlining that the Uniform Civil Code is “neither necessary nor desirable at this stage”, the 22nd Law Commission of India, in 2018, argued for reform of family laws of every religion through amendments and codification of certain aspects so as to make them gender-just.

Which of the following statement(s) is/are not correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

PM SVANidhi

WHY IN NEWS?

— About 41 per cent of the beneficiaries of the government’s loan scheme for street vendors – PM-SVANidhi (PM Street Vendors’ AtmaNirbhar Nidhi) – are women, but southern states fare much better than those in the north.

KEY TAKEAWAYS:

According to pmsvanidhi.mohua.gov.in and vikaspedia.in:

— The PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) was launched by the Ministry of Housing and Urban Affairs on June 01, 2020 for providing affordable Working Capital loan to street vendors to resume their livelihoodsthat have been adversely affected due to Covid-19 lockdown.

— The duration of the scheme initially was until March 2022. It has been extended till December 2024, with focus on enhanced collateral free affordable loan corpus, increased adoption of digital transactions and holistic socio-economic development of the Street Vendors and their families.

— A vendor, according to the scheme guidelines is any person engaged in vending of articles, goods, wares, food items or merchandise of daily use or offering services to the public in a street, footpath, pavement etc., from a temporary built up structure or by moving from place to place.

— The goods supplied by them include vegetables, fruits, ready-to-eat street food, tea, pakodas, breads, eggs, textile, apparel, artisan products, books/ stationary etc. and the services include barber shops, cobblers, pan shops, laundry services etc.

— Vendors can avail a working capital loan of up to Rs. 10,000, which is repayable in monthly instalments in the tenure of one year.

— On timely/ early repayment of the loan, an interest subsidy @ 7 per cent per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on quarterly basis.

— There will be no penalty on early repayment of loan.

JUST FYI:

Damini Nath Explains:

— According to data from the Union Ministry of Housing and Urban Affairs, of the total number of beneficiaries (36.33 lakhs) of the scheme in the country, 21.31 lakh are men and 15.02 lakh are women. The scheme also includes 219 beneficiaries of the “others” gender category.

— In 10 states and Union territories, almost all in the Southern and North-East region, women are the majority of the beneficiaries.

— Among the 10 are Andhra Pradesh (70 per cent women), Telangana (66 per cent women), Tamil Nadu (64 per cent women) and Karnataka (50 per cent women). Kerala is an exception, but this state has been a pioneer in fostering women’s empowerment through its own programmes like the Kudumbashree which in June this year completed 25 years.
— Manipur (94 per cent), Nagaland (88 per cent), Meghalaya (77 per cent), Arunachal Pradesh (75 per cent) and Sikkim (58 per cent) stand out for their high women share. In Assam too, the share of women at 47 per cent is higher than the national average of 41 per cent. Tripura is the only exception with a low 12 per cent women share.

— A Ministry official said the social fabric of the regions has a part to play in women outnumbering men in the number of beneficiaries. For example, in the matrilineal societies of Meghalaya where the youngest daughter inherits property and women operate most enterprises.

(Source | In south, more women availed loan scheme for street vendors by Damini Nath, pmsvanidhi.mohua.gov.in and vikaspedia.in)

Point to ponder: Who is a ‘street vendor’ in India? 

2. MCQ: 

1. The PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) was launched by the Ministry of Housing and Urban Affairs.

2. A vendor, according to the scheme guidelines is any person engaged in vending of articles, goods, wares, food items or merchandise of daily use or offering services to the public in a street, footpath, pavement etc., from a temporary built up structure or by moving from place to place.

Which of the above statement(s) is/are correct?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) Neither 1 nor 2

Predator UAVs

WHY IN NEWS?

— The apex body responsible for clearing all capital acquisitions for the Indian Armed Forces, the Defence Acquisition Council (DAC), on Thursday (June 15) approved the procurement of armed Predator Unmanned Aerial Vehicles (UAV) from General Atomics Aeronautical Systems (GA-ASI), an aeronautics company based in the United States, at a cost of over $3 billion.

— The move came just a week before Prime Minister Narendra Modi’s visit to the US, pointing at a possible announcement of the deal during the visit.

— The procurement is now awaiting the final nod from the Cabinet Committee on Security.

KEY TAKEAWAYS

Amrita Nayak Dutta Explains:

What is the Predator UAV?

— As per GA-ASI, the MQ-9 UAV has an endurance of over 27 hours, speeds of 240 KTAS, can operate up to 50,000 feet, and has a 3,850 pound (1,746 kilograms) payload capacity that includes 3,000 pounds (1,361 kilograms) of external stores.

— The aircraft’s manufacturer also says that it can carry 500 per cent more payload and has nine times the horsepower in comparison to the earlier MQ-1 Predator. Moreover, MQ-9 UAV provides long-endurance, persistent surveillance, and strike capability for the warfighter.

— The maritime variant of the MQ-9 UAV, known as Sea Guardian, has an endurance of over 30 hours.

— Earlier this year, the US Air Force (USAF) had ditched an MQ-9 Reaper in the Black Sea after a confrontation with two Russian Su-27 jets over international waters west of Crimea.

How will it help the Indian Armed Forces?

— Although the plan to buy this UAV has been on the cards for a long time, its purchase got delayed due to the emphasis on self-reliance in the defence sector and limitations imposed on imports.

— If the deal comes through, India will have 31 MQ-9s for its Armed Forces, including 15 for the Navy and eight each for the Army and the Indian Air Force (IAF).

— Once delivered and employed, these High-Altitude Long Endurance drones can carry out and boost the Indian Armed Forces’ Intelligence-Surveillance-Reconnaissance (ISR) capabilities. Armed with payloads, the weaponized UAV will be able to strike strategic targets in mountains and the maritime domain during long-endurance missions.

— As per the USAF, MQ-9 UAV is employed primarily as an intelligence-collection asset and secondarily against dynamic execution targets.

— “Given its significant loiter time, wide-range sensors, multi-mode communications suite, and precision weapons, it provides a unique capability to perform strike, coordination, and reconnaissance against high-value, fleeting, and time-sensitive targets,” the force says.

— It can also undertake close air support, combat search and rescue, precision strike, buddy-lase, convoy and raid overwatch, route clearance, target development, and terminal air guidance, according to the USAF.

Has India employed these UAVs earlier?

— In the aftermath of the Galwan Valley clashes in 2020, the Navy had leased two MQ-9 UAVs and the lease was since extended.

— In November 2022, GA-ASI announced that these leased UAVs had completed 10,000 flight hours during a period of two years since their maiden flight on November 21, 2020, and have helped the Indian Navy to cover over 14 million square miles of operating area.

— At Aero India in Bengaluru in February this year, Hindustan Aeronautics Limited (HAL) and GA-ASI had said that the turbo-propeller engines for the MQ-9 UAV would be supported by the former’s engine division for the Indian market.

— A joint statement which was issued then said they were planning to put in place an engine Maintenance, Repair and Overhaul (MRO) programme for future HALE UAV projects.

Which other countries use the MQ-9 UAV?

— As per GA-ASI, the MQ-9 UAV has been acquired by the US Air Force, the US Department of Homeland Security, NASA, the Royal Air Force, the Italian Air Force, the French Air Force and the Spanish Air Force.

(Source | India to buy Predator UAVs from the US: Capabilities, countries which use them by Amrita Nayak Dutta)

Point to ponder: Strategic convergence between India and US is growing. Discuss.

3. MCQ:

 ‘Communications Compatibility and Security Agreement (COMCASA)’, recently seen in news relates to: 

a) USA

b) European Union

c) France

d) Russia

Diabetes

WHY IN NEWS?

— India has around 101 million people living with diabetes and another 136 million people in pre-diabetes stages, found a recently published study by the Madras Diabetes Research Foundation and Indian Council of Medical Research.

— The study looked at the prevalence of metabolic disorders such as diabetes, hypertension, obesity, and high cholesterol levels in the population.

— The findings can be utilised by the states to develop health policies to target these non-communicable disease.

KEY TAKEAWAYS

Anonna Dutt Explains:

What were the findings of the study?

— Using a large representative sample of over 113,000 people across 31 states and union territories in the country, the researchers were able to determine the prevalence of various metabolic disorders such as diabetes across Indian population. The study found:

— More than a quarter of the population was either diabetic or in pre-diabetic stage. 11.4 per cent of India’s population or 101 million people are living with diabetes. Whereas 15.3 per cent of the population or an additional 136 million people are pre-diabetic. This is concerning as the researchers say that almost half of the pre-diabetics may convert to diabetes within five years or so.

— The prevalence of hypertension or high blood pressure was found to be higher still in the country. Around 35.5 per cent of the population or 315 million people are living with the condition as per the study.

— In addition to BMI (body mass index) that is generally used as a measure for obesity, the Indiab researchers looked at abdominal or central obesity. This is because Indians tend to gather fat in the abdominal region and despite the BMI being normal people might be at a higher risk of diseases of obesity.

— The study found that 28.6 per cent of the population would be considered to be obese as per the BMI measure, 39.5 per cent of the population or 351 million people had abdominal obesity.

— The study also found that 24 per cent of the population or 213 million people were living with hypercholesterolemia — a condition where the bad cholesterol or LDL levels are high.

What is Indiab? And, why is the study so important?

— India Diabetes or Indiab study is a 12 year-long project with over 113,000 participants. Data collected by the study over the years in phases across the different states have helped researchers in India accurately determine the prevalence of metabolic disorders. In addition, it has also generated important evidence such as a study by the group last year that showed that only 7 per cent of the known diabetics have their sugar, BP, and cholesterol in check.

— The study is also highly representative of the Indian population, meaning it has kept ratio of say men and women or people living in the rural or urban centres similar to the country’s population. Of the 1.13 lakh participants, 79,506 are from rural areas representing the country 70 per cent demography living in rural areas. “If you look at the Indiab demographic graph it matches exactly with the census graph, meaning it is a highly representative study,” said Dr V Mohan, one of the authors of the study.

— It is also one of the largest studies ever attempted. “No country has ever done such a big study representative of all their states. Even the biggest study from China had 40,000 participants from five or six places in the country. We have conducted door-to-door screening of 113,000 people representing all states and the 1.4 billion people living in it,” said Dr Mohan.

— With the data from different state being collected in different years 2008 through 2020, it was normalised for the year 2021 using demographic data from the most recent National Family Health Survey.
Is there a geographical variation in the data?

— The study found a definite rural-urban divide in the prevalence of the diseases. The prevalence of diabetes stood at 16.4 per cent in urban India as compared to 8.9 per cent in rural India. The prevalence of diabetes was higher in the Southern states and a few north Indian states such as Delhi and Punjab. The prevalence of diabetes was lowest in Uttar Pradesh at 4.8 per cent of the population.

— But, the prevalence of pre-diabetes was found to be almost same for both rural and urban India.

— More than half the people living in urban centres were found to have abdominal obesity as compared to 33.5 per cent of people in rural India. The highest prevalence was found to be in Puducherry with 61.8 per cent.

— When it came to hypertension, the prevalence was found to be 40.7 per cent in urban India as compared to 33 per cent in rural India. The highest prevalence of hypertension was seen in Punjab with 51.8 per cent. Hypercholesterolemia was reported in 27.4 per cent of the urban population and 22.3 per cent of the rural population. The highest prevalence was seen in Kerala with 50.3 per cent.
Would the study look at these numbers change over the years?

— Prior to this study, the estimate number of people living with diabetes in India by the World Health Organisation stood at 77 million. “Even then we thought the number was low. And, the under-estimation could have been because it was based on earlier data generated by our team that had a lower prevalence of diabetes because it included many east Indian states where the prevalence is generally lower than say Southern states,” said Dr Mohan.

— The current study with data from across 31 states paints a more accurate picture.

— However, he added, that it might not always be possible to re-do the study on over 100,000 people. So, to study the trends over time the research team will collect samples again later from states like Arunachal Pradesh and Tamil Nadu that were found to have the lowest and the highest prevalence of these non-communicable diseases in 2008 when the study first began. The changes can then be applied to existing data from across the country.

How do the study findings help in developing policies?

— With granular data available from each of the states, it can be used by the state governments to device their health policies. For example, the high prevalence of pre-diabetes shown in rural India by the study would mean that governments would need to focus their prevention and screening programmes and future health infrastructure there.

— Screening for the NCDs and medicines for those who get them have already been included in 1.5 lakh government health and wellness centres.

— Most of the interventions would include urging people to adopt lifestyle changes like better diet, exercise, regular sleep, no smoking or alcohol consumption. It would also include providing medicines like statins or metformin to control the cholesterol or blood glucose levels.

(Source |India has 101 million people living with diabetes: What a recent ICMR study said by Anonna Dutt)

Point to ponder: An ICMR-backed study has thrown light on the worrying proportions assumed by lifestyle-related diseases in the country. Discuss.

4. MCQ:

In the context of hereditary diseases, consider the following statements: (2021)

1. Passing on mitochondrial diseases from parent to child can be prevented by mitochondrial replacement therapy either before or after in vitro fertilization of the egg.

2. A child inherits mitochondrial diseases entirely from the mother and not from the father.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Miyawaki forests

WHY IN NEWS?

— Prime Minister Narendra Modi during his latest ‘Mann ki baat’ episode spoke about Miyawaki plantation, the Japanese method of creating dense urban forests in a small area. The PM also cited the example of a Kerala-based teacher, Raafi Ramnath, who used the Miyawaki technique to transform a barren land into a mini forest called Vidyavanam by planting 115 varieties of trees.

— Meanwhile, to fight climate change, curb pollution levels, and increase the green cover of the financial capital, the Brihanmumbai Municipal Corporation (BMC) has been creating Miyawaki forests in several open land parcels of Mumbai.

KEY TAKEAWAYS

What is the Miyawaki plantation method?

— Named after Japanese botanist Akira Miyawaki, this method involves planting two to four different types of indigenous trees within every square metre. In this method, the trees become self-sustaining and they grow to their full length within three years.

— The methodology was developed in the 1970s, with the basic objective to densify green cover within a small parcel of land.

— The plants used in the Miyawaki method are mostly self-sustaining and don’t require regular maintenance like manuring and watering.

— Over the years, this cost effective method has become the go-to solution for the civic body to restore the green cover in a space-starved city like Mumbai.

How is Miyawaki useful?

— The dense green cover of indigenous trees plays a key role in absorbing the dust particles of the area where the garden has been set up. The plants also help in regulating surface temperature. Some of the common indigenous plants that are used for these forests include Anjan, Amala, Bel, Arjun and Gunj.

— With several infrastructure projects like real estate metro rail construction in progress in Mumbai over the past few years, it was recorded that the surface temperature in certain pockets of Mumbai has increased. Therefore, to fight this challenge, such forests are being created.

— At the industrial neighbourhood in Marol (Andheri East), the BMC is creating an urban forest with the Miyawaki method. “These green patches play a major role in regulating the carbon levels of a given area, which may in return help in maintaining a clean year. Also, these forests encourage new biodiversity and an ecosystem is developed around it, which in turn increases the fertility of the soil and regulates surface temperature,” said Jeetendra Pardeshi, superintendent of BMC’s garden cell, which is implementing this project.

Which other areas in Mumbai have such forests?

— According to the civic body’s data, 64 Miyawaki forests have been planted in Mumbai so far. The Miyawaki drive was launched under BMC’s urban forest project on January 2, 2020 and the first such forest was created in Bhakti Park at Chembur in the eastern suburbs.

— The largest Miyawaki forest under this project was created at Chandivali’s Nahar Amrut Shakti Udyan, wherein over 41,000 plants were planted over 13 acres.

— Civic officials said that more than 4,00,000 trees have been planted in these 64 forests so far. The BMC’s Garden cell had earmarked 1,100 plots across Mumbai for setting up these forests, back in 2020, out of which more than 60 have been completed.

(Source | PM Modi talks of Miyawaki forests in Mann ki Baat: What is this method, also being used in Mumbai)

Point to ponder: What is Miyawaki plantation method and how is it useful?

5. MCQ:

With reference to ‘Forest Carbon Partnership Facility’, which of the following statements is/are correct? (2015)

1. It is global partnership of governments, businesses, civil society and indigenous peoples

2. It provides financial aid to universities, individual scientists and institutions involved in scientific forestry research to develop eco-friendly and climate adaptation technologies for sustainable forest management

3. It assists the countries in their ‘REDD+ (Reducing Emission from Deforestation and Forest Degradation)’ efforts by providing them with financial and technical assistance

Select the correct answer using the code given below

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Fish kill

WHY IN NEWS?

— Days after tens of thousands of dead fish washed up on multiple beaches of southeast Texas, USA, last week, authorities have removed the carcasses from several spots. The corpses first began to surface on June 9, leading officials to ask the public to stay away from the affected beaches until the time they had been cleared, due to the risk of being exposed to bacteria and sharp fins.

— Among the dead fish covering the shores were mostly menhaden but there were also some sharks, trout, bass, catfish and stingrays, according to The Washington Post. Residents told the newspaper that they had never seen that many dead fish in their lives.

KEY TAKEAWAYS:

Alind Chauhan Explains:

What led to the massive die-off of fish in Texas?

— Officials of the Quintana Beach County Park on June 10 said the incident took place due to a phenomenon called “fish kill”. It is the sudden and unexpected death of many fish or other aquatic animals over a short period and mostly within a particular area. It occurs mainly due to low levels of dissolved oxygen in the water that causes suffocation of the fish.
A combination of factors led to the occurrence of the Texas fish kill.

— First was the warm water. When sea surface temperatures rise, it becomes difficult for the fish to breathe as oxygen dissolves easily in colder water in comparison to warmer water. Things take a turn for the worse when a school of fish gets trapped in shallow water, which gets warmer more quickly. “This causes fish to act more erratically, which in turn, further depletes the oxygen from the water.,” officials mentioned in the post. Low oxygen levels could ultimately lead to the death of the fish.

— Another factor that contributed to the Texas fish kill was calm seas. Experts suggest that one of the ways for oxygen to enter the water is by mixing with wind and waves. But in the past few weeks, the waves along the Texas Gulf Coast have been very calm, causing the depletion of dissolved oxygen.

— One more problem was the overcast weather in Texas. Officials pointed out that due to cloudy skies, phytoplankton were unable to carry out the process of photosynthesis, which is another way of producing oxygen in the water. Photosynthesis is driven by sunlight and it slows down on cloudy days, resulting in decreased dissolved oxygen concentration.

Is the fish kill phenomenon unusual?

— No, it isn’t. In fact, Texas experiences fish kills every year during summers, when the temperatures of the sea surface rise. The phenomenon causes the death of mostly menhaden, much like this time, which serve as food for other fish — this is a crucial part of the region’s ecosystem.

What is the impact of climate change on fish kill?

— Although experts haven’t found any relation between Texas fish kill and climate change, they say that with rising temperatures of oceans, such incidents will become more prevalent. Warmer oceans will lead to less dissolved oxygen levels, causing more death of fish.

— Speaking to NPR, Katie St Clair, the manager of the sea life facility at Texas A&M University at Galveston, said, “Water can only hold so much oxygen at certain temperatures, and certainly we know that seawater temperatures are rising… It is concerning and something that needs to be monitored.”

— Warming of the oceans, however, has multiple adverse effects. Studies have found that fish like sardines, pilchards and herring will become smaller in size and not be able to move to better environments. Researchers have also noted that some fish species have started to leave their natural habitat in search of cooler waters, which has disrupted the fish industry.

(Source | Thousands of dead fish wash up on Texas coast: What is ‘fish kill’ and why it happens by Alind Chauhan)

Point to ponder: What will happen to fish as oceans warm?

6. MCQ:

Consider the following factors:

1. Warm sea temperature

2. Low level of dissolved oxygen

3. Clear skies

How many of the above factors are responsible for the Texas fish kill?

(a) Only one

(b) Only two

(c) All three

(d) None

Wilful defaulters

WHY IN NEWS?

— The Reserve Bank of India (RBI), in a controversial move, has allowed wilful defaulters and loans accounts involved in frauds to go in for a compromise settlement with banks to settle their dues.

— A section of bankers say the RBI decision may be detrimental to the banking system and depositors as the wrongful actions of such defaulters and fraudsters are being condoned, placing the burden of their misdeeds on the shoulders of ordinary citizens, especially depositors.

KEY TAKEAWAYS

George Mathew Explains:

Who are wilful defaulters?

— As per the Reserve Bank of India’s classification, a ‘wilful default’ would be deemed to have occurred if the borrower has defaulted in meeting their repayment obligations to the lender even when they have the capacity to honour the said obligations. There were 15,778 wilful default accounts involving an amount of Rs 340,570 crore as of December 2022 as against 14,206 accounts involving Rs 285,583 crore a year ago in December 2021 and 12,911 accounts for Rs 245,888 crore in December 2020, according to Transunion Cibil, a credit information company registered with the RBI.

— State Bank of India (SBI) leads with 1,883 wilful default accounts for Rs 79,296 crore, followed by PNB at Rs 38,360 crore, Union Bank of India Rs 35,266 crore, IDBI Bank Rs 23,601 crore and Bank of Baroda Rs 23,879 crore, according to data from Cibil website. Public sector banks account for 85 per cent of the wilful defaults at Rs 292,666 crore, indicating the reluctance of borrowers to repay bank loans despite having the capacity to make the payment.

— A wilful default happens when the borrower has not utilised the finance from the lender for the specific purpose for which finance was availed, and has diverted the funds for other purposes, siphoned off funds, or disposed of or removed the movable fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank.

What is a compromise settlement?

— A compromise settlement refers to a negotiated settlement where a borrower offers to pay and the bank agrees to accept in full and final, settlement of its dues an amount less than the total amount due to them under the relative loan contract. This settlement invariably involves a certain sacrifice by way of write off and/or waiver of a portion of its dues on a one-time basis.

— In the last two decades, banks have approved several compromise settlements, running into hundreds of crores with huge haircuts – or the reduction of outstanding payment or loans that will not be repaid by the borrowers – leading to huge losses for banks.

What did RBI say?

— Banks can undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors, the RBI said in a circular on June 8, 2023.

—The central bank has also directed banks to fix a minimum cooling period of at least 12 months before making fresh exposures to borrowers who had undergone compromise settlements. This means a wilful defaulter or a company involved in fraud can get fresh loans after 12 months of executing a compromise settlement.

Why has this been termed as a detrimental step?

— The RBI’s latest ‘Framework for compromise settlements and technical write-offs’ is considered as a “detrimental step that may compromise the integrity of the banking system and undermine the efforts to combat wilful defaulters effectively”. It not only rewards unscrupulous borrowers but also sends a distressing message to honest borrowers who strive to meet their financial obligations.

— “We firmly believe that allowing compromise settlement for accounts classified as fraud or wilful defaulters is an affront to the principles of justice and accountability,” said All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees Association (AIBEA), representing 6 lakh bank employees.

— It is worth noting that wilful defaults have a significant impact on the financial stability of banks and the overall economy. By allowing them to settle their loans under compromise, the RBI is essentially condoning their wrongful actions and placing the burden of their misdeeds on the shoulders of ordinary citizens and hardworking bank employees, bank unions said.

Why is loan recovery important?

— Recovery of debts due to a bank is an important activity that aims at protecting the interest of the depositors and other stakeholders. If banks do not recover NPAs, then ultimately, depositors and other stakeholders will suffer.

— “Therefore, any compromise settlement should have an underlying objective of recovery of dues to the maximum extent possible at minimum expense and within shortest possible time frame,” said a Union Bank of India note on compromise settlements.

— “While negotiating compromise settlements, it should be appreciated that the bank is public sector entity and the stakeholders are taxpaying general public. Therefore, more than interest of the Borrowers, the interest of public at large should be kept in mind,” the note said.

— One of the reasons for the high interest rates in India is the high level of NPAs in the banking system.

(Source | Compromise settlement for wilful defaulters: How RBI’s controversial move impacts the banking sector by George Mathew)

Point to ponder: Why NPAs are not just about bank governance?

7. MCQ:

In the context of the Indian economy, non-financial debt includes which of the following? (2020)

(1) Housing loans owed by households

(2) Amounts outstanding on credit cards

(3) Treasury bills

Select the correct answer using the code given below :

(a) 1 only

(b) 1 and 2 only

(c) 3 only

(d) 1, 2 and 3

ANSWERS TO MCQs: 1 (b), 2 (c), 3 (a), 4 (c), 5 (c), 6 (b), 7(d)

Share your views, answers and suggestions in the comment box or at manas.srivastava@indianexpress.com