U.S. President Joe Biden faces a number of challenges at home and abroad. In the foreign policy arena, relations with China and Russia pose the most intractable problems, as does the estrangement of key European allies who former U.S. President Donald Trump alienated by his isolationist rhetoric and gratuitous insults.
However, the most pressing issue facing the Biden administration is America’s relations with Iran given the concern that the present scenario may upend Washington’s non-proliferation strategy and increase tensions in the energy-rich Gulf region. Several of Mr. Biden’s top appointees in the foreign policy and security arenas were involved in the negotiations with Iran that led to the nuclear deal of 2015. They include Wendy Sherman, the original deal’s primary negotiator, who has been nominated Deputy Secretary of State, and William Burns, who was involved in the early stages of forging the Iran nuclear deal, as head of the Central Intelligence Agency (CIA).
Trump action, Iran reaction
In May 2018, Mr. Trump unilaterally withdrew the U.S. from the Joint Comprehensive Plan of Action (JCPOA) — reached by the five permanent members of the UN Security Council, plus Germany and the European Union with Iran — and re-imposed sanctions, especially on shipment of Iranian oil, to put ‘maximum pressure’ on Tehran to force it to accept America’s maximalist demands that went far beyond the agreement. The Trump administration argued that the 15-year time limit on Iran’s nuclear programme was insufficient and that Tehran must renounce in perpetuity its right to enrich uranium. Washington also demanded that a moratorium be imposed on Iran’s ballistic missile programme and that Tehran withdraws its support to regional allies and proxies opposed to U.S. policies.
After waiting a year for the European signatories of the JCPOA to persuade Washington to return to the agreement, Iran decided in 2019 to breach the limit for uranium enrichment imposed by the JCPOA. It also began increasing its stockpile of enriched uranium beyond the amount permitted under the agreement. In a confidential document, the International Atomic Energy Agency (IAEA) estimated that as of November 2, 2020, Iran’s stockpile of low-enriched uranium had reached more than 2,442 kilograms, eight times the limit permitted by the JCPOA.
These developments indicated that Mr. Trump’s policy of exerting maximum pressure had produced the exact opposite result, bringing Iran closer to weaponisation. This outcome has generated additional pressure on the Biden administration to reverse course and bring Tehran into compliance with the JCPOA by renewing America’s commitment to the agreement and lifting sanctions.
Biden strategy, complexities
Mr. Biden’s Press Secretary, Jen Psaki, in her very first press conference, clearly stated that the new administration intends to constrain Iran through diplomacy, not sanctions, and reaffirmed Mr. Biden’s position that he would be willing to return to the JCPOA if Tehran does the same. On its part, the Iranian regime has signalled that it is willing to honour the agreement and reverse the steps undertaken recently if the U.S. withdraws all sanctions imposed on Tehran by the Trump administration. Hours before Mr. Biden’s inauguration, Iran’s Foreign Minister Mohammad Javad Zarif reiterated Iran’s readiness to return to the JCPOA, but went on to say: “We are not in a hurry…If they lift the sanctions and comply with their obligations, we will also fulfil our obligations.”
However, a return to the JCPOA is not as simple as it sounds, as there is wide divergence between Washington’s expectations and those harboured by Tehran. The U.S. sees a return to the JCPOA as the first step towards curbing Iran’s missile programme as well as its regional ambitions that clash with those of the U.S. and its allies, especially Israel and Saudi Arabia.
On the other hand, Iran considers the JCPOA as a stand-alone agreement covering only Iran’s nuclear programme. Mr. Zarif told journalists on the day of Mr. Biden’s inauguration that subjects such as Iran’s missile programme and its regional policy were extraneous issues and should not be linked to the nuclear deal.
Furthermore, opinions in both Washington and Tehran have hardened over the past two years. The consensus in the U.S. has shifted to a much more uncompromising position because of Iran’s refusal to change the course of its West Asian policy and its deleterious consequences for U.S. interests. Iran’s Islamic Revolutionary Guard Corps has trained proxy militias that have played a major role in helping the Assad regime in Syria to turn the tide of war against U.S.-supported opposition forces. Tehran continues to finance and arm the fiercely anti-Israeli Lebanese Hezbollah and is the principal supporter of the Houthis in Yemen who have not only fought Saudi Arabia to a standstill but also attacked major Saudi oil facilities with Iranian-supplied drones and missiles. It also continues to train and arm Shia militias in Iraq and to checkmate American policies in that country.
Boost to hardliners
At the same time, the U.S. decision to unilaterally withdraw from the JCPOA has played into the hands of the Iranian hardliners and discredited those such as Mr. Zarif and Iran’s President Hassan Rouhani who had argued in favour of the JCPOA, and by implication improved relations with the U.S. The Rouhani government signed the JCPOA in 2015 with the reluctant endorsement of Iran’s supreme leader, Ayatollah Ali Khamenei, who has become far more sceptical now after the unilateral re-imposition of stringent sanctions by the Trump administration. This has reinforced his belief that America’s principal goal is regime change in Tehran.
Moreover, Mr. Rouhani is a lame duck President. Under Iranian laws he cannot run again when presidential elections are held in June 2021 because he has already served two terms. The recent parliamentary elections have resulted in the domination of the legislature by the hardline conservative faction known as the ‘principlists’. It is almost certain that the next President will belong to the same grouping unless an agreement is reached with the U.S. about lifting economic sanctions and returning to JCPOA, thus vindicating Mr. Rouhani’s moderate position. A new radical Iranian dispensation is unlikely to accept a mere return to the original JCPOA and will insist on a foolproof clause that will preclude a repetition of the U.S.’s unilateral withdrawal.
Even if the Biden and Rouhani administrations come to an understanding about returning to the JCPOA, the hardliners who dominate the Iranian Parliament are likely to insist that the renewed agreement must include a clause that would preclude a signatory from unilaterally abandoning the JCPOA. This was foreshadowed in the legislation passed by the Iranian Parliament in November and approved by Iran’s Guardian Council watchdog body in December 2020 that requires the government to boost uranium enrichment and limit United Nations inspections if sanctions are not removed by February 2021.
Within the U.S.
One can also expect a great deal of opposition in the U.S. Congress, particularly in the delicately balanced Senate, to a return to the JCPOA without the imposition of some restraint on Iran’s ballistic missile programme and perceptible indication of a change in its adversarial policy in West Asia. The clearly expressed opposition of America’s leading regional allies, Israel and Saudi Arabia, who consider Iran to be their principal antagonist, will add to the constraints on the Biden administration about re-engaging with Iran on the nuclear issue and removing sanctions imposed in 2018.
It is decision time for the Biden administration. Unless it is able to overcome the multiple hurdles in its path and reach an agreement with Iran in the next couple of months, it could lead to the installation of a more hardline administration in Tehran in June, thus ensuring that U.S.-Iran relations will be mired in hostility well into the future and will continue contributing hugely to instability in West Asia.
Mohammed Ayoob is University Distinguished Professor Emeritus of International Relations, Michigan State University
Farmers on the warpath would mean that agriculture reforms have again occupied centrestage not just in the minds of the politicians but also policymakers. To enable small farmers to diversify their crops or improve their income they must have access to credit at reasonable rates of interest. This has been an agenda of the triad of the Centre, the States and the Reserve Bank of India (RBI) for decades. Unfortunately, while the volume of credit has improved over the decades, its quality and impact on agriculture has only deteriorated. Agricultural credit has become less efficient in delivering agricultural growth. Otherwise, why should over 85% of farmers’ income remain stagnant over the years? Any other sector which has access to a low rate of interest credit has always boomed and ballooned so much so it has created a bubble of its own.
Every year, the central government announces an increase in the target of subsidised agriculture credit limit and banks surpass the target. On February 1, Budget day, the Union Finance Minister will again set a new agricultural credit target for 2021-22. In 2011-12, the target was Rs. 4.75-lakh crore; now, agri-credit has reached the target of Rs. 15-lakh crore in 2020-21 with an allocated subsidy of Rs. 21,175 crore. The question is: where is the credit and subsidy going and are they really benefiting the farmers?
Most small farmers left out
In the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers. Despite an increase in agri-credit, even today, 95% of tractors and other agri-implements sold in the country are being financed by non-banking financial companies, or NBFCs, at 18% rate of interest; the banks’ long-term loans rate of interest for purchasing of the same is 11%.
The central bank, the RBI, has also questioned agricultural households with the lowest land holding (up to two hectares) getting only about 15% of the subsidised outstanding loan from institutional sources (bank, co-operative society). The share is 79% for households belonging to the highest size class of land possessed (above two hectares), beneficiaries of subsidised institutional credit at 4% to 7% rate of interest. As in the Agriculture Census, 2015-16, the total number of small and marginal farmers’ households in the country stood at 12.56 crore. These small and marginal holdings make up 86.1% of the total holdings. As in the Situation Assessment Survey of Agricultural Households by the National Sample Survey Office (NSSO), Ministry of Statistics and Programme Implementation, the share of institutional loans rises with an increase in land possessed — showing that the bulk of subsidised agri-credit is grabbed by big farmers and agri-business companies.
A loose definition of agri-credit has led to the leakage of loans at subsidised rates to large companies in agri-business. Though the RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
In 2017, 53% of the agriculture credit that the National Bank for Agriculture and Rural Development (NABARD) provided to Maharashtra was allocated to Mumbai city and suburbs, where there are no agriculturists, only agri-business. It made indirect loans to dealers and sellers of fertilizers, pesticides, seeds and agricultural implements undertaking work for farmers.
A review by the RBI’s internal working group in 2019 found various inconsistencies. It found that in some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP) and the ratio of crop loans disbursed to input requirement was very unevenly distributed. Examples are in Kerala (326%), Andhra Pradesh (254%), Tamil Nadu (245%), Punjab (231%) and Telangana (210%). This shows the diversion of credit for non-agriculture purposes. One reason for this diversion is that subsidised credit disbursed at a 4%-7% rate of interest is being refinanced to small farmers, and in the open market at a rate of interest of up to 36%.
Subsidised credit should be the ‘cause for viable agriculture but, unfortunately, the agriculture sector’s performance has not been commensurate with the subsidised credit that it has received’. Even new farm laws have not addressed the reform in the agriculture credit system.
The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidising credit. Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organisations, or the FPOs of small farmers against commodity stocks can be a win-win model to spur agriculture growth’.
Technology as a solution
With mobile phone penetration among agricultural households in India being as high as 89.1%, the prospects of aggressive effort to improve institutional credit delivery through technology-driven solutions can reduce the extent of the financial exclusion of agricultural households. Farmers have been able to avail themselves of loans through mobile phone apps, says a media report. These apps use satellite imagery reports which capture the extent of land owned by farmers in States where land records are digitised and they grow the crop to extend the Kishan Credit Card loans digitally. Instant, otherwise, farmers have to produce the certified land record copy from the revenue department, which is much time consuming. Other steps are reforming the land leasing framework and creating a national-level agency to build consensus among States and the Centre concerning agriculture credit reforms to fill the gap and reach out to the most number of small and marginal farmers.
A.S. Mittal is Vice Chairman (cabinet minister rank), Punjab State Planning Board and Sonalika Group, and Chairman-ASSOCHAM (Northern Council). The use of various media reports and documents is acknowledged. The views expressed are personal
The major economies of the world have always realised the potential of shipping as a contributor to economic growth. Today, for instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI). China is trying to take control of the Bay of Bengal and the Indian Ocean Region.
However, geographically, China is not as blessed as India. It has a great variety of climates and it has a coast only in the east; yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council. What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.
Prior to the 16th century, both India and China were equal competitors on GDP. Historical records prove that India had maritime supremacy in the world. But over the past 70 years, India has lost its global eminence in shipping due to poor legislation and politics.
Helping foreign shipping liners
Starting from the establishment of new ports in independent India to the establishment of the present-day Chabahar Port in Iran, all of India’s actions on the shipping front have been counter-effective. This is due to a visionless administration. All the shipping infrastructure in peninsular India only helps foreign shipping liners. India has concentrated only on short-term solutions.
In the past, colonial traders had strong merchant marine, but they also developed optimum shore-based infrastructure with road and rail connectivity to facilitate their trade. There was balanced infrastructure onshore and at sea. Shore-based infrastructure was developed to cater to the carrying capacity. This needs to be understood with a clear economic sense.
Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too. As a country, we have still not optimised our carrying capacity. Foreign carriers and their agents continue to ransack EXIM trade with enormous hidden charges in the logistics cycle. Much of foreign currency is drained as transhipment and handling cost every day.
Given this state of affairs, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves. This is a historical mistake and a major economic failure of the country. As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.
Today, Ministry officials are happily relaxing “Cabotage” regulation in the name of coastal shipping. This benefits only the foreign container-carrying companies and not Indian shipowners. Official actions allow foreign carriers to enjoy the situation here and push the Indian tonnage owners to vanish from the scene. Starting from the Swadeshi Steam Navigation Company of V.O. Chidambaram Pillai to the Scindia Steam Navigation Company of our times, Indian owners have not got the blessings of successive governments.
In the port sector, instead of creating regional cargo-specific ports in peninsular India, the bureaucracy has repeatedly allowed similar infrastructural developments in multiple cargo-handling ports. As a result, Indian ports compete for the same cargo. If we make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transhipment hubs. We need to only concentrate on developing the contributing ports to serve the regional transhipment hubs for which improving small ship coastal operations is mandatory.
It is our long-cherished dream to be competent and cost-effective in international supply chain logistics. We need quality products to be available in global markets at a competitive price. This will happen only if we develop balanced infrastructure onshore as well as at sea.
A ray of hope
Sagarmala, a government programme to enhance the performance of the country’s logistics sector, provides hope. Its aims are port-led industrialisation, development of world-class logistics institutions, and coastal community development. When Sagarmala initiates infrastructural development on the shorefront, this will also get reflected in domestic carrying capacity.
As of now, shipbuilding, repair and ownership are not preferred businesses in peninsular India. The small ship-owning community in India also prefers foreign registry for their ships instead of domestic registration. If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
With the call for ‘Make in India’ growing louder and with simultaneous multi-folded cargo growth in the country, we need ships to cater to domestic and international trade. Short sea and river voyages should be encouraged. The ship-owning spirit of the Indian merchant marine entrepreneur has to be restored. Shipbuilding and owning should be encouraged by the Ministry. The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member. The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
Sagarmala should include coastal communities and consider evolving schemes to harness the century-old ship-owning spirit and sailing skills of peninsular India. Coastal communities should be made ship owners. This will initiate carriage of cargo by shallow drafted small ships through coast and inland waterways. All minor ports in peninsular India will emerge as contributing ports to the existing major ports and become transhipment hubs on their own. Old sailing vessel owners should be encouraged to become small ship owners.
It is sad that most of the global shipping companies which depend on Indian cargo for their business have Indians as either commercial heads or Indian crew onboard their ships. The creamy layer from management and nautical institutions are employed out of India. When the most creative human resource is not used in the country, what is the point of declaring that India has the number one youth population in the world?
The youth population is merely a number, not a skill-based strength. In the coastal region, their strength has not been tapped. This is a point of concern and Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.
R.N. Joe D’Cruz is the CEO of Sasi Logistics Pvt Ltd, Chennai
Ever since the Mumbai Police filed a supplementary chargesheet containing about 1,000 pages of WhatsApp messages between Republic TV Editor Arnab Goswami and former Broadcast Audience Research Council CEO Partho Dasgupta, the discussions in the media have been about ethical transgressions, manipulating institutional arrangements to show increased audience reach, and breaching the line meant to protect the autonomy and efficacy of regulating bodies and external research entities. For a news ombudsman, the main issue is that an effective institution of self-regulation for the Indian media does not exist.
There are four bodies in India for media regulation. The first is the Press Council of India, created through an act of Parliament. It is headed by a former Supreme Court judge. Its mandate is to preserve the freedom of the press and to maintain and improve the standards of newspapers and news agencies in India. It has 28 members — six editors; seven senior journalists; six media managers; one representative from a news agency; one nominee each from the Bar Council of India, the University Grants Commission, and the Sahitya Akademi; three members of the Lok Sabha; and two members of the Rajya Sabha. The tilt is towards the executive writ. This reminds us of Lord Justice Leveson’s recommendation while examining multiple ethical breaches in the U.K. media. He suggested that the regulatory body should be free of serving editors and MPs. But this idea has been rejected by governments everywhere.
The second is the News Broadcasting Standards Authority created by the News Broadcasters Association (NBA), an industry body. The broadcast industry has a third body, the Broadcasting Content Complaints Council, to deal with complaints against entertainment and general segment television programmes. A fourth body was created by those who left the NBA, called the News Broadcasters Federation. This is promoted by Mr. Goswami’s Republic TV.
However, a close examination of the functioning of these bodies reveals their inability to implement their primary mandate — ensuring freedom while adhering to agreed ethical and professional standards.
If media organisations are serious about effective self-regulation that ensures freedom not only from the government, but also from other vested interests, the need of the hour is to actively build in-house mechanisms. For instance, the Readers’ Editor (RE) ofThe Hinduis an independent, full-time internal ombudsman. Readers and other complainants have a designated pointsperson to reach out to. As the newspaper’s RE, I not only examine all the complaints that come to us but also effect course correction if the paper errs. The Organization of News Ombudsmen and Standards Editors has spelled out the responsibility in unambiguous terms: “promote the values of accuracy, fairness and balance in news reporting for the public good... assist media organizations to provide mechanisms to ensure they remain accountable to consumers of their news...” Many studies reveal that having an internal mechanism often helps news media organisations to improve transparency and develop trust with their audience.
The latest rigorous study about media regulation happened in South Africa. The South African National Editors’ Forum (Sanef) commissioned a panel, headed by retired judge Kathleen Satchwell, to conduct an inquiry into the ethical challenges facing South African journalism. They commissioned this study because “when humanity is crying for facts, truth-telling, fair reporting and accountability, sometimes ethical journalism seems to be on the ropes.” The panel’s recommendation rightly observed that the statute of ombudsmen would become effective and beneficial to both the news platform and the industry in general only when “news managers heed their rulings.”
Unless the news-consuming public demands for an independent, internal ombudsman from outlets from which they receive news, the ethical conundrum will continue to haunt us. We have to remember that the legal route rarely addresses the importance of a toxic-free information ecology. A programme, ‘Bindas Bol-UPSC Jihad’, by Sudarshan TV was found offensive by almost everyone — from the Information and Broadcasting Ministry to the Supreme Court. But that did not prevent the spread of venom and vitriol in our public sphere.
On January 24, we celebrated the third edition of the International Day of Education, a day proclaimed by the United Nations General Assembly to honour education and its value to humanity and sustainable development. This day provides an opportunity to discuss the importance of education for citizens around the world, and to find ways to advocate for inclusive quality education.
Our theme for 2021, ‘Recover and Revitalize Education for the COVID-19 Generation’, places an emphasis on the way the pandemic has negatively affected learning outcomes for students globally and how we should innovate and combine resources to invest more in education.
About 1.6 billion students from some 190 countries were affected by the shutdown of schools caused by COVID-19, reversing years of progress in education. In India, more than 1.5 million school closures affected about 286 million schoolchildren. This added to the six million girls and boys who were already out of school prior to the crisis.
According to UNESCO estimates, schools worldwide were closed for an average of three and a half months since the onset of the pandemic. This figure rises to more than five months when localised school closures are taken into account.
Because of dire fiscal challenges and the overwhelming need to prioritise public health and social safety spending, global education financing has been significantly reduced. UNESCO estimates that of the $11.8 trillion global COVID-19 fiscal response, a mere 0.78% (or $91 billion) was allocated to education, with $73 billion spent in high-income countries.
Yet, the governments of South Asia have made some real progress towards protecting education funding. On average, it is estimated that South Asia allocated 0.85% of its fiscal package to education, compared to 0.73% for Europe and North America and 0.69% for Latin America and the Caribbean.
These shifts in public expenditures were mainly driven by Information and Communication Technology measures to support the delivery of education through a mix of radio, television, and mobile technology, as well as the home delivery of printed learning materials for the most vulnerable students who are excluded from technology.
In India, inspired by the release of the National Education Policy (NEP), the Education Ministry has made significant efforts to develop courses to reach all learners via the Internet and the airwaves. The introduction of the NEP and the counter-effects of the pandemic have in fact provided a groundswell of change on which true reform is riding.
Still, much more needs to be done as remote learning remains out of reach for more than 500 million students globally. As we continue to struggle through this volatile situation, it is more than ever our duty to ensure that learning never stops. To highlight the remaining challenges, UNESCO is releasing new global figures now, one year into the COVID-19 pandemic, which show that over 800 million students, or more than half the world’s student population, still face significant disruptions to their education, ranging from full school closures to reduced or part-time academic schedules.
A clarion call
The learning crisis brought about by the pandemic therefore represents a clarion call to governments, development partners and businesses to increase funding and make education systems more resilient, inclusive, flexible, and sustainable.
Now is the time to step up collaboration and international solidarity and place education at the centre of the recovery and the transformation towards more inclusive, safe, and sustainable societies. The pandemic has been devastating but we can also see it as an opportunity to rededicate ourselves to a big push for education across South Asia.
Eric Falt is the Director and Representative of the UNESCO New Delhi cluster office covering Bangladesh, Bhutan, India, the Maldives, Nepal and Sri Lanka
The tragic death of four fishermen from Tamil Nadu — one of them a Sri Lankan Tamil refugee living in India — allegedly when the Sri Lankan Navy was about to arrest them last week, is yet another instance of the unresolved fisheries conflict in the Palk Bay taking an unacceptable toll of lives. While fishermen in Tamil Nadu say the four were killed in an attack by the Sri Lankan Navy, the latter maintains that they died when their trawler collided with a naval vessel while trying to avoid being apprehended. India has lodged a strong protest with the Sri Lankan authorities, who have set up a committee to find a permanent solution to the incursions by Indian fishermen. It was less than a month ago that the two countries resumed discussions through their Joint Working Group on fisheries after a three-year gap. India sought the early release of fishermen arrested in Sri Lankan waters, as well as the boats in Sri Lankan custody. Sri Lanka underscored the need to curb the illegal fishing, which adversely affects the livelihood of its war-affected fishermen. When the two sides decided to create a joint working group some years ago, they had agreed that there would be no violence or loss of life in the handling of the fishermen and that a hotline would be established between the respective Coast Guards. It is unfortunate that the hotline is yet to be operationalised, and deaths continue to occur.
The humanitarian approach that has been expected to be the cornerstone of the approach to this conflict has not always been discernible. The plan to wean away Tamil Nadu fishermen from the tendency to exploit the remaining fishery resources on the Sri Lankan side by replacing their trawlers with deep sea fishing vessels has not really taken off. Attempts to forge a negotiated settlement through direct talks involving fishermen from both sides have also reached a stalemate. Sri Lanka favours joint patrolling by both countries, and a ban on unsustainable fishing practices by Tamil Nadu fishermen — such as bottom trawling — but the latter want a lengthy phase-out period. Political leaders in Tamil Nadu rarely acknowledge that the State’s fishermen contribute immensely to the problem by crossing territorial waters. Nor is there sufficient recognition that the incursion into Sri Lankan waters is driven by trawler owners who force their poor employees to do so, who then get killed or arrested, leading to the festering conflict. So far there has not been enough political resolve to end this conflict. A comprehensive solution, one that would severely curtail unauthorised fishing and help in an orderly sharing of and sustainable use of resources by fishermen from both sides, is long overdue.
The RBI has proposed a significant shift in its regulatory approach towards India’s non-banking financial companies (NBFCs), from a general approach of light touch regulation to one that monitors larger players almost as closely as it does banks. If implemented, this could be the biggest overhaul of the regulatory framework for such finance companies (or shadow banks) in over two decades. After multitudes of investors were left high and dry as CRB group firms reneged on high-interest fixed deposits in 1997, Parliament bestowed greater powers over such firms to the central bank to fix the mess. The trigger now is similar though the scale of the problem has changed. The size of NBFC balance sheets is now more than a quarter of that of banks’ balance sheets, from just about 12% in 2010. In absolute terms, their balance sheets have more than doubled, from Rs. 20.7-lakh crore in 2015 to Rs. 49.2-lakh crore in 2020. While this growth is a reflection of how lighter regulations have given them the flexibility to meet a range of financing needs, from home loans to micro-finance and large infrastructure projects, it also manifested into a systemic risk. And that risk was apparent when one of the largest infrastructure investment-focused NBFC players, IL&FS, unravelled in 2018, with its payment defaults catalysing a crisis for the entire sector. The collateral damage meant NBFCs could not raise funds easily, and faced liquidity pressures that escalated to solvency concerns in some instances.
The descent of one such player, Dewan Housing Finance Corporation Limited (DHFL), began around the same time — its creditors approved a resolution plan for the firm last week. The RBI’s proposed regulatory reaction to such large NBFC failures that have had a systemic impact on the sector, could not have come sooner. It has sought to strike a balance between the need to be nimble and mitigate systemic risks, with a four-tiered regulatory structure. This entails a largelylaissez-faireapproach for smaller NBFCs, plugging some of the arbitrages available to mid-sized NBFCsvis-à-visbanks, and imposing tougher ‘bank-like’ capitalisation, governance and monitoring norms for the largest players and those which could pose a systemic risk due to the nature of their operations. A top tier has been envisaged with even more scrutiny, but the RBI wants to ideally use this approach only when a certain large player poses ‘extreme risks’. Given the banking sector’s own woes over the past two years (PMC Bank, Yes Bank, Lakshmi Vilas Bank), a holistic reboot of the oversight mechanism for NBFCs and banks is critical to retain confidence and maintain financial stability which central bank Governor Shaktikanta Das has termed a ‘public good’. It is hoped that the blueprint for the regulation of NBFCs which can lend for activities banks often do not support, be it micro-loans or infrastructure projects, is formalised soon. This would ensure the fledgling economic recovery is not hampered by funding constraints.
Bombay, January 24: A mass meeting organised by the Central Khilafat Committee was held last night for the purpose of appealing to the people of Bombay not to participate in the functions connected with the Duke of Connaught’s visit. Over fifteen thousand people attended. Mian Mahomed Chotani presided. A resolution moved by Mr. Yakab Hasan to the above effect was carried. Mr. M. Pickthall then moved a resolution condemning the action of the Bombay Corporation in having decided to give an address of welcome to the Duke. As the Corporation did not represent the true sentiments of the citizens it should forthwith rectify the error. Mr. Pickthall said if the Duke came as a messenger of the King-Emperor to hear the grievances of Indian people and take their messages to the King, he would have been most welcome. Two Hindus also supported the resolution. The audience then stood up and took an oath that they would abstain from any function connected with the Duke’s visit to Bombay.
The Government of India to-day [January 24] ordered the expulsion of Mr. Zafar Iqbal Rathod, First Secretary of the Pakistan High Commission, here [New Delhi] for active involvement in organising and directing the underground ‘Al Fatah’ organisation in Jammu and Kashmir, it was officially announced. Mr. Rathod has been declared persona non grata and ordered to leave India within 48 hours. The order expelling him was handed over to Mr. Mehdi Masood, Counsellor of the Pakistan High Commission, by Mr. A. K. Ray, Joint Secretary External Affairs Ministry, this morning. The Government of India’s note said, “As a result of investigations into certain events in the State of Jammu and Kashmir, it has been established that Mr. Zafar Iqbal Rathod, First Secretary in the Pakistan High Commission, has been actively involved in organising and directing the activities of an underground illegal organisation named ‘Al Fatah’ in Jammu and Kashmir which has been engaged in sabotage, espionage and other violent and unlawful activities. The note further said: “The conduct of Mr. Rathod has thus been in total violation of the norms of behaviour and activities of members of a diplomatic mission.”