Governance Today September 2015

Gnawing away from inside p.24 I DNA Bill: A threat to privacy p.55

SEPTEMBER 2015 VOL. - 01 ISSUE - 12 RNI NO: UPENG/2014/62662 www.governancetoday.co.in

60

OPERATIONAL EFFICIENCY

EVOLVING REGULATIONS

VALUE ADDED SERVICES

FINANCIAL INCLUSION

CUSTOMER SATISFACTION

TECHNOLOGY

INDIAN BANKS: NEGOTIATING NEW PARADIGM

Editor-in-Chief Ajit Sinha Editor Anand Mishra Senior Copy Editor Ramesh K Raja Correspondent Praveen Raman, Ritika Bisht, Sagarika Ranjan Guest Writers & Contributors Raj Bhushan, Dharamsing Teron, Ritwajit Das, Sumitra Goenka Graphic Designer Girdhar Chandra Fuloria, Sarvesh Dixit Web Architect Farhan Khan CORPORATE OFFICE Strategy Head Ajay Kumar VP Sales Gautam Navin VP Strategic Alliance & Branding Salil Dhar SALES & MARKETING (CORP) Anupam Gupta, Shubham Gupta, Anjana Yadav sales@governancetoday.co.in I 07840086703 GOVERNMENT ALLIANCE Vaibhav Jaiswal I 07840086705 ADVERTISEMENT Stuti Bhushan I 09999371606 Karamjeet Singh I 09990098732 Abhijeet Srivastava I 09990098572 ACCOUNTS EXECUTIVE Yogesh Chikara FOR SUBSCRIPTION CONTACT subscription@governancetoday.co.in ADVISORY BOARD Terry Culver Associate Dean, SIPA, University of Columbia Vinit Goenka National Co-Convener, IT Cell, BJP Amod Kanth General Secretary Prayas JAC Society Pratap Mohanty Former Dy Educational Advisor, MHRD, GOI Ranjit Walia Managing Counsel Walia & Co. Published By Ajit Kumar Sinha 713, 3BA - Tower No. - 4, River Heights, Raj Nagar Extn - Ghaziabad Uttar Pradesh-201003 Printed & Published by Ajit Kumar Sinha on behalf of Odyssey Infomedia Pvt. Ltd. Printed at Rama Offset Printers A-43, Sector - 10, Noida, UP - 201301 Editor-In-Chief: Ajit Kumar Sinha @ All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, and mechanical, including

4 I September 2015

Indian banks: Negotiating the new paradigm FOR KAUSHIK Kumar, the last couple of years have been unlike the previous decade or so.

Working in a semi urban branch in Bihar as a Branch Manager of one of the largest banks of the country, he is facing a dilemma. On one hand, he is pestered by the higher ups to increase business, which includes pushing more loans to priority sectors like agriculture and small businesses, and on the other hand, the fear of more loans going bad forces him to be extra cautious. Over the last few years, poor business sentiments have slowed the business decelerating demand for new loans.

He hopes the slow turnaround results in improvement in credit off the tale and improved repayment profile which would reduce his NPA book. Kaushik’s counterpart in a posh South Mumbai branch of the same bank is having another problem; he is losing customers to foreign banks because they offer a larger spectrum of services that includes house search and investment advisory. The situation of these two gentlemen pretty much sums up the predicament of the Indian banking industry today.

Banking in India has a rich history. Over last more than a century, it has been known for its conservatism, tradition and trust. It is because of these guiding values that Indian banks have rarely faced a run by depositors and investors, have gone down sinking public money or have speculated on risky assets to the level of wiping out networth... www.governancetoday.co.in

SMALL TICKET PAYMENTS WILL SEE A MAJOR SHIFT TOWARDS ELECTRONIC PAYMENTS

42 28 22

NEW KIDS ON THE BLOCK

Usha Menon General Manager IT, Central Bank of India

24 30

GNAWING AWAY FROM INSIDE “CONNECTIVITY AND BANDWIDTH KEYS TO CASHLESS TRANSACTIONS”: MARSHAL CORREIA

32

SERVING THE BOTTOM OF PYRAMID 58

35

ON SLIPPERY GROUND?

42 41

GEOTHERMAL ENERGY CAN CONTRIBUTE TO RENEWABLE ENERGY INITIATIVE OF INDIA

37

45

Thórir Ibsen Ambassador of Iceland to India

49

51

55

57 62

WOMEN’S SAFETY IS OUR TOPMOST PRIORITY Swati Maliwal Chairperson, DCW

59

UCBS DRUDGING TOWARDS OBLIVION ONE BIG STEP IN RIGHT DIRECTION NO LENIENCY IN RAPE CASES PRESERVING HINDU KUSH ECO ZONE A THREAT TO PRIVACY WOMEN ENTREPRENEURS: A DIRE NEED FOR INDIA’S DEVELOPMENT SKILLS HANG FIRE FOR ALPHABETS THEY REQUIRE

66

MARCHING TOWARDS PROGRESS 68

“TIME FOR A NATIONAL PROGRAM TO CURB DECLINING PRACTICE OF BREASTFEEDING”: DR. ARUN GUPTA

www.governancetoday.co.in

September 2015 I

5

Editorial

Focus shifts to the bottom of the pyramid A COUPLE of weeks ago, RBI granted in principle approval to eleven players to launch Payment banks. The list included who’s who of corporate biggies. The RBI also promised to roll out Small banks shortly.

While Payment banks will primarily be vehicles of making electronic payment and fund transfer besides raising deposits, Small banks will offer complete banking services in a limited area of operation. Coupled with the Jan Dhan Yojana, these entities have the capacity to completely revolutionize the Indian banking sector.

If we look at the overall tone and tenor of the latest discourse about banking sector, some broad themes emerge. Most prominent of these is the focus on the bottom of pyramid. Not only is there an urgent focus on bringing the large number of unbanked people in banking umbrella, but also there is a clear intent to use banking channel to push social benefits.

This is a welcome sign because the earlier subsidy regime had completely lost credibility. Further, garnering money from the rural areas to help rural entrepreneurship is way more sensible idea than coaxing banks to lend to unprofitable ventures in the name of priority sector lending. This is a much realistic and better way to achieve financial inclusion. Therefore, there is a sense of hope and optimism as regards these banks.

The backbone on which this entire edifice of planning rests is the rapid and disruptive rise of technology that allows banks to offer services on handheld devices such as mobile phones and tablets. The basic problem of setting up traditional branches in rural areas was the cost; information and communication technology has removed that constraint. Secondly, the ability of to make payment and remit money in cashless mode, via payment gateways is perhaps the most useful technological development of last decade.

Not only is it allowing migrant laborers to transfer money easily and reliably, but it is also stifling the Shylocks who were pocketing fat commissions in offering these services to rural folks.

Technology is however, not serving rural banking alone. It is also radically altering the business models of traditional banks who are finding operating environment changing very fast. Not only have customer and investor become very fickle minded, the services have also become tech oriented. In order to compete in this environment, banks need to go beyond core banking to please customers. Thankfully, technology has also endowed banks with the tools such as big data analytics and customer relationship management that allow collection of huge lots of data and its analysis to better understand consumer behavior, among other things.

But current tech based change of banking paradigm comes with its challenges. The security of data is the most prominent. As personal data of customers is on servers and future, will move on Cloud, there are greater chances of data theft and manipulation. Second, in our country, the most fundamental tool of the tech revolution, the internet, is very unreliable besides being very costly. Third, government and the RBI need to be ahead of the curve in order to ensure an orderly and efficient evolution of this new banking industry to emerge so that the customer is not duped.

In totality, coming times are going to be very exciting for banking and financial services sector in the country. Hopefully, the services would actually reach final targeted customer and makes a positive impact on his life.

Best regards,

Ajit Sinha Editor-in-Chief www.governancetoday.co.in

September 2015 I

7

THUS THEY SPOKE In an environment where there is a relative global slowdown, India seems to be doing reasonably well. We finished last year with 7.3% growth rate, will probably finish this year with a slightly better growth rate than that and next year hopefully will be a little better.

Arun Jaitley Union Finance Minister You (AAP MLAs) are not agitating leaders now, but elected leaders...

You have to understand that there is a difference between addressing a gathering at a demonstration and speaking in the Assembly.

Sumitra Mahajan Speaker, Lok Sabha

We told the PM that for the development of Delhi and benefit of its people, the Centre and the state government should work in tandem. It is important that the political ideologies of the two governments should not interfere with the work.

Arvind Kejriwal Chief Minister, Delhi Having seen how (management company) IOS has built MC Mary Kom as a big brand in the industry, I was convinced that I should allow them to manage my portfolio too. That was the major reason for deciding to join hands with IOS. Saina Nehwal Badminton champion

I feel so honoured to have been a part of this movie. It’s a great gesture from the government and I personally thank them to have bestowed such an honour on a man like Dashrath-ji who single handedly carved the future of his village. I am lucky I got to play a part of this man who is a true hero.

Nawazuddin Siddiqui Bollywood actor I am quite hopeful that the issue (one rank one pension) be resolved soon but request the ex-servicemen to wait and watch peacefully rather taking a shortcuts through mass protest.

Gen (retd) VK Singh MoS, External Affairs

8 I September 2015

www.governancetoday.co.in

GOVERNANCE WATCH

Indian mobile services market to reach $ 21.4 bn in 2015 The spending on mobile services in India will reach $ 21.4 billion this year, a report by American market research giant Gartner has said. Spending on mobile services will be driven by data services that is expected to grow at 15 per cent to reach $ 6.5 million in 2015, the report added. “A large chunk of this growth will be driven by the increasing use of cellular services on datacentric devices, such as tablets and notebooks, through either embedded cellular modems or USB sticks,” it said.

The report also added that mobile connections in India will grow to 880 million in 2015, an increase of 5 per cent from 837 million connections in 2014.Gartner said newer and faster networks, rise in number of users of these networks, and more affordable smartphones will help to increase spending on data services.

Jaitley launches India Aspiration Fund to promote startups Union Finance Minister Arun Jaitley has launched the India Aspiration Fund (IAF) with the aim to promote startup culture in the country. The IAF has been set up as fund of funds under the Small Industries Development Bank of India (SIDBI). “India is witnessing a startup revolution and to harness the potential of India’s innovators and entrepreneurs a vibrant financial ecosystem is essential. IAF will play a vital role in this financial ecosystem,” he said. An initial corpus of Rs 400 crore has been already allocated to various venture funds under it. The IAF will be managed by an investment committee. Jaitley also launched a new scheme called SIDBI Make in India Loan for Small Enterprises (SMILE) with an allocation of Rs 10,000 crore.

Moody’s cuts India’s growth forecast for 2015-16 Global rating agency Moody’s has trimmed India’s growth forecast for the current fiscal from 7.5 per cent to 7 per cent. Its report ‘Global Macro Outlook for 201516’ stated, “We have revised our GDP growth forecast down to around 7 per cent in light of a drier-than-average monsoon although rainfall was not as low as feared at the start of the season.” It also stated, “One main risk to our forecast is the pace of reforms slows significantly as consensus behind the need for reforms weakens once the least controversial aspects of the government’s plan have been implemented.” While the IMF has predicted India’s growth to touch 7.5 per cent in the current fiscal, the finance ministry has pegged it in the range of 8-8.5 per cent. Moody’s, however, retained its India growth forecast of 7.5 per cent for 2016-17.

www.governancetoday.co.in

September 2015 I

9

GOVERNANCE WATCH

PM gifts huge package to poll-bound Bihar Prime Minister Narendra Modi has announced a fresh financial package of Rs 1.25 lakh crore in addition to the Rs 40,657 crore for the existing projects for poll-bound Bihar. The PM said he had promised to give away a package of Rs 50,000 crore to Bihar in the run-up to the Lok Sabha elections. “But after coming to power, I realised that the amount was not enough for the developmental needs of Bihar,” he said. “I, therefore, have decided to provide a package of Rs 1.25 lakh crore for Bihar (and) change its face and fortunes.” The Prime Minister, who addressed the rally after launching several road, bridge and skill development projects worth Rs 9,700 crore, said that his government would also release the amount of Rs 40,657 crore which had been earmarked for the old projects in the state.

AP Government brings e-POS to check PDS leakage In a move to bring efficiency to the state’s public distribution system (PDS), the Andhra Pradesh government has introduced electronic Point of Sale or e-POS model which is currently being implemented in all its 13 districts. While essential foodgrain, sugar and kerosene are being distributed across the state via e-POSequipped PDS, the Krishna district has gone a step further and become the first in the country to digitise the database of ration cards and complete the seeding of Aadhaar numbers into it. Officials said that Aadhaar-enabled PDS supported with e-PoS devices would soon lead to automation of all 2,155 fair price shops in the district.

The entire supply chain from the Food Corporation of India to mandal levels has been completely linked.

When Aadhaar-enabled PDS with e-POS devices was implemented in 511 fair price shops in the district, we could save an estimated R1.91 crore a month.

30,000-40,000 households giving up LPG subsidy daily With a little assistance from state-run fuel retailers, PM Narendra Modi’s magic appears to be working well among cooking gas consumers. Between 30,000 and 40,000 households are giving up the LPG subsidy daily in response to a countrywide door-to-door campaign launched by the oil marketers to capitalize on the PM’s call to ‘Give It Up’. The result is nothing but magical in a country used to government freebies. The number of households surrendering the subsidy has topped the 20 lakh mentioned in Modi’s Independence Day speech. Within a day of the speech, the number rose by more than a lakh to 21.26 lakh and has further gone up to 22.57 lakh, oil ministry data shows. On August 3, Union Oil Minister Dharmendra Pradhan told the Parliament that nearly 13.87 lakh LPG consumers had given up subsidy as of July 28.

10 I September 2015

www.governancetoday.co.in

GOVERNANCE WATCH

Kerala becomes the first ‘complete digital state’ Kerala has become the first state in the country to be declared as a ‘complete digital state’. CM Oommen Chandy came up with the announcement during the Independence Day celebration. “The implementation of e-district programmes and linking of Aadhaar and bank accounts have laid a strong foundation for ‘Digital Kerala’. I am proud to declare the state as the complete digital state, based on these indicators,” said Chandy.

He added, “The state has achieved 100 per cent mobile density, 75 per cent e-literacy and broadband connection upto panchayat level.” The state would also launch an innovative programme in the name of Dr APJ Kalam to enable the youth translate their innovative ideas into successful business ventures. The programme aims at creating at least one enterprise from state universities every year based on innovative ideas.

Govt may issue fresh advisory for TV on terror coverage In a bid to rein in violations during coverage of terror operations, the Centre is likely to issue another advisory to news channels asking them not to disclose operational details. The Information and Broadcasting Ministry had amended the Cable TV Network Rules in March to ban coverage of anti-terror operations and restrict them to official briefings. During the recent Gurdaspur gun battle, the ministry issued an advisory to channels asking to refrain from terror operations coverage. Interestingly, the Broadcast Editors Association (BEA) has opposed the new amendments saying that it limited media coverage.

“While the BEA does not believe in live visual coverage of terror incidents, it does believe that media coverage can’t be restricted to official briefings. However, there are self-regulatory guidelines regarding coverage of terror incidents which this body strictly adheres to,” BEA said in a statement, according to media reports.

20 major iron ore mines to be auctioned India will auction about 20 major iron ore mines this year in its first such sale ever as it looks to revive its corruptiontainted mining industry. India’s mining sector has been mired in controversy over illegal allocation of resources.

Once the world’s third-biggest iron ore exporter, the country now imports the steelmaking ingredient due to a court-led crackdown on illegal mining. The government hopes auctions will help curb wrongdoing. While it is unlikely to lead to an immediate boost in iron ore output at a time when there is a global glut, mine sales will bring India closer to its target of tripling its steel capacity to 300 million tonnes by 2025 and relying less on ore imports. Most of the states are in the midst of carrying out their pre-auction activities and hopefully by the end of October and November onwards they will start auctions. www.governancetoday.co.in

September 2015 I

11

GOVERNANCE WATCH

MoU between NCCBM & NTPC NTPC Ltd and National Council for Cement & Building Materials, (NCCBM), Ballabgarh has signed an Memorandum of Understanding (MoU) for condition assessment of civil structures in NTPC power projects & stations spread across different parts of the country, in New Delhi. The NTPC has an installed capacity of 45548 MW through 18 coal based, 7 gas based, 8 solar renewable, one Hydro and 7 Joint Venture power stations. The MOU was signed by R K Srivastava, ED (NETRA) NTPC Ltd and V V Arora, Joint Director & Head NCCBM in presence of A K Jha, Director (Tech) NTPC Ltd and A Pahuja , Director General , NCCBM and senior officials. NCCBM would provide recommendations for repair and remedial for restoration and rehabilitation of the aging structures to ensure the structural integrity, restoration of strength and health of RCC.

NTPC bags ASSOCHAM award in corporate governance The NTPC Limited has been awarded with “ASSOCHAM CORPORATE GOVERNANCE EXCELLENCE AWARD in “Listed PSU Category -2014” in recognition for the outstanding corporate governance practice undertaken by the company. The award was presented

by Union power minister Piyush Goyal at a function held in New Delhi. K Biswal, Director (Finance), NTPC received the award on behalf of NTPC. The NTPC was selected for the award after a detailed evaluation process done by a jury headed by Shri V N Khare, former Chief Justice of India. At the award ceremony, the union minister said that he is looking at NTPC Limited as the world’s most valuable energy company four years from now. “I am going to hold to NTPC to this when I am continuously telling them you have to be the world’s most valuable power company in the next four years.”

I J Kapoor takes over as technical member APTEL Inder Jit Kapoor took oath as technical member of Appellate Tribunal for Electricity (APTEL). Before joining the tribunal, Kapoor was serving as director (commercial), on the board of NTPC Limited for about 7 years. He has made professional contribution in overall management functions including the fields of commercial, engineering, operations, contracts & materials management, consultancy and project management. His professional experience include engineering, commercial and market orientation, legal and financial soundness, strategic management and business leadership. The post in APTEL was lying vacant since Rakesh Nath demitted the office on 20th May 2015. Kapoor is a Mechanical engineering graduate from Delhi College of Engineering and has done MBA in marketing. He joined NTPC in 1978 was the first trainee to be on the Board of Directors of the company.

12 I September 2015

www.governancetoday.co.in

GLOBAL WATCH

Ranil Wickremesinghe returns as Sri Lanka PM In a closely watched parliamentary election, Ranil Wickremesinghe emerged victorious in the parliamentary election of the emerald island, upsetting chances of former president Mahinda Rajpaksa of reentering the power corridors. In a 225 member house, Wickremesinghe’s United National Party won 106 seats against 95 seats won

by United People’s Freedom Alliance of former president Rajapaksa. This election had assumed importance in wake of the fact President Maithripala Sirisena had vowed not to appoint Rajapaksa prime minister even if he won a majority. This is the fourth stint of Wickremesinghe at the PM of the country. He is considered a dynamic leader with a balanced foreign policy orientation and is known to be inclined to have equally good relations with major regional and global powers. This is much against the previous dispensation of Rajapaksa who was considered very close to China.

Indonesia will promote Yuan In a move that could offer some relief to Chinese authorities reeling under bad economic data and financial market collapse, Indonesia’s Finance Minister Bambang Brodjonegoro has said in an interview that the country will encourage direct transactions with the Yuan and Rupiah. The move also supports China’s effort to turn the Yuan into a global reserve currency. China is Indonesia’s biggest trading partner, although weak commodity prices have dampened Indonesian exports in recent times.

Brodjonegoro also said that the government of Indonesia may issue a Yuan-denominated bond next year, a first for Indonesia. The recent decision of China to devalue its currency has severely impacted most Southeast Asian currencies, including Rupiah, which has slid past 14,000 to the dollar, its weakest since the Asian financial crisis of the late 1990s.

Draft constitution spooks Nepalese business class After about a decade of discussion and debate, the draft constitution of the Himalayan nation was finally submitted on Aug 23rd. However, the business community of the country is worried that the draft if accepted, would jeopardize its interests. Business leaders fear that the constitution has a distinctive communist or socialist bent.

They point to the preamble of the draft constitution, which expresses a “commitment to create the foundations of socialism,” and to an article which defines the state of Nepal as being “socialism oriented.” Many fear that this could be an indication that the country could veer towards a state controlled economy, which would seriously impact the investment that is so much required in wake of the devastating earthquake that hit the nation last April. Nepal’s politics has been dominated by leftist parties since the monarchy’s fall in 2006. www.governancetoday.co.in

September 2015 I

13

COVER STORY

Indian banks: Negotiating the new paradigm Banks need to alter there business models in wake of disruptive technologies, changing customer requirements and evolving operating environment

ATMs dotting the urban and semi urban areas define the changing face of Indian banking sector

Anand Mishra FOR KAUSHIK Kumar, the last couple of years have been unlike the previous decade or so.

Working in a semi urban branch in Bihar as a Branch Manager of one of the largest banks of the country, he is facing a dilemma. On one hand, he is pestered by the higher ups to increase business, which includes pushing more loans to priority sectors like agriculture and small businesses, and on the other hand, the fear of more loans going bad forces him to be extra cautious. Over the last few years, poor business sentiments have slowed the business decelerating demand for new loans. He hopes 14 I September 2015

the slow turnaround results in improvement in credit off the tale and improved repayment profile which would reduce his NPA book.

Kaushik’s counterpart in a posh South Mumbai branch of the same bank is having another problem; he is losing customers to foreign banks because they offer a larger spectrum of services that includes house search and investment advisory. The situation of these two gentlemen pretty much sums up the predicament of the Indian banking industry today.

Banking in India has a rich history. Over last more than a century, it has been known for its conservatism, tradition and trust. It is because of these guiding values that

Indian banks have rarely faced a run by depositors and investors, have gone down sinking public money or have speculated on risky assets to the level of wiping out networth, which have all been the part and parcel of banking institutions in many developed and developing countries over last thirty years or so. A pragmatic and conservative Reserve Bank of India has overseen this orderly development. All weak banks have been efficiently amalgamated with or taken over by other banks without any erosion of shareholders’ and depositors’ wealth. The banking system as a whole has been mostly very successful in intermediating between creditors and debtors and www.governancetoday.co.in

in staying true to the confidence of all stakeholders. The changing times, however, require a different set of capabilities and expertise in not only managing money, but also in absorbing new technologies and scaling up on the value chain to retain customers.

As is the case with all other business sectors, banking also faces new challenges in a changing business paradigm and can cash on opportunities that are made available by the new economy which is faster, more faceless and more cashless in nature. Customers in this new world are fickle minded, more demanding and want everything in one place. Money in the new world is highly mobile, investments harder to retain and returns more volatile. As such, banking in this new complex environment requires evolved regulation, intelligent risk management and more integrated business models. This is a new paradigm in which everything changes very fast and only those survive who have stronger balance sheets, better product portfolio, higher profitability and lower cost.

Evolving customer and business environment The customer of today is not same or similar to what he was even a decade ago. Gone are the days when he waited patiently in queue to deposit money or get a bank draft made. A large part of the routine banking transactions are today done at ubiquitous ATMs. So, customers are visiting banks more for value added services such as buying insurance and investing in mutual funds.

A private sector branch manager in a posh NCR locality says three out of four customers are stepping in branch looking for non traditional banking products.

In short, customers are looking for as many types of financial services as possible under one roof, many of which are not banking services in the traditional sense. This calls for a changed product portfolio from banks. Banks are responding by adding more services to their www.governancetoday.co.in

RaghuramRajan Governer, RBI

At the time of taking over as RBI Governor, Rajan had promised a “Dramatic remaking” of Indian banking sector. RBI has announced many steps to revamp the sector since then, encluding new holding structure of banks portfolio to keep prevent existing customers from deserting and keep attracting new customers. As such, it is customary to find all banks paddling broadly similar platter of services ranging from housing loans and credit cards to personal loans and vehicle loans, insurance and investments in equities, mutual funds and even portfolio services for higher networth clients.

This universal banking platform requires deeper pockets, more diverse human capital and most importantly, effective management of risks arising out each business vertical. In a nutshell, changing customer requirements have forced banks to adopt new business models

that optimize fund and fee based businesses and interest and noninterest incomes. While in a high interest rate regime, interest based income has an upper hand, in a declining or stagnant market, it is the non interest based income that differentiates winners from the also ran. And this diversification is working well; research shows that increasing diversification in income streams has led to greater profitability in Indian banks. Also, it has been found that private sector banks, which are more focused on urban business, have been able to increase non interest based income more when compared with public sector banks (PSBs) that have significant presence in semi urban and rural India where it is much tougher to push up fee based businesses. In urban centers, banks are increasingly pooling up commissions, remittances, commodity based loans, asset management and wealth management and treasury products, etc. as important income streams and this trend is likely to gather momentum. Moving forward, managing a healthy composition of income without assuming too much additional risk will be important for all types of banks as competition chips away margins in the lending business and interest rate cycles turn unpredictable.

At the time of taking over as RBI Governor, Rajan had promised a “Dramatic remaking” of Indian banking sector. RBI has announced many steps to revamp the sector since then To cater to the changed business requirement and newer competitive realities, the regulatory environment has also evolved.

Over the last few years, banking regulations have evolved which in effect have made the banking sector structurally more sound and evolution more orderly. At the time of taking over as the RBI Governor, Raghuram Rajan had expressed his intent to radically alter the Indian banking sector, and the flurry of steps that have been taken over the last couple years do indicate towards this transformation. Examples of September 2015 I

15

PAYMENTS BANKS What is expected out of them?

In a fundamental shake up to the banking sector, the impact of which would be fully felt after a couple of years, the RBI has given ‘in principle’ approval for payment banks to 11 entities. The list includes some of the biggest corporate names such as Reliance Industries, Aditya Birla Nuvo and Tech Mahindra, and also corporates in non financial business, like Airtel and Vodafone. Basically a stripped-down version of traditional banks, these Payment Banks are expected to bypass the traditional branch model and serve customers primarily through hand held devices like mobile phones and tablets.

These banks have been allowed to transfers and remittances through a mobile phone, raise deposits of upto Rs. 1 lakh, and pay interest on these balances just like a savings bank account, but have been barred from giving loans. They have also been allowed to offer automatic payments of bills, and purchases in cashless transactions.

Further, Payment Banks can transfer money directly to bank accounts at nominal cost and issue debit cards and ATM cards usable on ATM networks of all banks.

Targeted primarily to serve low-income households, small businesses and migrant laborers, the new system could revolutionize banking in the country. It is for the first time that banking licenses have been granted for specific banking activities instead of the full spectrum of banking services. These banks are expected to fill the gap that exists because of the inability of traditional banks to open up uneconomical branches in remote rural areas. On the contrary, Payment Banks would leverage the deep and increasing penetration of mobile phones which covers the entire length and breadth of the country. The rapid decline in prices of smartphone and tabs is also contributing to the rise of cashless transactions that Payment Banks could cash on. In totality, Payment Banks could emerge as a major pillar in the financial inclusion plan of the government. such changes include new holding structure for the banks, which stipulate a minimum of 25 per cent of branches in rural areas, to giving free hand to foreign banks to open branches wherever they choose to. It has also rationalized the foreign investment limits in banks to facilitate higher capital inflows and better risk management. These steps have also allowed for greater competition and improved service quality.

In order to foster greater financial inclusion, the RBI had mooted the idea of introducing Payment banks and Small banks.

16 I September 2015

The guidelines were issued in last November and the licenses for 11 payment banks have recently been given. The basic objective to set up such entities is to allow private participation in the domain of traditional banking and fill the void that is created by the non presence of banks in rural areas, which in turn allows inefficient and unethical players to exploit poor people.

Payment banks would promote financial inclusion by providing small savings accounts, payment and remittance services by enabling high volume-low value transactions in deposits and payments/

remittance services. Small banks on the other hand are supposed to provide a spectrum of basic banking products such as deposits and credit in a limited area of operation, thus bringing in hitherto un-served sections of the population in banking services fold. In all, the RBI is interested in ushering in greater competition among players while at the same time ensuring that banks are internally strong and well capitalized. On the other hand, there is a greater push to reach out to the maximum number of people at the bottom of the pyramid which would ensure that banks are well prepared to act as efficient conduits to facilitate the socioeconomic programs of government.

Basle III to weigh heavy on PSBs

India is among the nations that have accepted Basle III norms for capital adequacy and risk management. While this is going to be applicable for all banks, the impact is going to be felt most by state run banks which are already reeling under high levels of bad loans. Private and foreign banks, which have no social obligations and are largely confined to corporate loans, are relatively better placed.

Basle III norms have kicked in from April 2013 in a phased manner and are expected to be fully implemented

by March 31, 2019. These norms are essentially focused on strengthening the capital and liquidity profile of banks, which in effect would enable them to withstand systemic shocks when crises hit. While good quality of capital will ensure stable, long term sustenance, compliance with liquidity covers will increase the ability of banks to withstand short term economic and financial stress. Keeping with the norms, Liquidity Coverage Ratio (LCR) of 60 per cent has been introduced in Jan 2015 which would be ratcheted up to 100 per cent by 2019. But a higher LCR comes as a problem for banks. On one hand, they have to focus on quality deposits and on the other they will have to increase the proportion of high quality liquid assets. This could pull www.governancetoday.co.in

down profitability. To stave off this situation, some experts have suggested deep cuts in the overall SLR requirements which would free up more cash.

As for the Capital Adequacy Ratio (CAR), any bank’s buffer against current and future losses, against 9 per cent level in March 2015, it would go up to 11.5 per cent by March 2019. This increase in the required CAR is going to impact banks badly as it translates into a lower return on equity (ROE) because of a fall in leverage.

The situation of PSBs is worse as they are working hard on another front to rid themselves of the high NPAs. According to the Financial Stability Report of the RBI, PSBs are leading the decline in the CAR profile of Indian banking sector as a whole. The CAR for PSBs fell to 11.24 per cent as on March 31, 2015, from 11.4 per cent in the year-ago period. For the system as a whole, it went down from 13.01 per cent a year ago to 12.70 per cent at the end of March 2015.

CAR of differents segments of banks

PSBs have led the decline in capital adequacy ratio (CAR) of Indian banking sector

PSU banks account for twothirds of India’s banking system.

If they are hit by capital shortage, it would not be a good news for the manufacturing sector and the Make-in-India initiative of the government. In order to remain solvent to keep lending, these banks will need to increase their capital base. Also, there will be a fiscal burden, if majority shareholding has to be retained by the Indian government. According to CARE, till 2019, banks’ capitalization need could range from Rs1.5 to 1.8 lakh crores, assuming an average GDP and credit growth rate of 6 per cent and 16 per cent respectively.

A Fitch report pegged the capital requirement at $200 billion to continue growing at the current rate and still meet the Basel III norms.

Now the tricky part. The government feels banks could mobilize up to Rs 1.60 lakh crore from the capital market over the next four years. But if market opinion is anything to go by, investors don’t like PSBs because of their poor asset quality and lower profitability, which is reflected in their price to www.governancetoday.co.in

September 2015 I

17

AN ‘INDRADHANUSH’ FOR PSBs Realizing the critical role that public sector banks have to play in the ambitious financial plans of the government and in kickstarting industrial growth cycle, the government has introduced a seven point program for revitalizing PSBs. The components of the program are as follows: Capitalization of Banks: The government would pump in Rs 20,058 crore this financial year in 13 PSBs this year. An additional Rs 5,000 crore would be allocated based on efficiency criteria. SBI will get the highest Rs 5,511 Cr, followed by Bank of India at Rs 2,455 Cr, IDBI at Rs 2,229 Cr, PNB at Rs 1732 Cr and IOB at Rs 2009 Cr. Bank Board Bureau: The Bank Board Bureau, expected to start functioning from the next financial year, would house the government’s stake in PSBs. Planned as a panel of eminent professionals, the bureau will advise banks and act as a link with the government. It would be headed by the RBI governor.

Destressing Banks: To help banks tackle bad debts, a de-stressing plan has been chalked out. The government would try to get projects moving through expeditious approval and hand holding, taking over management control of equity infusion by promoters, rejigging the duty structure, pushing for flexibility in restructuring of existing loans. Major impacted sectors are steel, power, highways, power distribution utilities and sugar.

Empowerment: The government would ensure that there will be no interference from the government and banks will be encouraged to take their decision independently keeping the commercial interest of the bank in mind.

Fixing Accountability: A new framework of key performance indicators for state-run lenders is going to be set up. A robust grievance redressal mechanism will also be put in place for customers of banks as well as staff.

Appointments: Executives from the private sector have been hired to run state-owned banks.

Governance: The government has established the Gyan Sangam conclave, which is a platform for deliberations on how to improve the banking system.

earning (P/E) and price to book value (P/BV) ratios. That in essence means banks would have a really tough time raising money from the market. SBI, the largest public sector bank, commands valuations that are about fourth of private sector banking major HDFC Bank.

Most other PSBs command worse valuations.

18 I September 2015

Mounting bad debts

Bad debts or Non Performing Assets (NPAs) have become the Achilles heel of Indian banking sector. Banks, especially, the public sector ones are reeling under the unprofitable advances they had made in order to stave off an all out economic recession in the wake of the 2008 financial crisis. Things

have now come to a stage where the menace has started to impact the viability of the entire sector. As on March 2015, the levels of gross NPAs (GNPAs) and net NPAs (NNPAs) for the system have reached 4.45 per cent and 2.36 per cent for the system as a whole. Numbers are especially bad for PSBs; The Gross NPAs for PSBs as on March 2015 stood at 5.17 per cent, while the stressed assets ratio, defined as the ratio of Gross NPA plus Restructured Standard Advances to Gross Advances, stood at 13.2 per cent, about 2.3 per cent more than that for the system. The Global Financial Stability Report of the IMF paints an even scarier picture.

It says that 36.9 per cent of India’s total debt is at risk, among the highest in the emerging economies. Against this, the report mentioned that banks have a loss absorbing buffer of less than 8 per cent, among the lowest among comparable economies. Finance minister Arun Jaitley said recently that bad loans of state-run banks have reached “unacceptable” levels.

Such high level of risky and doubtful assets has important implication for the new business generation activities of the banks and requires careful analysis of options that can be adopted to improve the system. While RBI is trying to put in place mechanisms to detect stressed assets early in the loan life, through programs such as guidelines on Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalizing Distressed Assets in the Economy, Corrective Action Plan (CAP) and Sale of NPAs by Banks etc., the government is setting up mechanism to pump in money in these banks.

However, at the end of the day, it is the banks that have to do the real work of strengthening their systems.

Leveraging technology to improve and innovate This is where new age technologies and number crunching www.governancetoday.co.in

PM Modi addressing Gyan Sangam conclave earlier this year

methodologies could come handy.

The developments in computing and communication technology on one hand and business analytics on the other hand allow banks to do things they could not earlier. Not only technology renders physical interaction between banks and customers unnecessary, it also allows banks to gather enormous volumes of data in no time and process that data to derive information that can assist better decision making. In the banking industry, the business and data analytics have emerged as a major go-to tools to manage bad and risky debts.

Through improved data availability, banks can and must undertake ex–ante assessment of risk as against the ex–post analysis which is the current norm, especially in PSBs. Access to real time data also allows for early detection of stress in asset from information through different channels. But risk assessment and management is not the only operational arena in which technology could help.

It is allowing other existing and www.governancetoday.co.in

new banking services to improve and change. According to a leading private banker in Mumbai, his bank is spending as much on high-end data analytics and IT personals as on banking staff.

Payment management is an area that can be radically improved with technology. Even today, over 60 per cent of all payments in the country are being made in cash. However, as is evident from the rise of card and internet transactions, cashless payment are the future, a trend which has been strengthened by the Payment and Settlement Systems Act, 2007, which enabled the RBI to regulate, supervise and lay down policies involving payment and

settlement. Following this Act, RBI has encouraged e-payments in the banking sector. The emergence of PayPal, T-Mobile and Google Wallet at global level and Pay TM and Pay U Money in India show that the space for banks in many financial transactions is shrinking.

Banks would need to embrace and absorb such disruptive technologies in their business models in order to sustain. As Payment Banks become a reality, the trend towards digitally enabled transactions in small and micro payments space would be accentuated.

Moving forward, most of the banking service would migrate to online platform which means that

While new age private sector banks and foreign banks are investing heavily in technology, PSBs are lagging both in terms of application of technology and having the sufficient number of adequately trained manpower September 2015 I

19

Technology allows more effective financial inclusion

banks would need to have presence on the internet, allowing banking to be undertaken on handheld devices like mobile phones and tablets.

According to estimates, in the next ten years, as many as 250 million customers would access banking services over the mobile. Internet banking and customer care services together account for less than 10 per cent of banking services access in India against over 60 per cent in the US. Needless to say, the share of internet banking and customer care would rise sharply in years to come.

And to cater to this demand, banks, especially the state run banks need to start making serious investments in tech and human resources from today. Big Data and Customer Relation Management (CRM) are going to be huge business enablers in this transition.

That’s not all, if international banking is any indication, banks would also innovate to offer allied and value added services on anywhere anytime philosophy.

These may range from helping 20 I September 2015

customers locate the best shopping destination to informing customers about the actual price of a product instead of the listed price.

These trends indicate towards the evolution of a service environment in which banks would provide traditional banking as a core service, besides offering value added services by pooling host of other market related information and also offer advice, very often free of cost, based on customers’ interest as evidenced by prior financial transactions.

Technology has allowed banks to go much beyond their brief to serve customers.

In coming years, the ability to absorb the quantum leap in high end computing, communication and data management is what is going to decide who would wean away the maximum number of high value customers and high margin businesses. While new age private sector banks and foreign banks are investing heavily in technology, public sector banks are lagging both in terms of application of technology

and having the sufficient number of adequately trained manpower that can facilitate the transformation from a legacy banking system to a modern, agile and technologically sound banking platform. On good development is that all PSBs have moved onto the Core Banking Solution (CBS) platform and many have developed capabilities to offer online banking. But they must invest more to leverage technology for offering value added services on one hand and to do data mining and analytics on the other. The basic idea is to use data for effective decision making at various levels, including product customization, developing business models and delivery channels.

Even as traditional banking is about to take a huge stride by adopting technology to promote its existing business as well as add on to its services platter, the government is trying hard to push banking to hinterlands. Financial inclusion is the keyword that finds mention not only in government’s welfare www.governancetoday.co.in

UNIQUE BANKS SERVICES Garanti Bank, Turkey: Offers a free mobile app that uses GPS and Foursquare to tell customers about nearby stores with special offer, based on their past spending.

Commonwealth Bank, Australia: Offers a mobile app that helps home buyers by using augmented reality. By just pointing a smartphone camera and any house, all relevant information about the property, along with the estimated monthly mortgage and insurance payment can be fetched. The app covers more than 90 percent of all residential properties in the country.

Alior Bank, Poland: Provides its corporate clients through a single-bank foreign exchange trading platform that configure and manage FX rates that are sent to its FX platforms.

BBVA, Argentina: Makes available to its US customers information on the actual selling price of cars against list price by using TrueCar data, in order to sell its auto loan and auto insurance products.

This helps customers in price negotiation. programs, but also routinely in major banks’ annual reports and future plans. The RBI is chipping in with the creation of the Payment and Small banks with sole intention to bring in unbanked population in banking ambit.

A successful financial inclusion drive would allow people in rural areas to save/ remit/ receive money efficiently and avail cheaper loans. On the other hand, it would prevent leakages in subsidy programs of the government by allowing direct cash transfers, something which has already begun. The ambitious Jan Dhan Yojana of the government is also a solid foundation of the financial inclusion program and new types of

banking entities could act as major catalysts in this drive.

Banks, big or small, can leverage technology to better reach out to the rural masses in a cost efficient manner. The primary constraint in achieving significant financial inclusion has so far been the cost of servicing small value customers that have no credit and irregular income history. The combination of IT and mobile telephony, to a large extent, obviates the need for physical presence, thus allowing banks to circumvent the cost problem. Technologies such as Unstructured Supplementary Services Delivery (USSD), General packet radio service (GPRS), Wireless Application Protocol

The primary constraint in achieving significant financial inclusion in India has so far been the cost of servicing small value customers that have no credit and an have irregular income history www.governancetoday.co.in

(WAP), Subscriber Identity Module (SIM) - based application, and Near Field Communication (NFC) allow banks to offer services on hand held devices. In this regard, IT kiosks can act as a useful vehicle which could have cheque and cash deposit, internet banking as well as for noncash ATM transactions. Other tools such as mobile payments, biometric ATMs for semi or illiterate people, biometric hand held devices etc. can hugely increase banks’ ability to reach the rural customer and allow less educated people to undertake banking activities.

Banking industry stands at a crossroads today. Increased risk in the business environment, stricter regulatory norms, globally integrated markets, evolved customer requirements and emergence of disruptive technologies have made the traditional banking business models obsolete and ineffective. To stay profitable and competitive in a changed market, banks need to mutate into financial supermarkets having a complete range of banking and financial services on one hand and exotic and innovative value added services on the other. And competition in today’s market comes from not only other banks, but also from non-banking tech companies that can impinge on business segments. But banks are not the only ones that need to evolve. Government and the RBI have to do some work as well.

They have to provide regulatory support and put in place systems that can allow efficient competition and orderly sectoral development.

The government also has the responsibility to keep PSBs healthy as they have the lion’s share in the industry and are the prime vehicles for financial inclusion. Ultimately, the success of the banking sector would be measured on a few simple parameters such as the availability of credit to all those who want it, profitability, capital and liquidity position and the quality of assets.

The tools may change, but the objectives hardly do. anand@governancetoday.co.in

September 2015 I

21

COVER STORY

New kids on the block Payments banks could redically alter basic banking at grassroot level the asset base of the Indian banking system. The payments banks are believed to be the safest of banks since they have only the government as borrower, and governments don’t default. In future, payments bank licences may be available on tap as almost anybody with Rs 100 crore in his pocket can set up a payments bank, assuming they pass the RBI’s “fit and proper” norm. We could see even 50-100 such banks being set up over the next couple of decades when India will be fully banked.

They will revolutionize money flow – just imagine their geographical reach and how their mere presence will impact one and all.

Among the 41 applicants, the RBI chose 11 to grant “in principle” approval. These include India Post, Reliance Industries, Aditya Birla Group, Airtel, Vodafone, National Securities Depository, Tech Mahindra, Sun Pharma promoter Dilip Shanghvi, Paytm founder Vijay Shekhar Sharma, Cholamandalam Distribution Services and Fino PayTech.

The biggest advantage of payments bank is ‘last-mile connectivity’, unlike a regular bank. So, it is possible that your neighbourhood store can function as a bank branch.

These banks will essentially depend on technology to reach payment services to all customers, using mobiles as the vehicle of banking, as mobiles go even where humans don’t. Physical bank branches (or bankers or ATMs) will still be needed for some purposes i.e. for opening an account, depositing cash etc. but all day-to-day payments, including peer-to-peer payments can be done remotely. The mobile phone will become the virtual ATM and small-payments cheque-book. And opening an account is expected to be like acquiring a pre-paid mobile number. Hopefully, this savings in cost will be passed to customers by way of lower fees.

The development promises to be a game-changer for India akin to over 20 years ago when the Narasimha Rao government decided to issue licences to private banks that helped open up the market and pushed state-owned banks to transform both operationally and technologically and in the process add to

Analysts anticipate intense competition, which should drive down charges for remittances, fund transfers and other banking transactions.

Customers who do not have the means to maintain minimum balance will be welcomed into these banks as revenue will be earned through transaction charges and not

Mobile phones could shortly emerge as a crucial banking device

Ramesh Kumar Raja VERY SOON, the nearest general store to your house or office might become a one-stop shop for depositing and withdrawing money. Thanks to the Reserve Bank of India for allowing in principle 11 entities to start payment banks; so much so that basic banking services will soon be offered even in unbanked areas. As a matter of fact, one would also be able to buy insurance and mutual fund products.

These banks, however, will not offer any loans or credit cards unlike the regular banks, often referred to as universal banks. They can only deposit their money in government bonds. Customers who already have regular savings bank accounts can use their payments’ bank account to make daily or monthly cash transactions, such as utility bill payments or payments for groceries, either through debit card or mobiles.

This could also help guard against 22 I September 2015

debit card fraud, as customers can maintain a smaller balance in these accounts, as compared to their regular SB accounts. Even if one doesn’t have a regular savings bank account, s/he can still deposit and withdraw money up to Rs 1 lakh.

www.governancetoday.co.in

on the spread of interest between deposits and loans.

The onset of payment banks will also transform social welfare and subsidy schemes. Government subsidy payments to the poor – whether for LPG, kerosene or even food and fertiliser – can now be routed through regular and payment banks. India Post is already there in places where banks aren’t with over 1.5 lakh post offices, and tomorrow Airtel and Vodafone will reach customers through mobile-enabled payment systems.

The threesome of Jan Dhan bank accounts, Aadhaar IDs and mobile banking will enable direct payments to the poor and in process eliminate fake recipients and ensure cash in zero-balance accounts, etc. Inclusive banking and subsidy reforms are simply the biggest things to happen in the coming time.

With payments banks, we now have one supplementary means to eliminate black money in large parts of the financial system. A government that wants to eliminate black money can effectively ban cash transactions once a 95 per cent mobile and Jan Dhan penetration rate is achieved.

The government will be one of the biggest beneficiaries of payment banking, as payments banks will expand its access to cheap funds.

Currently, banks are the major investors in government bonds. While this will remain so even with the entry of payment banks, the sheer impact of additional money coming into payments bank accounts which can only invest in short-term government bills of up to one year’s maturity, will drive down shortterm interest rates, and the government can borrow more cheaply.

While this step of RBI has received warm appreciation from different quarters, some experts feel the dawn of payments banks will trigger major disruptions in banking, which will hit the smaller banks hard. As per Ashvin Parekh of Ashvin Parekh Consultancy Services, smaller banks will be under pressure as the large-sized banks have already tied up with partners in payments www.governancetoday.co.in

FM Arun Jaitley feels payment banks would bring in more money in banking system

banks. Similarly, the Fitch Ratings says the proposed payments banks will increase competition for the public sector lenders and could also pose risks to their market share over the long-term. RBI Governor Raghuram Rajan, on the other hand, quashes those fears and says the new kids on the block will rather act as a feeder to their bigger peers. “The idea behind payments banks is to cut preemptions for other banks.

Also, banks have the flexibility with SLR, which has been coming down steadily while payment banks are required to keep their money in government securities,” Rajan said in a conversation with SBI chairperson Arundhati Bhattacharya. According to Finance Minister Arun Jaitley, “Payments bank will ensure more money comes into banking system.

Various banks are looking at increasing their rural reach, including big banks like SBI, payments banks will help them realise this.”

Although the RBI expects payments banks to target migrant labourers and the self-employed, besides low-income households, offering low-cost savings accounts and remittance services, this new experiment does come with its challenges. Payments banks are stripped down as they will not be allowed to carry out normal lending activities.

It does raise questions about who will serve credit needs of the unbanked. RBI suggests that payment

banks will serve as a bridge to allow people to eventually migrate to fullservice banks, which is likely. But payments banks also pose new regulatory challenges and RBI will need to step up its game. However, when seen in the background of limited access to the formal banking system, the move to introduce newer forms of banks is the way to go.

Thankfully, it is an experiment well worth the effort in a country where more than 60 per cent of people earn less than $2 a day. In this environment costs matter and a full-service bank’s structure has proved cumbersome. RBI should complement this step by making good its promise to authorise small finance banks, should be announced shortly. The small finance banks will undertake basic banking activities of accepting deposits and lending to the unbanked sections like micro-business units, small and marginal farmers, micro and small industries and unorganized sector entities. Once this happens, nonbank finance companies will become small banks and make financial inclusion more complete from the small borrower’s point of view.

Between them, payments banks and small banks will make Indian banking more competitive and more inclusive on both the assets and liabilities. ramesh@governancetoday.co.in

September 2015 I

23

BAD LOANS

Gnawing away from inside NPAs are fast becoming a nightmare for banking sector Praveen Raman NPA OR the non-performing asset of a bank is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time. To put it simply, an asset is tagged as nonperforming when it ceases to generate income for the lender.

Banks are technically always faced with the risk of default by the borrower in the payment of either principal or interest. This risk in banking parlance is termed as ‘Credit Risk’ and accounts where payment of interest and /or repayment of principal is not forthcoming are treated as Non Performing Asset.

As per the Reserve Bank of India, an asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. Existence of NPAs is an integral part of banking and every bank has some in its advance portfolio. However, the high level of NPA is a cause of worry to any financial institution. The NPAs in India’s financial sector are troubling the financial sector and policy makers alike from quite some time as their bulk has increased beyond a manageable limit. The NPA or bad loans of the public sector banks (PSBs) have increased to Rs 2.67 lakh crore at the end of March 2015 from Rs 2.16 lakh crore a year ago. There are enough indications that the NPAs of the PSBs as a percentage of the NPA of the whole system is increasing continuously. Gross NPA Ratio of the PSBs increased to 5.43% at the end of March 2015 as compared to 4.72% a year ago.

What explains such a high NPA in system The poor business environment 24 I September 2015

is among the prime factors for rising NPAs. Business environment refers to economy, regulatory regime, legal system and political climate in which banks are operating.

These factors include recession in the economy, sudden change in global & domestic markets, lack of conducive legal system for loan recovery i.e. inadequate legal provisions on foreclosure & bankruptcy laws and dilatory legal procedures in enforcing security rights. Additionally, lack of cohesive regulatory framework, political pronouncements like debt relief, Socio-political pressures on commercial credit decisions, vitiated loan repayment culture, policy reversal i.e. changes in governmental policies etc. are reasons for generation and increase of NPAs in the system because these tweaking of norms change the profitability structures for a very large amount of investment that has already been sunk in various venture. A typical example could be cancellation of Telecom & Coal mine licences, which could have been awarded wrongly in the first place.

But poor business sentiments, changing business environment and bad decision making on part of promoters explain only part of the problem. The other part is more non economical in nature and relates to how non financial considerations can impact financial decision making. Indian financial institutions have long been misused for achieving political mileage and banks have been forced to spend money for commercially unviable projects. For Example, the government of India has given a massive wavier for rural debt almost every year, which invariably accentuates in election year.

Many

poverty

elevation

programs failed on various grounds in meeting their objectives. The huge amount of loan granted under these schemes were totally unrecoverable by banks due to political manipulation, misuse of funds and non-reliability of target audience of these sections. Loans given by banks are their assets and as the repayment of several of the loans were poor, the quality of these assets were steadily deteriorating.

Credit allocation became ‘Loan Melas’, loan proposal evaluations were slack and as a result repayment were very poor.

Another reason for a large buildup in the system is that banks had lent to projects a part of the economic package announced by the government to avert a financial crisis in 2008. While easy money availability possibly averted a crisis, the ghost of financing unviable projects at that time has come to haunt banks now. State run banks are in worse shape as they were more invested in such projects.

The impact on lending behavior of banks The rising NPAs have devastating effect on the economy.

Its consequences are not only felt by the government that has to think in terms of keeping banks afloat, but also by banks whose lending habits are impacted. For one, profitability of the banks is hampered severely as the banks do not earn any income from NPAs, rather they incur cost for their maintenance and have to provide for future losses. It is reported that total net profit of all PSBs including the SBI fell sharply by 26.8 per cent to Rs 37,017 crore in the financial year 2014-15 compared to that during previous year. Furthermore, on the current NPA stock, as per estimates, banks are incurring a minimum loss of www.governancetoday.co.in

Public sector banks are worst off in NPA management

Rs 20,000 crores annually besides making provision of Rs.1 lac crores.

Due to non-realization of NPAs, the credit flow to needy persons/ sectors is held up as banks have become extra cautious.

Secondly, to compensate their interest loss in NPAs, to some extent banks are charging the good customers a higher rate of interest.

Thus, the cost of credit i.e. interest rate goes up and consequently the high interest rate affects the viability of many running units. www.governancetoday.co.in

Cleaning up the mess For containing NPA at a manageable level, preventive as well as corrective steps are required.

The preventive measures are those measures which prevent creation of fresh NPAs in banks. This will began by framing cohesive & conducive regulatory regime. For example, RBI should be more liberal in Income Recognition, Asset Classification (IRAC) norms when the economy is on downturn; particularly for those sectors which are

severely affected due to economic slumps and political scam; such as coal based industries, infrastructure, textile, aviation, etc. Another area is improving loan repayment culture in the society by banning political loan waiver schemes and giving incentives for timely loan repayment.

Lot of work need to be done on improving credit skills and credit monitoring tools and techniques of the bankers. Some borrowers are not putting or are withdrawing their capital/equity tactfully from the September 2015 I

25

March’14

All SCBs March’14 June ‘15

March’14

All PSBs March’14

June ‘15

Mining

Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

0.7 0.6

0.6 0.9

0.6 0.9

0.8 0.6

0.7 0.8

0.7 0.8

Iron & Steel

Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

4.9 8.2

4.8 10.8

4.8 10.2

5.7 8.7

5.5 11.2

5.6 10.6

Textile

Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

3.7 7.5

3.5 7.7

3.5 7.2

4.1 7.5

4 7.8

4 7.4

Infrastructure Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

14.6 28.8

14.4 29.4

14.8 30.7

16.8 29.5

16.5 30.2

17.1 31.9

Aviation

Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

0.5 3.9

0.5 3.3

0.5 3.1

0.6 4.3

0.6 3.6

0.7 3.4

Total

Share in Total Advances of SCBs Share in Total Stressed Advances of SCBs

24.4 48.9

23.9 52

24.2 52

28 50.5

27.2 53.7

28 54

As is evidenced, infra and heavy industry line iron and steel are the major culprits

(Figure in per cent)

infuse Rs 70,000 crore into ailing PSBs by 2018-19. In this direction, the government has decided to infuse capital to the tune of Rs 20,000 crore this fiscal, half of which will go to “weak” banks.

A big portion of NPAs are stuck in infrastructure projects

units/projects in connivance with various consultants/professionals such as chartered accountants, valuers, legal advisers, etc. There should be some legal mechanism for punishing those consultants who do not follow their legal ethics & values while submitting their reports to the bankers who rely on them for taking credit decision. On the corrective measures front, bankers should work harder on credit management. For revitalizing distressed assets in the economy, Reserve Bank of India has come up guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP) for taking prompt action for early identification of distressed assets and taking corrective actions on regularizing the accounts, revival of viable units, and recovery/ 26 I September 2015

sale of unviable units after proper diagnosis of the problems. These guidelines should also be extended to existing NPA accounts for taking prompt action for revival/ recovery by lenders. For example, prior to above RBI guidelines, if any account under consortium/multiple banking arrangement has already been declared NPA by any lender, but it is standard & not being reported as SMA-2 by any other lenders, then that particular lender is not able to take corrective measures for this distressed asset, as other lenders are not mandatorily compelled for such joint action.

Government steps in to recapitalize PSBs

There are indications that infusion of capital could start as early as September. This money is likely to strengthen balance sheets of banks reeling with high NPAs and bad loans. In his Union budget for the fiscal presented in February, Finance Minister Arun Jaitley had said that the government has earmarked slightly under Rs 8,000 crore for capital infusion purposes for the current year.

The amount was low and the banks needed more. Therefore, the government agreed to a further capital infusion but in April said that it will rank banks on their needs for more funds.

Public sector banks have served the country well, financing the industrialization since independence.

They have also played a significant social role by providing easy credit to agriculturists.

They need to be revitalized and made stronger so that they can continue to play their important role in the national economy and for that the menace of NPAs needs to be eliminated. praveen@governancetoday.co.in

The government has decided to www.governancetoday.co.in

ADVERTORIAL INTERVIEW CENTRAL BANK of India (CBI) is one of the prominent public sector banks in India.

The bank is pushing aggressively the technology to upgrade its operations. To know more about how the application of technology can change the banking sector in general and CBI’s functioning in particular, Ritika Bisht spoke to Usha Menon, General Manager IT, of the Central Bank of India.

Edited excerpts:

Usage of latest computing and communication technologies has changed the nature of banking industry over last few years. How do you see technology banking industry in times to come?

SMALL TICKET PAYMENTS WILL SEE A MAJOR SHIFT TOWARDS ELECTRONIC PAYMENTS

The first and foremost impact can be seen in the size of the branches which have become leaner but the variety of services offered have become broader.

Secondly, technology has given the opportunity to provide the Banking services on various channels which otherwise would not have been possible. This has helped in providing the banking services 24X7 at the customer’s convenience through various channels like Internet Banking, ATM, Mobile Banking, Kiosks etc. This has also majorly reduced dependency on the Branches.

With the advent of smart phones and internet on mobiles the banking industry is poised for a paradigm shift in the way Banking is conducted. Moving forward, small ticket payments will see a major shift towards electronic payments with the availability of various channels and payment instruments/ modes. All this will also have a direct impact in reduction of cash transactions.

With high growth of cards and net based 28 I September 2015

Usha Menon General Manager IT, Central Bank of India www.governancetoday.co.in

transactions, economy is moving fast towards a cashless future. How has this transformation impacted the CBI? The shift towards e-channels has been very pronounced in our Bank in the last few years. The number of cards has doubled to around 1.7 Crores in a short span of 1 year. There are also over 25 lakhs internet banking users. The Bank had tied up with various bill aggregators, IRCTC, Government Depts. Corporates etc. Due to all this, the card based and online transactions have grown rapidly.

This has lessened the load on branches and enabled better branch staff management and also help retention of existing business and targeting newer business opportunities.

How do you see nonbanking companies such as Paytm or PayUmoney impacting the business of traditional banks like yourself?

Ours is a traditional bank with a sound and loyal customer base which continues to grow.

While there could be a minimal, temporary impact, such healthy competition and newer services are welcome in a rapidly changing ecosystem. These could be seen as additional business opportunities for banks since these companies will require basic banking services and the gap would be filled in by traditional banks, which will continue handling large value transactions.

Over last few years, the retail banking has become more mechanical and less personal. For example, now we can deposit checks and cash through ATM and even www.governancetoday.co.in

apply for credit cards through the same. What does this mean for branch banking?

The retail banking would see further mechanization with the advent of newer delivery channels.

Our bank provides core banking services like time deposits opening also through Internet Banking without manual intervention which reflects the change. The branches would be acting more as touch points to address the customer’s enquiries and other grievance handling rather than basic customer services.

Security of individual data has become a big issue in today’s banking business.

How do you ensure that the data of your customers are absolutely safe? It has assumed importance with usage of Cloud in banking sector.

Usage of Cloud in banking sector is still in a nascent stage given the inherent security concerns. While transition to Cloud services is to be expected as a given in a few years, it will happen gradually while ensuring that the real and perceived security threats are adequately mitigated through appropriate protection techniques, suitable SLA terms and certifications/ compliances etc.

How can higher application of technology help banks reach hitherto unbanked population in hinterlands? Can technology contribute to the financial inclusion drive of the government?

If yes how?

The transformation in banking in India has technology as its backbone. This is coupled with the

rapid technological advancements in the areas of computing and networking. Increasing availability of infrastructure in remote areas has helped banking reach hitherto unbanked population.

The entire concept of Financial Inclusion is based on availability of suitable technology, including Biometric Authentication. Cards have been issued to customers though it will take a while for these customers to get used to it. Technology adopted by Business Correspondents is also getting upgraded rapidly which will definitely improve the way banking is done.

The major driver of spread of banking services will be the ubiquitous mobile device which has on boarded the poor, uneducated population by the sheer ease of use built into these devices.

In your opinion, what is the next evolutionary step in the development of Indian banking sector?

How can banks like Central Bank cash on these developments?

Mobile phone is one device which can evolve into an ideal platform for future of banking, wherein banks would try and include maximum possible services. Banks like our Bank will hugely benefit from the reduced onboarding cost per customer and also the lower transaction cost coupled with larger customer base. Some of the pioneering techenabled services launched by our Bank such as Missed Call alerts, SMS banking for automatic Aadhar seeding, blocking/hotlisting of cards, balance enquiry etc. and Mobile based passbook have been very well received by our customers.

Such endeavors have gone a long way in garnering newer business opportunities as well as retain existing customer base.

September 2015 I

29

ADVERTORIAL INTERVIEW

CONNECTIVITY AND BANDWIDTH KEYS TO CASHLESS TRANSACTIONS

WITH EMERGENCE of technologies such as cloud computing, the face of banking and finance is changing in most fundamental ways. In a discussion with Marshal Correia, VP and General Manager, HP, Ramesh Kumar Raja explores the services of HP India in the banking and financial services domain. Edited excerpts:

How in your opinion is computing technology changing the financial services industry? How in your opinion is computing technology changing the financial services industry? How is it going to change interaction of customers with financial services provider?

The number of smartphone users in India has been dramatically growing. It has already crossed 160 million users. This is an opportunity for the payments business. The way they interact with the customers will see dramatic changes

What are your major service or product categories and which are the financial services domain you focus on?

HP has come up with a new style of business catering to the growing demands of customers.

The new style of business helps banks to adapt quickly to the emerging dynamic changes and stay relevant.

Marshal Correia VP and General Manager, HP 30 I September 2015

How is technology allowing banks and other financial services players to integrate various businesses and climb up the value chain? www.governancetoday.co.in

With the use of analytics and mobility, the entire handling of the customer has been seeing a sea change.With the information available through analytics, the entire customer experience will undergo a transformation. Banks will be able to provide instant, customized solutions and a customer will have the flexibility and ease of accessing information and executing transaction from basically anywhere. All this, with ample security measures, are provided to mitigate fraud.

Which are the most disruptive tech developments of last five years that has revolutionized financial services industry and how? And which are the most promising new technologies that you feel have the potential to impact the financial services market over next decade or so?

The emergence of smartphone and various banking applications available through phone has revolutionized the way banking operates now. That along with the analytics and cloud will change the way the industry operates.

Cashless transactions is growing rapidly in India.

But India has a very poor connectivity and bandwidth availability coupled with very high cost of internet access.

Don’t you think it would stifle the growth of a cashless economy? What can be done to address the issue?

Connectivity and bandwidth www.governancetoday.co.in

are definitely keys to cashless transactions. While the government and industry are working on to improve it, what we help banks create in applications and solutions that does not require too much bandwidth and can be accessed with low speed connection as well.

This initiative by HP will augur well for Digital India.

the ambit of financial services such as banking, insurance and access to credit? What role can high tech firms like HP play in furthering the cause of financial inclusion?

Security of data from unauthorized access is perhaps the biggest challenge for financial services firms. Do you think it is appropriate to have sensitive personal data on cloud and create a cloud based business model?

HP has come out with a state of the art Tablet (especially built for business correspondents) which has an inbuilt finger scanner (to authenticate client), voice prompt (for voice guidance), and thermal printer (for transaction receipt).

This is a big revolutionary step, as a business correspondent will now carry simply an integrated Tablet instead of a traditional handheld device with multiple attachments.

Security is definitely a key to a cashless transaction. Cloud based

We have successfully implemented for Bank of India, where a BoI customer can send money to any person across India

“HP has come out with a state of the art Tablet (especially built for business correspondents) which has an inbuilt finger scanner (to authenticate client), voice prompt (for voice guidance), and thermal printer” models can provide ample security to ensure data is not misused.

In keeping with the recent announcement of RBI with regard to payments banks, we at HP are geared up to provide holistic banking solutions on cloud to reduce acquisition cost as well as 24/7 customer service with minimal downtime and with all appropriate security measures.

How in your opinion can advanced computing and communication technologies help in bringing in large sections of rural population under

and what is required is just a mobile phone. A recipient can go to any BoI ATM and withdraw money from it post punching OTP which has been generated by the accountholder. This service is known as IMT (instant money transfer). For Andhra Bank, in order to facilitate and reduce time taken for account opening in Core Banking System, we have come up with Digital KYC option, where a filled form is scanned and account details are captured automatically in the system. This effort has reduced turnaround time for new account opening as well as improving the employees’ productivity.

September 2015 I

31

MICROFINANCE

Serving the bottom of pyramid MFIs are going where banks have feared to tread

Microfinance institutions create wealth by harnessing the money at grassroot level

Praveen Raman THE MICROFINANCE institutions (MFIs) play a vital role in providing short term loans and other financial services in remote areas and helping people and communities come out of the vicious poverty. Given the low presence of banking facilities in remote areas, the MFIs have potential to provide financial services to the last man in the society and help him create wealth. As over 60 per cent of our population lives in villages, microfinance can be critical to poverty alleviation strategies as MFIs mostly work in rural areas. Microfinance helps to improve access and efficient provision of savings, credit, and insurance facilities and enables the poor to smoothen their consumption, manage their risks better, build their assets gradually and develop their micro enterprises.

32 I September 2015

Over the last few years, the reach of MFIs to the rural poor have been impressive, but more stress is now required.

Nobel Laureate Muhammad Yunus is credited with laying the foundation of modern MFIs with establishment of the Grameen Bank, Bangladesh in 1976. The MFIs sector has grown rapidly over the past couple of decades, especially in developing economies, like India, where the governments work under severe financial constraints.

MFIs in India exist as NGOs and Non-Banking Financial Companies (NBFCs). Commercial Banks, Regional Rural Banks (RRBs), cooperative societies and other large lenders have played an important role in providing financial services to MFIs. Banks have also leveraged the Self-Help Group (SHG) channel to provide direct credit to group borrowers. With financial inclusion

emerging as a major policy objective in the country, Microfinance has occupied the center stage as a promising conduit for extending financial services to unbanked sections of population. At the same time, practices followed by certain lenders have subjected the sector to greater scrutiny and stricter regulation.

In focus for wrong reasons In the last couple of years, the microfinance activities have come under limelight as they aim to serve people who are otherwise excluded from the economic system.

The Andhra Pradesh episode, in which farmers committed suicide, a first in MFI history after which the MFI in question had to leave the state, attracted a strong debate on the governance and ethics in the conduct of the MFIs. There are www.governancetoday.co.in

some other issues too that require a closure look, especially the ownership of the MFIs. The ownership structure of Indian MFIs is dominated by family and friends groups.

Mostly family members and friends are board members; thus the board structure is characterized by inadequate checks and balance of executives, lack of transparency in reporting, lack of independent board nomination, insufficient transparency about ownership and conflict of interest at various levels of management. Moreover, remuneration payments are irrational and unusually high. It is characterized by unplanned bonuses, granting of shares and non-transparent pricing of shares. It is also often seen that that related party transactions are not transparent and MFIs provide huge loans to founders and board of directors to buy their own company shares.

Despite the fact that MFIs in India recorded a rapid growth, in the end, big MFIs have incurred losses and clients have been pressures from MFIs to pay back their loan.

Such things have marred the reputation of microfinance sector.

STATES’ SHARE IN MFI GLP

Four states corner more than half of MFIs portfolio

though it falls under priority sector guidelines, the bank’s cost of funds to MFIs is still very high. Thus, it leads to an even higher lending rate for the microfinance borrowers.

Intervention required

Leveraging MFIs for financial inclusion

There is no denial that the microfinance has brought hope to many, but without the government intervention, the potential cannot be utilized in full.

Pointing the need for policy intervention, HP Singh, CMD, Satin Creditcare Network, a Delhi based MFI offering short term loan to poor people, said: the government needs to bring into act the legislation and regulation of microfinance institutions under central government (under supervisory of RBI) so that states do not have any say in regulation and not have the authority to stop microfinance activity in the respective states on various pretexts. Singh also stressed on the importance of a steady flow of capital to the microfinance sector through formal banking sector and financial institutions so that the lending to the bottom of the pyramid is not erratic. Also the cost of funds has to be brought down for the MFIs. Even

The central government has taken several initiatives on the financial inclusion front over last one year with a uniform focus on three key foundations of financial inclusion – credit, savings and insurance.

The microfinance institutions are expected to play a vital role in delivery of various products and service offerings which are aimed at benefiting the vulnerable sections of the society. The formation of MUDRA is a significant step towards maximizing access of finance to the underserved socio-economic segments and underpenetrated geographies. Till date the focus of microfinance institutions has been limited to the micro-entrepreneurs who need very small loans (Rs 10,000 - 50,000) to start or grow a very small business.

The advent of MUDRA bank which is aimed at promoting loans upto Rs 10 lakh, will act as a catalyst for microfinance and other financial

www.governancetoday.co.in

institutions to develop and promote appropriate products for small and medium level enterprises. This thrust goes in line with the government’s ‘Make in India’ program which is highly dependent on the success of MSME sector.

How to strengthen MFI sector It becomes imperative to save MFIs in India because of their social cost and all steps must be taken to ensure their good health. To begin with, the policy regime will have to be friendly. The regulation was not a major concern when the microfinance was in its nascent stage and individual institutions were free to bring in innovative operational models. However, as the sector completes almost two decades of operation and move up to a high growth trajectory, an enabling regulatory environment that protects interest of stakeholders as well as promotes growth, is needed.

Secondly, in addition to proper regulation of the microfinance sector, field visits can be adopted as a medium for monitoring the conditions on ground and initiating corrective action whenever needed. This will keep a check on September 2015 I

33

Growth of disbursements in key states (INR Bn); (Below) last five years progress report

Indicator

FY 12-13

FY 13-14

FY 14-15

Branches (in numbers)

8,848

9,741

10,553

Employees (in numbers)

59,240

66,959

80,097

Clents (in million)

19.42

23.68

30.5

GLP (ib billion Rs)

174.07

248.62

401.3

Loan disbursed (in billion Rs.)

233.75

351.18

549.51

the performance of ground staff of various MFIs and their recovery practices. This will also encourage MFIs to abide by proper code of conduct and work more efficiently.

However, the problem of feasibility and cost involved in physical monitoring of this vast sector remains an issue in this regard.

It has been seen that in lieu of reducing the initial cost, MFIs are opening their branches in places which already have a few MFIs operating. Encouraging MFIs for opening new branches in areas of low microfinance penetration by providing financial assistance will increase the outreach of the microfinance and check multiple lending. This will also increase rural penetration of 34 I September 2015

microfinance in the state.Also in order to serve clients better, MFIs need to provide a complete range of products including credit, savings, remittance, financial advice and also non-financial services like training and support. As MFIs are acting as a substitute to banks in areas where people don’t have access to banks, providing a complete range of products will enable the poor and rural masses to avail all services.

Then there is a big issue of interest rate structure for the sector.

It has been observed that MFIs are employing different patterns of charging interest rates and a few are also charging additional charges and interest free deposits (a part of the loan amount is kept as deposit on

which no interest is paid). All this make the pricing very confusing and hence the borrower feels incompetent in terms of bargaining power.

So a common practice for charging interest should be followed by all MFIs so that the sector becomes more transparent and competitive, and the beneficiary gets the freedom to compare different financial products before buying.

MFIs should also use new technologies to reduce their operating costs. As the emergence of mobile and internet banking has proven, it is possible to offer services without being present on ground. MFIs can use internet based technologies to collect data, monitor loan portfolios and manage workforce on the ground. Most NBFCs are adopting cost cutting measures, which is clearly evident from the low cost per unit money lent (9-10 per cent) by such institutions. NGOs and Section 25 companies are having a very high value of cost per unit money lent, often in range of 15-35 per cent which puts enormous burden on profitability. Also initiatives like development of common MIS and other software for all MFIs can be taken to make the operation more transparent and efficient.

Moving forward, MFIs would be competing with small and payment banks who would also try to cater to rural market. To compete well. MFIs would have to become nimble, reduce cost and bring out innovative products in order to survive, which they must as they have a large social mandate to fulfil. praveen@governancetoday.co.in

www.governancetoday.co.in

MAHILA BANK

On slippery ground?

After nearly two years of existence, Mahila Bank struggles to carve a niche

After nearly two years of existence, Mahila Bank struggles to carve a niche

Sagarika Ranjan INAUGURATED WITH much fanfare on November 19, 2013, with a promise of a bigger leap towards greater emancipation of women, what went wrong with Bharatiya Mahila Bank (BMB) that “rumors” of its merger is in the air of the banking world today? Of the women, for the women and by the women, all in all a power house for women’s entrepreneurship best defines the idea behind the Mahila Bank. One of its kinds, the BMB was started to create an institution with selected group of talented women who would contribute towards increasing the visibility of women in the decision-making arena and enhance their financial inclusion. The Government took the decision to set-up India’s first Women’s Bank based on the idea that women need equal access to economic institutions and assets. www.governancetoday.co.in

Now both of these components are interrelated; control over assets is essential to access finance and vice versa. The first logical step towards economic empowerment, therefore, is to provide equal access to capital to women while addressing the problems of lack of collateral.

This would help promote both asset ownership by women and entrepreneurship.

Thus, to help increase employment and entrepreneurial opportunities for the women in India, the Government infused an initial capital of Rs. 1000 crore in the Bharatiya Mahila Bank Limited.

However, today this ambitious project faces the threat of losing its identity.

So what went wrong, or is it too early to draw conclusions?

Going by the analysis establishing process of the Bank over last two years, be said that hiccups have

of the Mahila it can always

been there. Even during the planning stage there were people who disagreed with the very basic concept of Mahila bank and the notion that it would promote financial inclusion of women. The concept rather the basis of creating BMB was an assumption that an all-women bank will be inherently wiser about dealing with women customers. This concept failed to convince a number of people in the knowhow of business and economy. These people believed that success of any financial institution depends on factors like capital, costs, risk, governance, labor, systems, technology and administration rather than the gender of capital provider. Even psychologists say that this idea that women are better than men or vice-versa is wrong. They say that it is easy for both men and women to fall prey to stereotyping and discriminatory behavior, so how is it justified that women staff would September 2015 I

35

Diamond (60th) branch of BMB opened in Nagpur

serve better to women customers?

Effort should be to improve the quality of products and service and focus on better training than creating men and women divide. As to build a successful institution, bias and malpractice need to be checked through good leadership and effort, not through sexual discrimination.

The banking industry which is head-deep in nonperforming assets (NPA), when global economy seems to be reeking under continuous devaluation of currency and where scams along with natural disasters are corroding the Indian treasury right up to its base, investment into another new set-up rather than strengthening the already existing ones definitely doesn’t seem to be a good idea, at least not now. Another area where the Mahila bank seems to be missing its objective is the promise of enhanced financial inclusion of women. The Mahila Bank opened its first branch at Nariman Point area of Mumbai and not in any rural area. Entire bunch of its first batch of branches was in urban centers. The umbrella of financial inclusion was spread out in an area of Mumbai which is one of the richest areas in India. The women here are probably as much financial ‘included’ as women in the western countries. So instead of beginning with financial inclusion in a backward village, as it was expected to be, the first branch was dedicated to the glitterati of Mumbai not the needy villagers of India where financial inclusion of 36 I September 2015

women is truly lacking.

Despite these issues facing the Mahila Bank, bankers still have positive views for the bank.

Senior bank officials say, “The very concept goes by the approach expressed. Many a time you have to move out of the designed fashion to achieve the objective of the plans. The specialized cadre of the women employees taking care of the business at the nascent stage is sometimes difficult, however years of study and social observation suggest that financial empowerment of women has a multiplier effect on welfare of families which then percolates down to the economy.

Mahila bank has been started keeping this in mind.” As far as the allegations are concerned, the bank people say that the number may not be adequate and so the organization, at present, looks like a “mixed up population”. Further clarifying the concept, a senior banking official said, “Its vision was never restricted to woman entrepreneurs only for financial module. However, going by the theme, women entrepreneurs were to be given preference and priority over their male counterparts.”

So the question of it being a sexual decision doesn’t hold true.

It was done to help those women who do need special attention as they are much backward than the women in the cities. Countered with the question of the first bank being opened in Mumbai and not in a village for backward women,

it was defended on the grounds of administrative and business plans.

“It was done to give it a better start and nothing else,” said another senior bank official. Talking on the issue of merger of the Mahila Bank with the State Bank of India, the officials said, “At the moment there is no official communication towards merger move of the Mahila Bank.” A number of negative comments and headlines for the Mahila Bank have been hitting the headlines for quite some time. News of it being a failure, a flop show, and even a politically correct but financially stupid idea have been carried by esteemed dailies all over the country. However, the bankers’ fraternity negates these “unofficial” news. They defend the bank on the grounds of it being a very new organization which is bound to have teething problem.

Defending the credibility of the institution, another official says, every organization has to meet the challenges of the system and in the competitive scenario with no background on the track, it takes some time for any organization to have its own identity and brand name.” He further adds that banking has become a challenge in the present set up and Mahila Bank will have to keep the things in place and make a space for its visibility.

“There is no basis for understanding that such modules cannot survive in Indian context. The economy of India is doing fine and we should have a positive outlook,” he says.

In totality, therefore, on the one hand, critics are speaking out loud on Bharatiya Mahila Bank being a complete flop show, on the other hand, bankers are asking for more time for the institution. Forming opinions about an institution during its gestation period is never a healthy practice but it is nothing but the bank’s wobbly start-up that has invited all the flak. So whether BMB proves a gradual wipe out of public money or emerges as the harbinger patron of women entrepreneurship, only time will tell. For the time being, it is all crystal gazing. edit@governancetoday.co.in

www.governancetoday.co.in

CO-OPERATIVE BANKS

UCBs drudging towards oblivion Effective intervention is required to infuse life back in the segment

The urban co-operative banks serve a large number of people but their future is uncertain

Praveen Raman A SOUND financial sector is supremely important for the economic health of a nation. The financial sector acts as a bridge for channeling resources from final savers to final investors. As a result, the greater the ease of resource intermediation, the lower the cost at which these resources can be available to final investors, enhancing investment and growth.

The Urban Cooperative Banks www.governancetoday.co.in

or the UCBs were set up with the objective of promoting sustainable banking practices amongst a relatively specific target clientele viz., the middle income strata of the urban population. They were brought under the regulatory ambit of the Reserve Bank of India (RBI) by extending certain provisions of the Banking Regulation Act, 1949, effective from March 1, 1966.

The performance of the cooperative banking sector in the country as a whole has attracted

considerable attention in the recent years especially in the context of the ongoing phase of financial sector reforms. More specifically, financial and managerial weakness of a good number of cooperatives has been a matter of concern for policy makers and the RBI, which is the banking sector regulator. State governments and the cooperatives have been demanding capital infusion for wiping out past losses. But, there is a broad agreement that unless the question of inherent weakness of September 2015 I

37

Duality in command does come in the way of effective supervision.

Academics and bankers made vociferous representations to the Madhava Rao Committee that dual control over UCBs must end as that was instrumental in stifling their growth.

The assets of UCBs has started to grow again in last couple of years Source: RBI FSR Dec 2014

these banks is adequately addressed, funds infusion will not solve the problem; it may just be like throwing good money after bad. In this respect, the areas that need careful examination include the pattern of resources of cooperatives (owned funds, deposits, and borrowings), the deployment of resources, the management and supervision, the role of cooperative banks in the financial system and the regulatory framework for cooperatives.

The essential spirit of the regulatory and reform measures adopted for the commercial banks need to be extended to the cooperatives as well with necessary adaptations to suit the circumstances in which cooperative banks operate. This would imply that areas such as strengthening of regulatory and supervisory framework, enhancing capital adequacy standards, introducing stringent licensing norms for new entrants into the sector, enabling legal amendments and corporate governance measures need to be given very close attention.

Some years ago, the government had set up a committee under the chairmanship of M Narasimham to study the financial sector reforms.

The Committee recommended 38 I September 2015

many steps for reforming in the UCB too. The Committee suggested that the RBI should review the entry norms in respect of UCBs and prescribe revised prudent minimum capital norms for them. To achieve an integrated system of supervision over the financial system, the committee recommended that UCBs should also be brought within the ambit of the Board of Financial Supervision. In response to these recommendations of the Committee, the Reserve Bank set up a High-Powered Committee on Urban Cooperative Banks under the chairmanship of Shri K. Madhava Rao, former Chief Secretary to the government of Andhra Pradesh, to review the performance of UCBs and suggest measures to strengthen them. The committee gives its views on important functional and supervision areas.

On the issue of licensing policy, it said that in the new liberalized regime, licensing policy for new UCBs is expected to be not only transparent, but also precise and objective, based on established standards and procedures.

On the issue of jurisdiction, the Committee said that the UCBs are controlled by the state government and the RBI and this

The Narsimham Committee had also unequivocally recommended for ending dual control regime over UCBs. In the case of commercial banks, the RBI has the wherewithal under the Banking Regulation Act for dealing with crucial aspects of functioning, but in the case of co-operative banks, many areas which directly relate to supervision over them have been kept beyond the Reserve Bank’s authority. Since UCBs are primarily credit institutions, rationally, the responsibility for their supervision devolves on the RBI. The Committee recommended that this duality of control be done away with and the responsibility of regulation of UCBs be placed on the Board for Financial Supervision.

Good corporate governance is essential for the effective functioning of any financial entity. To this end, the Rao Committee suggested that at least two directors with suitable professional qualification and experience should be present on the boards of the UCBs and that the promoters should not be defaulters to any financial institutions or banks. As for capital adequacy, the Madhava Rao Committee also reiterated that a majority of the UCBs was in favor of extending the CRAR discipline to UCBs. The Narasimham Committee in its report had rightly observed that a legal framework that clearly defines the rights and liabilities of the parties to contracts and provides for speedy resolution of disputes is an essential bedrock of the process of financial intermediation and that the UCBs are no exceptions to this basic principle. It was also recommended to include a new law for granting statutory powers directly to banks (and financial institutions) for possession and sale of securities backing a loan, an enabling framework for securitization of www.governancetoday.co.in

receivables and strengthening the recovery mechanism.

The existence of a large number of unlicensed banks has been the result of a mild screening process in the past. In view of the regulatory discomfiture that such banks impose on the system as a whole, it was suggested that these banks be licensed provided they satisfy the quadruple criteria of (a) minimum prescribed CRAR, (b) net NPA ratio not exceeding 10 per cent, (c) have made profits continually for the last three years, and (d) have complied with the RBI regulatory directions.

The road ahead Acknowledging that the UCB sector is an integral part of financial system, the RBI has brought in a series of reforms to better govern the segment. The recommendations of the Madhava Rao Committee has dwelt extensively on certain regulatory issues related to UCBs’ licensing policy, but the issues related to dual control necessitate legislative changes to State and Central Acts and there is hardly any progress in this area. In the backdrop future agenda for reforms in urban co-operative banking sector would focus on some critical areas.

Most important aspect of improvement is aligning UCB sector with rest of financial system. Unlike the other segments of cooperative credit sector, UCBs today undertake multifarious banking activities.

Some of them have also been permitted to undertake forex and merchant banking activities. There is a view emerging in the recent past that because UCBs are members of payment system, beneficiaries of deposit insurance scheme and enjoy unlimited access to public deposits, should be subject to exactly the same regulatory rigors as other scheduled commercial banks are.

As part of risk management, it is important to realize that today, main risk exposure of UCBs’ is not the credit risk but interest rate risk.

Most of the UCBs’ interest rates particularly on deposits are out of sync with the rest of the banking www.governancetoday.co.in

NPAs have been on rise for UCBs

sector. This puts the profitability of these banks in stress. In this backdrop, observance of Risk and Asset Liability Management guidelines assume great importance in the overall functioning of these banks.

Disclosure and auditing of returns As market discipline is an important supervisory tool in approach to new capital adequacy framework, prescription of disclosure standards for UCBs is of imminent necessity. UCBs, therefore, should be made to disclose crucial financial data such as level of owned funds, unimpaired net worth, CAR, Gross/Net NPAs, operating results, ROA, compliance with reserve requirements, per employee productivity, etc. along with balance sheet. This issue is engaging the attention of the Reserve Bank. The other part is of strengthening the audit system for the segment. The RBI has advised States to follow the standard audit norms with regard to UCBs. Unfortunately, many State Governments have yet to respond positively despite many years of persistent persuasion by the RBI.

Governance It is extremely important that there is a mechanism to ensure that an effective system of internal

Source: RBI supervisory returns

governance is in place in all UCBs to ensure not only proper and ethical functioning of these banks but also to ensure the safety of depositors and investors’ money. And right manning of the boards is an important aspect of governance. As such, the chief executive should be a person of clean image and display a professional attitude. The board should consist of knowledgeable persons who are aware of their responsibilities. There should be a board level committee which should focus attention on the findings of audit and inspection teams and ensure compliance thereof.

Urban co-operative banking sector had once occupied a formidable space in the Indian financial system. However, because of unprofessional management and lax supervision, it has wilted and reduced to mere shadow of its past stature. Unfortunately for customers, depositors and investors, governments have mostly chosen to ignore the segment which could have been a useful tool for increasing the banking footprint in the rural areas.

Hopefully, the new push towards financial inclusion by the government and the zeal of the RBI to restructure the Indian banking sector would come to help UCBs out of morass. praveen@governancetoday.co.in

September 2015 I

39

INTERVIEW

GEOTHERMAL ENERGY CAN CONTRIBUTE TO RENEWABLE ENERGY INITIATIVE OF INDIA Th贸rir Ibsen Ambassador of Iceland to India

40 I September 2015

www.governancetoday.co.in

ICELAND IS known globally for its breath-taking natural beauty, its volcanoes, and high tech hydro and geothermal energy sector.

Also, Iceland is perhaps the most preferred destination for shooting of movies. A large number of Hollywood blockbusters such as Interstellar, Oblivion, Star Trek into Darkness, Thor: the Dark World and Prometheus have been shot at various locations of the country. To discuss how India and Iceland can come together to cooperate on some of the crucial issues of business and energy security, ANAND MISHRA, Editor, Governance Today and Rajesh Mehta, a serial entrepreneur and foreign investment specialist, spoke to MR. THÓRIR IBSEN, Ambassador of Iceland to India. Mr. Ibsen has a rare ability to bring together the commercial, political and social aspects of relation between countries and is putting all of that to further the cooperation between the two countries. Edited excerpts:

Could you please throw light on how India and Iceland are enhancing the bilateral trade relations?

The top priority is to conclude our Free Trade Agreement. Trade relations between Iceland and India are good. But neither country is taking the full advantage of their mutual business opportunities.

This is partly because of the lack of trade agreement between the two countries. Iceland along with its EFTA partners Norway, Liechtenstein and Switzerland, is currently negotiating a free trade agreement with India. Early conclusion of the agreement will boost the business confidence between Iceland and India and provide a platform for greater economic cooperation between the two countries.

The opening of the Icelandic Embassy in February 2006 in New Delhi and of the Indian Embassy in Reykjavík in August 2008 have strengthened diplomatic and business ties between the two countries.

And we enjoy the support of the Indo-Icelandic Business Association www.governancetoday.co.in

in India and of the Icelandic-Indian Chamber of Commerce in Iceland. Iceland and India have also concluded a number of important bilateral agreements including agreements on the Promotion and Protection of Investments, on Double Taxation avoidance as well as an Air Service Agreement.

We have also signed a number of Memorandum of Understanding (MOUs) in key economic areas such as renewable energy and sustainable fisheries. Today three large global companies of Icelandic origin, Marel, Promens and Actavis operate assembly and manufacturing plants in India.

I can envisage much deeper trade and investment relations between Iceland and India when we have concluded our Free Trade Agreement. The enhanced economic cooperation would contribute to the policy priorities of the Narendra Modi Government such as the Make in India, the Re-invest, the Smart Cities Mission and the Digital India Mission.

Iceland is being promoted as hot destination for films.

Please elaborate your views regarding this in relation to India.

Yes indeed, both large Hollywood and Indian regional films have been shot in Iceland. These include The Game of Thrones, Oblivion, Thor (The Dark World), Star Trek (Into Darkness), Batman Begins and James Bond, as well as Indian Regional films like Nayak, Brindavana, Aadhavan and Namo Venkatesha. And Bollywood is catching on. As we speak a major Bollywood film is being filmed in Iceland starring India´s top actors Kajol and Shah Rukh Khan.

There are in fact ample opportunities for Indian film producers in Iceland.

What incentives are given to Indian Films shot in Iceland?

Iceland offers a variety of unique filming locations unlike

anywhere else in the world. Its stark landscape and amazing range of geological and natural phenomena with imposing glaciers, geysers, black sand beaches, lava fields, floating icebergs, majestic waterfalls, stark highlands, steam emitting red and yellow sulphur mountains as well as active and dormant volcanoes are a treat to film makers. In Iceland, this spectrum of scenery is all within easy reach. And the light conditions are unique. The Midnight Sun provides for the opportunity of long days of filming during the summer months.

We have also local film services companies with trained crews with proven experience of producing quality films in tough conditions. They provide international filmmakers with the full range of professional services including assistance with locations, crew, equipment, casting, studios, stand-ins and permits when needed.

Film producers can also apply for reimbursements from the State Treasury of up to 20 per cent of the costs incurred in the production of films and television programs in Iceland. The reimbursement scheme is simple, transparent and effective. And since Iceland is a member of the European Economic Area, films and television programs made in Iceland are classified as European material when released in Europe. A large number of Hollywood blockbusters like Interstellar have been shot in Iceland

What is happening on collaboration on geothermal energy between the two countries?

Narendra Modi, the Prime Minister of India has put forth an ambitious target of increasing the use of renewable energy in India. The plan is to increase the production of renewable energy by 160.000 MW by 2022. When attained, it will be a major contribution to energy security in India and to the reduction of air pollution with great health benefits and better quality of life for Indians. Iceland September 2015 I

41

two countries.

What are the other major areas in which India and Iceland can cooperate?

India and Iceland could cooperate in many areas. For example, there are ample opportunities for cooperation in targeted areas such as renewable energy and sustainable fisheries and in scientific research in the areas of seismic activities, glaciology and climate change.

Geothermal is one of the primary energ y sources for Iceland

can help in that endeavour.

While solar and wind energy will evidently play a major role in meeting this target, hydro and geothermal energy is also sizable in India and can also contribute significantly. Iceland has extensive expertise and experience of using hydro power and geothermal energy. In fact hydro power and geothermal energy supply close to 90 per cent of all the energy consumed in Iceland. Harnessing geothermal energy for electricity production has the added benefits of supplying hot water for household use for heating and hot water, for tourism services such as swimming pools, and for agriculture, in providing greenhouses and drying vegetables.

But while India is used to the idea of hydro power, the first geothermal energy plant has yet to be built in India. I am confident that the first plant will soon be built with the help of Icelandic knowledge and expertise because both the Indian government and businesses have come to understand the potential of geothermal energy for India and of Iceland’s experience of using geothermal energy. And a number of Indian experts have graduated from the United Nations University Geothermal Programme in Iceland. Indeed, geothermal harnessing can make an important contribution to Re-Invest, the renewable 42 I September 2015

energy initiative of Prime Minister Narendra Modi.

How are the two countries collaborating on Food Processing Industry?

Iceland is a food production and export country. We have a long and well established expertise in food processing technology and methods. A good example is Marel, Iceland´s largest global company.

It grew out of the fishing industry, producing measuring scales and processing equipment. Now this company has branched into the poultry industry, manufacturing production lines that are used all over the world. Indeed, Marel has an assembling, sales and service centre in India, more specifically in Bengaluru. Marel India provides advanced equipment systems and services to the fish, meat and poultry industries.

There are many other companies in Iceland that have followed suit, specializing in food cooling technologies, packaging, food preservation, food and hygiene inspection and control, digital technology for the food processing industry to enhance better utilization of the raw materials, etc. This knowledge and technology could easily be applied in India with enhanced economic cooperation between the

In fact Iceland and India have signed MOUs in the areas of Renewable Energy Cooperation, Sustainable Fisheries Development and on Earthquake Prediction Research. The last one is in particular pertinent in the light of the two large earthquakes in Nepal last spring, and the fact that scientists are predicting further serious earthquakes in north India.

When the President of Iceland H.E. Mr. Ólafur Ragnar Grímsson was awarded the Nehru Prize, he decided to dedicate the associated funds to train young Indian glaciologists in Iceland. A program was set up in cooperation with the University of Iceland, the India Institute of Science, the Wadia Institute, and TERI. This programme continues and Indian glaciologists come for training in Iceland and Icelandic scientists and professors give yearly courses in glaciology and climate sciences at the Indian Institute for Science in Bangalore.

Yet another area of co-operation could be women’s empowerment and women’s entrepreneurship. In fact the women’s branch of FICCI is visiting Iceland this fall to meet women entrepreneurs. And in Iceland we host the United Nations University Gender Equality Studies and Training Programme.

What are the areas in which you think Indian business can invest in Iceland and vice versa?

There are important business opportunities for Indians in Iceland. Apart from the sectors www.governancetoday.co.in

we have already discussed such as renewable energy, food processing industry and the film industry, I should mention in particular biotechnology, information technology and tourism. Icelandic start-up industry is fast growing and provides an attractive market especially in cutting edge sectors like digital technology and bio-technology.

Among the advantages of Iceland are advanced infrastructure, young and well educated population and favorable business environment. Iceland is also geographically located between the two largest western markets, the European Union and North America. Iceland is a member of the EU single market and has Free Trade Agreements with 38 countries. And we are negotiating with 8 more countries, including India as I mentioned earlier. Iceland is also strategically well located for the future sea route over the North Pole and through the North-East Passage linking Europe and Asia with the shortest shipping route, something that is drawing the attention of number of key economies in Asia, notably China, Japan, South Korea and Singapore, as well as of India.

The tourist and hospitality sector is also growing rapidly in Iceland and require more facilities not the least upper end hotels and services. Iceland has become one of the fastest growing tourist destinations in the world. The number of tourist arrival in 2014 was three times the country’s population and this year the number of tourists will be close to four times the population of Iceland.

And for Indians, Iceland is a fascinating tourist destination. It offers pristine nature, pure air, clean water and spectacular landscape including glaciers, volcanoes, lava fields, waterfalls and fjords. You can experience the beauty of the Midnight Sun in the summers and the mystery of the Northern Lights (the aurora borealis) in the winters. And there is plenty of leisure from the natural warm baths of the “Blue Lagoon” to entertainment, www.governancetoday.co.in

contemporary arts and our Viking heritage. Indian travellers can reach Iceland by air from most European capital cities with flying time of three hours or less. Or take a cruise ship from Europe.

Please let us know how can India and Iceland cooperate on multilateral institutions like EU and UN? Iceland and India have enjoyed more than 40 years of cordial diplomatic relations that dates back to 1972. We are both members of the United Nations where we are seated side by side, in accordance with the alphabetical seating order that has facilitated sharing of views and mutual understanding.

We share the ideas of democracy, the rule of law and the peaceful settlement of dispute. I believe that we can extend our cooperation within the UN framework even further in number of areas. I will mention but two pertinent areas.

The first is women’s rights and the fight against the violence against women. These are issues that are receiving increasing attention in India. Indeed last November, the “2nd Global Symposium - Men and Boys for Gender Justice” was held in New Delhi, an important initiative because it is devoted to the participation of men and boys in building gender equality. The meeting provided an important input into the “Barbershop Conference” held at the UN Headquarters in New York last January. The conference was held at the initiative of Iceland and Suriname in the leadup to the 20th anniversary of the Beijing Declaration and Platform for Action for gender equality, the empowerment of women and the human rights of women and girls. The HeForShe movement, which is engaging men and boys as advocates for gender equality and women’s and girls’ rights, was a partner of the conference. The aim of the “Barbershop Conference” was to change the way men talk about gender equality and engage themselves. This is an important theme that Iceland and India could

work on together within the context of the UN or here in India.

Another area for global co-operation could be the promotion of the use of geothermal energy. India would best contribute to that effort by joining the Global Geothermal Alliance (GGA) that Iceland helped initiate on the occasion of the United Nations Secretary-General’s Climate Summit in September 2014. The Global Geothermal Alliance will serve as a coalition for action to increase the share of geothermal energy in the global energy mix. Geothermal energy is an abundant resource that has great potential to provide low-cost energy and mitigate climate change.

It can be used for electricity generation as well as for direct heat applications including space and district heating, domestic hot water supply, greenhouses, and process heat for industry and agriculture. Geothermal resources have been identified in nearly 90 countries.

In this context I should also mention the Arctic cooperation.

Although not a UN matter, the Arctic region has a global relevance. Iceland strongly supported India’s application for observer status in the Arctic Council. Now that India has obtained that status, we encourage India to pursue its scientific interests and explorations in the Arctic, for in our estimation Indian scientists can make important contribution to Arctic research in particular in the area of climate research.

The Arctic cooperation has also inspired dialogue and cooperation in the Himalaya region, which often is referred to as the Third Pole due to its important glaciers. In fact the President of Iceland H.E. Mr. Ólafur Ragnar Grímsson, who has enjoyed a longstanding friendship with India, has lent this process his support. President Grímsson has actively brought the attention of global leaders to the Arctic region in particular by forming the Arctic Circle, which is the inspiration for the Himalaya-Third Pole Circle. edit@governancetoday.co.in

September 2015 I

43

NAGA ACCORD

One big step in right direction The Naga accord can lead to peace and prosperity of Northeast, if honestly implemented

The agreement between the government and the NSCN (IM) has raised hopes for peace

Dharamsing Teron THE ‘NAGA Accord’, signed on 3rd August 2015, hailed by Prime Minister Modi as ‘historic’, seems to have kicked up more controversies now than the signatories on both sides would have liked. In a sense, the accord is historic as it came after nearly two decades of a long and winding wait and more than 80 rounds of dialogues held in places like Zurich, Paris, Hague, Osaka, Davos, Bangkok, Chiangmai, Amsterdam and New Delhi, involving six Indian Prime Ministers in the process to bring to an end ‘mother of all insurgencies’ in India’s Northeast since the ‘ceasefire’ in 1997. The controversies surrounding the accord began as immediately as it was signed as both sides remained tight-lipped over the details of what actually transpired between them, fuelling serious speculations among Chief Ministers of Manipur, Arunachal Pradesh and Assam who went on record www.governancetoday.co.in

opposing any clause that could affect the territorial integrity of their respective states. The ‘framework agreement,’ as it has been called, has not revealed any clarity on the details other than the NSCN (IM) top leadership rubbishing reported ‘climb-down’ from the two core issues of ‘sovereignty’ and ‘Naga integration’. The Naga ‘sovereignty’ if it was agreed on 3rd August would have meant separate constitution for Nagaland, a separate flag, separate passport, permanent UN representative, joint Foreign Affairs and Defence/Military, right to use Naga currency and, the pan-Naga Government to cover all Naga inhabited areas, which, Special Interlocutor RN Ravi had denied.

He ruled out the redrawing of state boundaries without taking on board all the stakeholders.

Historical perspective of Naga insurgency The Naga insurgency, spanning

over six decades, is dubbed as the ‘longest running’ separatist movement in India since the days of the legendary Naga leader Angami Zapu Phizo who in 1946 headed the ‘Naga National Council’ (NNC) and declared ‘Naga Independence’, a day ahead of India’s midnight tryst with freedom in 1947, when his meeting with Gandhiji demanding complete secession for the Nagas was drowned in rhetoric. The ‘Naga Club’ (NC), formed in 1918 first raised the Naga issues with the British government demanding exclusion from colonial constitutional design.

Phizo transformed NC to NNC which attempted to negotiate the Naga Independence issue with Nehru but failed. In 1951, the Nagas demonstrated their resolve by enforcing the boycott of first General Election in Naga Hills in 1951 calling it a ‘plebiscite’ for Naga Independence. The NNC formed the underground ‘Naga Federal Government’ in 1956 and raised the ‘Naga Federal Army’ to launch a series of violent campaigns. Amidst September 2015 I

45

the secessionist violence, Nagaland was inaugurated in 1963 as the 16th state of the Indian Union.

Sustained military offensive and peace missions paved the way for a settlement with the NNC, known as the ‘Shillong Accord’ in 1975, which was rejected as ‘sell out’ by a group of hardliners who subsequently gave birth to the ‘National Socialist Council of Nagaland’ (NSCN) in 1980 led

by Isaac Chisi Swu, Thuingaleng Muivah, and SS Khaplang. The new state of Nagaland enjoyed a decade of peace as NSCN struggled to influence the Naga affairs on its terms. NSCN preached a Naga brand of socialism along Maoist ideology and Christian spirituality in its campaign to attain sovereignty for the Naga areas covering parts of Maynmar, Manipur, Arunachal Pradesh and Assam to constitute the ‘Greater Nagalim.’

Meanwhile ‘official incompetence and corruption’ started to create popular frustrations among the Naga youth which invigorated the NSCN to transform it into the ‘most powerful and wellknit’ insurgent group in India. But soon, the NSCN suffered a split as it divided into two warring factions in 1988. The one-time comrades IsaacMuivah and Khaplang parted ways plunging Nagaland into a virtual killing field as fratricidal clashes took heavy tolls, coupled with unabated extortion and kidnapping. In April 1988 Khaplang’s men killed at least a hundred cadres of the IM faction in an attempt to assassinate Muivah, which marked the ‘bloodiest clash’ in the history of NSCN. Khaplang suspected that Isaac-Muivah was clandestinely negotiating with the Government of India. The split was also attributed to ‘tribalism’ as Khaplang was a Myanmarese Naga while Swu was a Sema and Muivah a Tangkhul.

Negotiation process did indeed begin, but not as Khaplang had imagined. It was not until 1995 when Prime Minister PV Narashimha Rao met Isaac-Muivah in Paris in June. The process was continued by Prime Minister Deve Gowda as he sent Minister of State 46 I September 2015

Greater Nagalim as demanded by the Naga leaders

Rajesh Pilot on a secret mission to Bangkok in November 1996 to try to convince the IM leadership for a political dialogue. A year later, Deve Gowda and the IM leaders met in Zurich in February ‘agreeing’ to ‘unconditional talk’ at ‘Prime Ministerial level’ which could be held in a ‘third country’.

Subsequently, IK Gujral, who became the PM, favoured peace talks with the Naga insurgent groups ‘without any precondition’ who informed the parliament about a ‘mutual agreement’ for a three-month ‘ceasefire’ beginning

1st August 1997. Events seemed to move rather rapidly now. During this time, the ‘Atlanta Peace Meet’ in July-August 1997 happened under the aegis of ‘Baptist Fellowship of North America’ aiming ‘to thrash out a solution to the 50 year old Naga insurgency...’ but without the participation of IM faction which boycotted it. The Government of India declared a ceasefire in August 1997 primarily with the IM faction but made it applicable to the Khaplang faction as well which was welcomed by the people in Nagaland. But the Khaplang faction www.governancetoday.co.in

Khaplang’s parting ways with Issac and Muviah led to violent factionalism in NSCN

denounced the ‘ceasefire’ as a ‘treachery’ and conspiracy to divide Nagas. Later. peace talks began with Mr Swaraj Kaushal as the interlocutor, followed by former Home Secretary, Mr Padmanabhia.

Meanwhile, NSCN-K indicated its willingness to enter the peace process by declaring a unilateral ceasefire in April, 2000, which was hailed as an important phase of negotiation.

Amidst simmering tension within the Naga polity, when the third round of peace talks slated to be held at the Hague in January 2000 was to start, Thai police arrested Muivah in Bangkok from a flight from Karachi and lodged him in jail implicating him of possessing false documents. This created a road block as IM leadership insisted on his release as only he could represent the Naga issue. Blames and counterblames ensued, eclipsing the peace process to further uncertainty. IM blamed the arrest of Muivah as government handiwork while the government accused him of plotting against India and organizing massive arms shipment from Pakistan via Thailand and Myanmar.

Government of India believed www.governancetoday.co.in

that IM was using the ‘ceasefire’ to stockpile more weapons. The initial goodwill began to give way to a growing sense of frustration and suspicion. The Naga peace process was resumed in 2001 after Muivah’s release from detention in Thailand. Since then, dozens of Indo-Naga peace talks were held which apparently went nowhere.

The Government of India stuck to its position of no ‘compromise’ on cross-border Naga integration and ‘sovereignty’, the core issues raised by the NSCN-IM. The NSCNIM even raised the possibility of seeking a third-party intervention in the Naga issue in the Holland talk in 2006 as a strategy to keep the peace process rolling. It has been observed that ‘after each round of talk, the NSCN leadership’ made ‘it a point to repeat that the organization’s commitment to a sovereign Naga homeland remains unchanged, notwithstanding the clear movement towards greater autonomy’.

All through these gruelling and seemingly unending exercises of peace parleys, often punctuated by suspension of talks owing to several issues, the NSCN-IM

gained by way of ‘eliminating the other insurgent factions’ and establishing itself as the sole arbiter of the Naga cause. Meanwhile, the frontline civil society organizations such as the Naga Hoho, Naga Mothers’ Association (NMA), Naga Students’ Federation (NSF), Naga Peoples’ Movement for Human Rights (NPMHR) and United Naga Council (UNC) played very important role in ‘sustaining the peace process’, both within India and abroad.

While peace talks with the NSCN-IM have seen various ups and downs through roadblocks and bottlenecks, the process with Khaplang has remained a non-starter all these years and after the 3rd August ‘framework agreement’, the group chose to suo-moto ‘abrogate’ the ‘ceasefire’, pushing the entire process into an uncertain future.

Impact of Naga insurgency on the overall problem of NE India: The Naga insurgency has serious implications for the Northeast.

From the womb of the ‘mother of all insurgencies of Northeast’, a September 2015 I

47

host of armed outfits sprung up like the proverbial wildfire increasingly destabilizing peace, development and security in the region. As a result, not a single state in the Northeast region is today free from insurgency and violence. The Naga insurgency, for its own strategic considerations, both harboured and nurtured similar armed groups which succeeded largely due to economic backwardness and the repressive counter-insurgency measures. Particularly, the 90s witnessed a sudden spurt in insurgent outfits in the Northeast, now engulfing new areas which were once considered peaceful.

In the wake of the six-year antiForeigners’ movement, the United Liberation Front, Asom (ULFA) emerged in 1979 which appealed to the middle class youth of the Assam plains, posing big security threat to the state. Insurgency so far considered only as confined to the Naga, Mizo and Manipur hills went mainstream with the emergence of ULFA, opening a floodgate for other tribal insurgencies from among the Bodos, Karbis, Dimasas, Khasis, Garos, Adivasis and KochRajbongshis etc. with their own multiple rival factions on issues of ethnic identity, political, economic and constitutional safeguards.

On its own, the ‘sovereignty’ and ‘integration’ of Naga inhabited areas as pursued by the Naga insurgents have great political and social ramifications as the

‘core issues’ would require the redrawing of the existing state boundaries of the three states of Manipur, Arunachal Pradesh and Assam. And already the three states have strongly objected to such a formula. The Naga independence demand which Nehru scoffed off as ‘absurd’ has throughout the decades probably tested the Indian political leadership to its limit.

Importance of peaceful Nagaland and prospect of peace The ‘Look East-Act East’ policy, which has its roots in the ‘Look East Destiny’ of the late 80s in the post cold-war period when India began peaceful overtures to ASEAN countries, already drawing Myanmar in to its regional grouping, is aimed to accelerate economic cooperation, development through reforms and liberalization. The ASEAN market is attractive to Indian exporters facilitated by geographical proximity, shorter delivery schedules and lower freight costs. There is an added advantage of a good number of people of Indian origin (PIO) in Southeast Asia who share historical, religious and cultural commonalities that hold the promise of economic linkages that will be ‘multifaceted and in-depth.’ But in order for this to happen, India must ensure that Nagaland and the entire Northeast for that matter remain peaceful

and conducive to such an opening up. The ASEAN countries are also aware of the overall security environment in the region which is crucial for the ties to materialise and grow.

The Naga peace talks have sustained over two decades amidst crises and roadblocks. The fact that the peace parleys have taken such a long detour may have demonstrated the Naga leaders’ strong resolve to play the game the Government of India is adept at. From the Northeast’s perspective, ‘ceasefire’ and ‘peace talks’ are more often seen as official ploys to exhaust the patience and capacity of the various insurgent groups which end up without anything substantive. The Indo-Naga peace process also has agonisingly lingered on for much too long and neither side is showing signs of tiring. As in the past, there are talks of reassurances that the differences between the two sides have been ‘narrowed down’ and that they are soon coming up with a ‘framework’. With neither side willing to reveal the reality, it again seems a long wait and an uncertain outcome.

The outcome of the Indo-Naga peace deals much depends on the Indian political leadership and the military-bureaucratic establishment.

The new generation Nagas, who are increasingly taking active interest in the positive transition of Naga society, could act as key players in shaping the popular opinion in either side. The fact that more and more civil society organizations are taking up increased responsibilities to promote the peace talks is indication that the desire for peace process to succeed is very high among general population in the region. For the Indian state, stakes are very high as a peaceful resolution of the Naga problem would pave way for peace in entire Northeast which, in turn, would lead to greater integration of the country with Southeast Asian nations.

(The writer is an author and a freelance writer from Karbi Anglong, Assam)

Naga insurgency has resulted in many road blockades between Manipur and Nagaland

48 I September 2015

edit@governancetoday.co.in

www.governancetoday.co.in

LEGAL ISSUES

No leniency in rape cases Supreme Court overrules soft approach of MP High Court

The judicial action sparked off the whole gamut of issues of settlement by way of ‘compromise’ or mediation in a cases like rape.

Raj Bhushan RECENTLY, THE Supreme Court of India commented in the context of a rape case from Madhya Pradesh. It was held that that courts cannot take a soft approach on the issue and the Supreme Court described the High Court (Madhya Pradesh) ruling as a “spectacular error.” It also came hard on the lack of sensitivity on the part of a lower court which had allowed a rapist to go scot free by accepting an agreement on wedlock.

In another case, the Madras High Court judge had granted interim bail to the rapist so that he could ‘mediate’ with the victim. In this case, the learned Judge in pretext of holding alternative dispute www.governancetoday.co.in

resolution such as mediation gave the benefit to the accused to mediate and arrive at the settlement.

Compromise formula in rape cases - a perspective These abovementioned judicial actions sparked off the whole gamut of issues of settlement by way of ‘compromise’ or mediation in a criminal act like rape. It also raises debate about whether to treat the act of rape as an individual wrong or wrong against the society? Additionally it raises doubt that the said ‘compromise’ is influenced by the exterior factors and are free from all other duress? This leads to a complex situation in the present social matrix wherein the crime against women have become more

complex and rampant. One of the compromise formulas practiced by the accused in the case of rape is the proposal of marriage with the oppressed, thus escaping punishment.

Now the moot question is as how the marriage proposal exonerate the accused from act of rape wherein the rape is a crime and the intention of marriage was nonexistent at the time of commission of the crime?

Compromise is generally arrived at in a civil or a criminal case wherein a personal loss is caused and it has no social ramification. However the ‘compromise’ in rape cases will dilute the charges against the accused and the case will fail to meet the logical end. Also, compromise without any intimidation or duress is a rare phenomenon especially in September 2015 I

49

the compromise arrived at between the parties in rape cases” Compromise, if allowed to be fructified in the criminal justice system in cases like rape, may lead to a precarious situation especially when a woman belongs to the socially and economically weaker section of society. This lead to encouragement to the perpetrator who may utilitze the compromise as a legitimate tool to intimidate the women and may get away without prosecution. Therefore the conception of compromise in the cases like rape under no circumstances should be encouraged.

Rape – a moral wrong and more

Even after massive uproar after Nirbhaya case, not much has changed on ground

HOW INDIA TREATS WOMEN

the crime like rape.

Rationality of the compromise in rape cases To address the issues we need to look in to the real intent behind the compromise purportedly arrived between the parties and secondly are the compromise in the rape cases sustainable and viable option of criminal justice system in a crime like rape in a present social matrix?

The recent cases may be aberration to the present precedents as settled by the Hon’ble Supreme Court in India. In case of a compromise in rape cases it was held in Shimbhu and another Vs State of Haryana- “a compromise entered into between the parties cannot be construed as a leading factor based on which lesser 50 I September 2015

1,25,433 1,09,035 40,477 2,58,104 4,99,642 481 66,114 11,23,434 51,623

Source: NCRB

Total number of cases under trial Kidnapping & Abduction of Women Dowry deaths Assault on women with intent to outrage her modesty Cruelty by Husband or his Relatives Domestic violence cases Immoral trafficking Total crime against woman Total rape cases under probe

punishment can be awarded. Rape is a non-compoundable offence and it is an offence against the society and is not a matter to be left for the parties to compromise and settle.

Since the Court cannot always be assured that the consent given by the victim in compromising the case is a genuine consent, there is every chance that she might have been pressurized by the convicts or the trauma undergone by her all the years might have compelled her to opt for a compromise. In fact, accepting this proposition will put an additional burden on the victim. The accused may use all his influence to pressurize her for a compromise. So, in the interest of justice and to avoid unnecessary pressure/ harassment to the victim, it would not be safe in considering

The rape is not only a moral wrong but it also a crime against the dignity of the woman and is a nonnegotiable or non-compoundable offence and is beyond a personal wrong. If a woman belongs to a weaker section in the society, she may ready to compromise her dignity without much resistance.

Dignity of a woman is a part of her non-perishable and immortal self and there cannot be a compromise or settlement as it would be against her honor. Any compromise after the rape to settle the issue out of court or through court intervention reflects lack of sensitivity towards the dignity of a woman. Any kind of approach to assuage the heinousness of crime should therefore not have any legal permission.

The idea of compromise is an effective tool to meet the common point of justice between the litigants; however certain crimes cannot be compromised with.

Any ‘compromise’ in crimes such as rape will alienate respect and reputation of women in the society.

That would eventually lead to a compromise on the basic tenets of a civilized society. Any society which conceives the idea of compromise in these kinds of crime is deplorable and must be fought back.

(The writer is a New Delhi-based lawyer) edit@governancetoday.co.in

www.governancetoday.co.in

ENVIRONMENT

Preserving Hindu Kush eco zone The ‘water tower of Asia’ provides water to one fifth of humanity

The warming trend in the region is higher than the global average

Ritwajit Das HINDU KUSH Himalayan (HKH) range has been identified as one of the major geophysical regions of the world that are going to get affected due to climate change.

Recent studies have shown that the HKH region and the downstream areas that depend on it, including the Indo-Gangetic plain – the ‘grain basket of South Asia’ – are particularly vulnerable to the changes in climatic condition. The warming trend in the HKH, higher than the global average is a cause for grave concern because this region, with the greatest concentration of ice outside the polar regions (and hence www.governancetoday.co.in

dubbed ‘the third pole’), is the ‘water tower of Asia’, providing water to one fifth of humanity.

The HKH region is also undergoing rapid change due to a number of other drivers, which make the natural and human systems in the region increasingly vulnerable. Climate change contributes to the frequency and magnitude of extreme weather events and natural hazards, leading to disasters with high economic and social costs. Although mountain communities generally have a high degree of self-reliance and a rich tradition of risk-aversion practices, the fast pace of change is compromising their capacities to deal effectively with change. In this

regard women are particularly vulnerable. Needless to say, preserving this delicate natural system is necessary to save mankind.

Placing the problem on the high table At the sixteenth Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Cancun, Mexico in 2010, Norway announced its support of more than USD 12 million to the International Centre for Integrated Mountain Development - Nepal (ICIMOD), the Center for International Climate and Environment Research – Oslo, Norway (CICERO), and the United September 2015 I

51

Nations Environment Program (UNEP)/GRID-Arendal, Norway to help the people of the HKH region prepare for a difficult and unpredictable future in view of the rapidly melting glaciers and other impacts on livelihoods and socioecological systems. After a series of consultations “the Himalayan Climate Change Adaptation Program” (HICAP) was created.

HICAP is a pioneering collaboration between three organizations – International Centre for Integrated Mountain Development (ICIMOD), GRID-Arendal and Center for International Climate and Environmental Research – Oslo (CICERO).

The program aims to help enhance the resilience of mountain people, particularly women, by improving understanding of vulnerability to change and identifying opportunities and potential for adaptation. To achieve this, the program seeks to increase understanding of change and uncertainties, enhance capacities, and make concrete proposals for policy and action. It is for the first time in the world climate change adaption program of this gigantic scale, involving five countries, has been created. The program intends to develop high quality climate change adaptation program in five sub-basin of Himalayan Hindu Kush Mountains – the Koshi, Eastern Brahmaputra, Upper Brahmaputra, Upper Indus and Salween Mekong river belts, based on high quality scientific research, modeling, simulation and spatial analysis.

Simply put, HICAP is an ideal mix of science, policy and practice.

The interdependency of scientific accuracy and research is the nucleus of the program. CICERO and GRID – Arendal will be generating high quality knowledge of climate change impacts on natural resources besides developing climate change and water availability and demand scenarios. On its part, ICIMOD will steer the overall program and apply the scientific climatic knowledge by contributing to policy and practice for enhanced adaptation. According to Nand Kishore Agrawal, the Program Co-ordinator of HICAP, 52 I September 2015

For the first time a climate change programme of this magnitude is taking place

“HICAP works to produced solid interdisciplinary scientific knowledge across social, environmental, and climatic themes; create meaningful knowledge with and for communities; identify adaptation policy and planning strategies; and inform member countries of policy directions on climate change adaptation.”

Installing adaptation a plausible solution to climate change HICAP is strategically developed to increase understanding of uncertainties influencing climate

change and encourage use of the knowledge thus created. What HICAP is trying to achieve is embedded into three concentric agendas.

The first is to reduce uncertainty through the development of scenarios for climate and for water availability and demand, customized and downscaled for parts of the Brahmaputra, Ganges and Indus river basins. Second agenda is to develop knowledge on environmental and socioeconomic impacts of the responses to climate change at local, national, and regional levels, and to enhance capacities to assess, monitor and communicate them. And

HICAP is an ideal mix of science, policy and practice

www.governancetoday.co.in

the last agenda is to make concrete and actionable proposals for strategies and policies for adaptation considering vulnerabilities, opportunities, and potentials, with particular reference to strengthening the role of women and local communities.

These agendas are in-turn amalgamated and organized into seven interlinked components, namely Climate Change Scenarios, Water Availability & Demand Scenarios, Ecosystem Services, Food Security, Vulnerability and Adaptation Analysis, Gender and Adaptation and Communications and Outreach.

Test case for synergy among nations HICAP will be a landmark program in terms of its size, transboundary cooperation and critical objectives. Himalayas and its associated ecology is the nucleus of its program. For the first time in AsiaPakistan, India, China, Nepal and Bangladesh have teamed up to address the issue of climate change adaptation in Himalayan context. In terms of governance and program deliverables respective countries have idiosyncratic demands and requirements. Pakistan, Bangladesh and Nepal have strong penchant for program implementation components through community development and pilot site testing. On the other hand, India and China are putting strong emphasis on climate change science, research impetus and policy building.

Each country has nominated their best policy and practice think tanks and institutions for this purpose. These institutions range from pure academic institutions like IIT Delhi and IISC Bangalore from India to applied research agencies such as Institute of Geographic Sciences & Natural Resources Research (IGSNRR) and Kunming Institute of Botany (KIB) from China. Then there are policy oriented think tanks like Social Development Institute, Sichuan University, South Asian Network for Environmental Economics, Nepal and Aga Khan Rural Support Program (AKRSP), Pakistan. In all, there are seven institutions from China, six from Nepal, www.governancetoday.co.in

CRITICAL QUESTIONS HICAP ADDRESSES

Which resources are important to local livelihoods in the HKH region and how do climatic and other global and regional drivers and processes affect these resources?

What additional layers of stress does climate change place on individuals, households, communities, policy makers and ecosystems?

What institutional capacities and which structural factors beyond people’s immediate control impact their climate induced vulnerabilities?

How much change do people desire, how much can they handle, and when is the change disruptive?

How certain can we be about the future impacts of climate change and other overlapping changes (e.g. deforestation, migration, global markets) on people’s lives?

What policy, institutional, and technological options are available to facilitate adaptation?

What are the central policy frameworks influencing people’s adaptive capacities and government actions in relation to adaptation?

How can we measure and evaluate adaptation measure and evaluate adaptation interventions? four from Pakistan, three from India and one from Bangladesh have come together for the program.

Besides these, ISS Netherlands and University of Sussex are also integral parts of this mosaic program.

Agrawal thinks co-ordination between various international and national parties involved with HICAP is a huge task but it gives a good sense of governance accountability and guiding perspective to steer the program in a tangible way towards its objectives.

Initial results: Shaping and momentum Now in third year of its six-year implementation period, HICAP has

generated a large volume of science and knowledge on adaptation to change in the region. With 75 publications in various stages of drafting, review and circulations, spanning 7 components encompassing a number of scientific and research disciplines, and situated in five sub basins in five HKH countries, there is a wide range of information coming out of HICAP research. In addition, the several pilots and action research launched under the program have given valuable experience to illustrate and elucidate the research findings in relation to the way change is felt and handled on the ground.

For example, its study on the September 2015 I

53

changes in river flow carried out in the upstream areas of five river basins – Indus, Ganges, Brahmaputra, Salween and Mekong showed that glaciers in the five river basins are likely to reduce by 20-55 per cent by 2050. It also estimated run off in various river basins the results of which strongly indicate that governments have to be prepared to deal with unexpected floods and dry periods, despite greater water flows on an aggregate basis. Similarly, on the issue of ecosystem services and forest patterns HICAP research showed that projected increase in erratic rainfall and river flows is expected to escalate degradation and trigger landslides. On the issue of food security according to research of HICAP showed that the farmers in the eastern Brahmaputra and Koshi River basins have experienced decreased productivity in both staple and cash crops because of environmental changes. Up to 40% of males in rural communities in the Koshi basin are migrating for domestic and international work.

Women are left to manage work in the field while the decision-making power often remains with the absent men.

Research further shows that governments and organizations can enhance food security by encouraging diversification of crops in small-scale farming, reevaluating cash crop and livelihood programs from a climate-smart perspective, incentivizing youth to maintain and develop farming systems, and strengthening education and knowledge-sharing networks.

Mapping the way forward Building on these results, HICAP will continue program activities until 2017 and will take into account the multiple change processes currently ongoing in the Hindu Kush Himalayas. During this time, the program is expected to produce more evidence-based knowledge to provide multi-dimensional understanding of the complex change processes in the HKH region, as well as concrete advice for appropriate policy and action at all levels.

Stakeholders dealing with climate 54 I September 2015

Better information about ecological disasters can lead to improve preparedness

change and other changes, from policy makers to local communities, do not experience change and its impacts as they see and face isolated phenomenon separated by discipline. While separating scientific disciplines is useful for the purpose of research and knowledge generation, these issues are more intelligible to stakeholders when presented as an integrated whole, taking into account the effect that each part of the system has on its other parts.

While the program is organized in components, much of the work in HICAP is interdisciplinary and carried out in collaboration between several components. Even so, there is a strong need to consolidate the disparate knowledge being produced under the program along the lines that will enable more effective dissemination to stakeholders in the region. HICAP will change the ball game for adaptation programs from local to global levels. The program is all about taking an architectural approach mixing science, policy and practice in context of adaptation. It is all about building a clock which is going to last and sustain rather than just telling the time. With a budget of $18 Million, spanning across five sub basins in four countries is one of the most gigantic yet unique climate change adaptation program ever conceptualized.

HICAP is the answer which international climate - adaptation lobby looking for. In 2015 North Eastern India especially Assam and

Manipur witnessed the most unprecedented flood and flood like events in last 200 years, which affected more than 300,000 people in both rural and urban areas. Cumulative economic loss is expected to surpass $80 Million. The government machinery and institutional set-up did not anticipate the disaster outbreak of this stature. Since these extreme weather events are going to be more frequent in future, adaptive capacity of communities need to be strengthened at all level from policy to practice. And HICAP is just doing that.

Developing and least developing countries are already putting strong emphasis on climate change adaptation for Paris Agreement later this year. Developing countries like India, Philippines, Brazil and China have already declared the importance of adaptation in their national climate policies. Least developed countries like Laos, Cambodia, Kenya, and Uganda are demanding strong support for financing of projects for climate adaptation at UNFCCC. Paris won’t be a success if it does not take adequate consideration of adaptation angle. And programs like HICAP will present a very strong and justified case for climate change adaptation contributing both to policy and practice.

(The writer is an international research consultant working in the area of environment, urbanization, climate change and sustainable development.)

www.governancetoday.co.in

DNA BILL

A threat to privacy Provisions are too intrusive, usage too vague and possibility of abuse too high to have any positive impact Sagarika Ranjan YES, OUR country is going hi-tech but there is a word called customized imbibing of something new as per the health of the recipient and here India is the recipient. Good news that we are taking up new ways to check crime but bad news is that feasibility with regard to the Indian scenario does not seems to have been taken into account as far as the Human DNA Profiling Bill is concerned.

A study by the Council for Responsible Genetics — Overview and Concerns Regarding the Indian Draft DNA Profiling Act, explains “the draft DNA Profiling Bill (hereinafter “Bill”) pending before parliament attempts to create an ambitious centralized DNA bank that would store DNA records of virtually anyone who comes within any proximity to the criminal justice system. Specifically, records are to be maintained of suspects, offenders, missing persons and “volunteers.”

The schedule 2 to the Bill contains an expansive list of both civil and criminal cases where DNA data can be collected including cases of abortion, paternity suits and organ transplant.

In all fairness, the Bill contains provisions limiting access to and use of information contained in the database, and provides for the deletion of a person’s DNA profile upon their acquittal.

In simple terms, the Bill will codify the set procedures of a comprehensive legislation regulating the collection, use, analysis and storage of DNA samples while creating a DNA Database.

DNA analysis has consistently been instrumental in criminal www.governancetoday.co.in

investigation as strong scientific evidence under the Criminal Procedure Code. However, the clouds of doubt are hovering on the ethics, privacy, use and abuse of the data. Such advanced forensic information collection involves a lot of money which increases the risk of corruption. Another factor is the consent of individuals that is mandatory in order to collect the body substances for record. Forensic, legal and genetic experts raise some reasonable doubts, expressing possibilities of cross contamination of samples, mislabeled samples, and misrepresentation of test disclosure, typing errors and transplanting DNA samples intentionally.

In a country where almost all the developmental parameters indicate a developing trend, where there are scams, allegations of misuse and abuse and where over 70 per cent of the population do not understand what DNA means, taking such a vital decision of establishing and maintaining a DNA database doesn’t seem to be wise in any way. In India around 3.3 million arrests have been made in criminal offences. And the task of creating a DNA database of such magnitude is enormous, and costly.

This apart, there are several ambiguities regarding the provisions of the bill. For example, the Bill doesn’t say clearly with regard to the circumstances under which one’s DNA will be collected for the database building ‘with or without consent’ of the person. The UK and the USA grant collection of DNA sample without consent within a stipulated time frame as their laws clearly assign when DNA sampling can be done.

When DNA data are collected, the persons will have to provide their name, gender, address and

caste. However, the timeframe for the deletion of one’s DNA from the database is yet to be set. So it raises serious doubts on how long one’s DNA is kept on record.

DNA Profiling Bill allows victims of accidents and disasters to trace missing persons for civil disputes. The Bill even permits creation of population statistics, identification research, parental disputes, issues related with reproductive technologies and migration as well.

Infringement into the privacy of a person as mentioned in the bill also raises eyebrows across demographics. DNA Profile can disclose the privacy of a person including medical history, family history and other such private details. One of the databases based on caste may deepen social rift as the politicians may target some specific caste for their criminal indulgence for mere divisive social vote bank engineering.

The worst part is that the draft bill has provision of collection of “intimate body samples” from “the genital or anal area” and also breasts in the case the suspect is a female.

Further, there are provisions of external examination of private parts. Taking photograph or video recording in those areas is also allowed in case there are any wound or impression that the help further investigations. Such provisions may push civilian priorities set aside and DNA Database may get abused.

Even the study by the Council for Responsible Genetics points out that there are certain ambiguities in the bill that raises security concerns.

It states that “rather than choose to link the DNA profile data to a specific offender or case, the drafters of the Bill instead like the “body September 2015 I

55

substance or body substances” with that specific offender or case. Whether sloppy drafting or clever nuance, this provision elides the DNA profile with the DNA sample, injecting unneeded — and potentially harmful — ambiguity into the proposed law.”

The paper further suggests compounding of this ambiguity. It states that, “Access to Information” opens the door to much more than DNA profiles alone being kept on the government database. In all three of its subsections it purports to govern access to “the information” contained in the database, not “the DNA profiles” contained in the database.

Taken at face value, this provision of the Bill suggests that any and all sort of “information

DNA DECODED Deoxyribonucleic Acid (DNA) contains the instructions needed for an organism to develop, survive and reproduce. To carry out these functions, DNA sequences must be converted into messages that can be used to produce proteins, which are the complex molecules that do most of the work in our bodies DNA is rock solid evidence that convicts the guilty and exonerates the innocent. Analysts can compare the suspect’s DNA to DNA left behind at the scene of the crime. Results can confirm that a suspect was involved, or can help clear someone wrongly accused.

. . . pertaining to a convict” that might be derived from his or her DNA can be stored on the database.

Even if prudential oversight provisions elsewhere in the Bill suggests a tightly controlled technoforensic apparatus, the overbroad construction of provisions raise significant questions about the wisdom of enacting the text in this form, states the study.

A social activist, on the condition of anonymity, said that police excesses have been making headlines and allegations pop up almost every now and then. People in India do not feel secure with police around and passing of this bill will give them all the necessary power to interfere and disturb the private lives of any individual.

The potentials of the bill in solving crime is not that great when compared to the threats it poses on the privacy and security of the citizens of India. Not only police, even terror outfits, red rebels and

other anti-social elements could have a free way into committing hi-tech crimes, with access to such data. And the record of Indian establishment in maintaining sanctity or secrecy of data is not enviable.

The supporters of the bill assure that the data will be maintained in the safest corridors but they fail to take into account the extent of advancement in cyber-crimes.

Moreover, there are several grounds on which any investigation officer can have access to the data with all legal consent and abuse the same for personal purpose.

The DNA bill is, therefore, not fit for contemporary India.

Every step, right from collection of samples to maintaining it, using for investigation to its deletion remains unclear in the present draft of the bill. The situation therefore will be alarming if the bill actually becomes a law.

Kumar Deepak, Environmentalist with the United Nations Development Program (UNDP), sums up what more is needed to get the bill passed. He says, “The draft of the DNA Profiling Bill needs a more comprehensive legislation regulating the collection, use, analysis and storage of DNA Samples.”

Perhaps an even more imperative requirement is to sensitize and the law enforcement apparatus so that citizens are willing to trust them with any information, personal or otherwise. edit@governancetoday.co.in

56 I September 2015

www.governancetoday.co.in

WOMEN ISSUES

Women Entrepreneurs: a dire need for India’s development “To call woman the weaker sex is a libel, it is man’s injustice to woman. If by strength is meant brute strength, then, indeed, is woman less brute than man. If by strength is meant moral power, then woman is immeasurably man’s superior”....

- Mahatma Gandhi

Slowly but surely women are making in roads in corporate India

Sumitra Goenka IN INDIA, women comprise about 30 percent of corporate senior management positions, which is notably higher than the global average. However, it is equally true that they have to assume the responsibility of being a homemaker first. According to the World Economic Forum’s (WEF) Global Gender Gap Report 2014, www.governancetoday.co.in

Indian women spent an average of 352 minutes per day on unpaid work while men spent just 52. If we consider the overall workforce, India doesn’t rank as a leading country in the world - 113th out of 135 - when it comes to the gender gap while women entrepreneurs constitute only 10 percent of the total number of entrepreneurs in the country.

Even in agrarian sections of

the country, where women work as hard in the fields as men, they are also expected to manage the home. Women seeking and finding employment in paid jobs outside the home is far from the norm.

According to the same WEF report, India’s women make up slightly over a third of the workforce, get paid just over half of what men get for similar work and on average, earn a quarter of what men do.

September 2015 I

57

However portraying a contrary picture, some surveys suggest that women entrepreneurs have an edge over male entrepreneurs and edges matter to investors. The figures back up this claim in and outside India.

One of the most obvious reasons to invest in women leaders in India is that women control the vast majority of household spending.

So unless you are a business that is focussed mostly on men, women are more likely to better understand customer perspective. Another is that women are often better at building long-term relationships than men.

There is also the factor of having diversity in a leadership team.

Multiple studies have argued that socially different group members do more than simply introducing new viewpoints or approaches. So diverse groups outperformed more homogeneous groups not because of an influx of new ideas, but because diversity triggers more information processing which is absent from homogeneous groups. A company’s odds of success increase with female executives at the higher levels like Vice President and director etc.

Statistically significant evidence shows that there is dependence between a company having female executives and its success.

Since entrepreneurs typically spend some time in the workforce before starting up, less women in jobs outside the home also translates to fewer women entrepreneurs.

Thus, with an aim to facilitate employment opportunities for women, the micro, small and medium enterprise (MSME) ministry is implementing special, dedicated schemes for Women Entrepreneurship Development.

These schemes include Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme and Mahila Coir Yojana that envisages economic empowerment of women through trade related training, information and counselling extension activities related to trades, products and services. Under this scheme the financial loans are provided by 58 I September 2015

Overall Success Rates of Companies with Female Executives

The warming trend in the region is higher than the global average

VC-backed M&As by Companies with Female Executive(s)

The warming trend in the region is higher than the global average

nationalized banks and through grants of central government subject to maximum limit of Rs 30 lakh through NGOs for capacity building and for undertaking selfemployment ventures by women in non-farm activities. Under Mahila Coir Yojana, financial assistance is provided for motorized ratts for spinning coir yarn to women artisans after giving them the required training.

As per another World Economic Forum report, nine percent of Indian firms have female participation in ownership. Earlier data, from the Fourth All India Census of Micro, Small and Medium Enterprise sector (2006-07) says there were over 26 lakh ‘women enterprises’ (out of a total of 3.67 crore), i.e.

around 7.3 per cent of all MSMEs. Women’s entrepreneurship isn’t an alien concept in India. But much of this enterprise has tended to be small-scale, and in areas in which women are expected to have ‘natural’ expertise, for instance; food-related businesses like baking and catering, clothing-related like tailoring or boutiques, handicrafts, lifestyle sector businesses, and so on. It is time their talents are used in more diversified and traditionally male dominated areas as well. The author has used the data from some of the surveys conducted by Dow Jones, Forbes, Ministry of MSME and World Economic Forum for the reference edit@governancetoday.co.in

www.governancetoday.co.in

SKILL INDIA

Skills hang fire for alphabets they require Basic education, the platform for running skilling program is missing

This is not the first time that the government has taken an initiative to tap the human resources that is available in hinterlands.

Sagarika Ranjan SKILLED INDIA is a dream for now. Weaved out of policies’ aims and imitation of the developed nations, the weave lacks shape; it lacks yarn and lacks the prerequisites. We are trying to make hands write sentences when the mind does not know of alphabets.

We are asking the legs to turn left when the minds knows not what directions are.

But how can youths decipher the skilled development program manuals out of an illiterate, uneducated childhood? The 70 per cent rural folk are asking for alphabets and what they get is skill development program manuals.

Where are the basics? Spending over 17 years in the field of vocational training and livelihood, Mrinalini Kher says that maximum youth who have aspirations and desire to make something of their lives are www.governancetoday.co.in

girls and young married women and those who did not have even the basics to avail the skill development opportunities.

Kher has been a part of Yuva Parivartan, an NGO that has been working for years to provide livelihood to underprivileged youth, for almost two decades and transforming lives through honing the skills of hundreds all over India. Sharing her experiences she says, “The experience shows mentoring, counseling and personal rapport with the trainers, and finally total support and involvement of family is a sure route to success.”

Of late the government has rolled out a number of skill development programs to bring under its purview the favorable demography of India. However, this is not the first time that the government has taken an initiative to tap the human resources that is available in hinterlands.

There are two sides to this coin of skill development. One aspect – the positive one – can well be seen on the website of the National Skill Development Corporation (NSDC). The website boasts of laurels. The most recent being the eight medallions that team India won at the Worldskills competition held at Sau Paulo in Brazil. This apart, the government has introduced a number of schemes, commissions, scholarships and incentives to promote skill development for the welfare of the population.

These were facts and efforts from the managerial and policy levels that are mostly confined to the urban folks of the nation. Now, facts from the grassroots level – there are 300 million dropouts in schools every year of which 65 per cent are in the rural areas. “What courses can Yuva Parivartan offer to our rural youth, who constitute as much as 50 percent of the total September 2015 I

59

youth population, who reside in those pockets of the country where there are no industry, where infrastructure is defined by huts, makeshifts, two buses per day in the name of transportation and if the numbers are not good enough the drives chooses to rest for the day,” asks Kher.All, including the Government, NGOs and the individuals working towards skill development, are trying to fix the tower top not noticing that the foundation itself is missing. Most organizations, public or private, only think of urban or semi urban areas while poor infrastructure and no industry culminates into low economic activity in these rural areas where mainly rain fed agricultural income is the only means of livelihood.

The very focal point is misguided. Government schools which are the foundation of skill development are in tatters. A very recent ruling by the Allahabad High Court that made it compulsory for government servants to send their children to government schools sparked a controversy across the country. On one hand where the Supreme Court has been moved to implement this ruling across India, the government servants are “furious” over the decision.

“This is a decision of its kind.

This will hopefully improve the condition of government schools.

Else, there is nothing, absolutely nothing that can be compared between private and government schools. Infrastructure is secondary, there is always a doubt whether the teachers will turn up or not,” said a government school principal on condition of anonymity.

Skill development has to start from early stage. Sharing her suggestions, Kher explains, “There is a need to spread awareness among parents on importance of skill education. Though things are changing, there is still a large chunk of population where the children and youth have to resist orthodox family views and social norms to take to skill development.”Kher further adds that there is a need to shift from degree-intensive education to 60 I September 2015

ITIs can be used for improving the skills of youth

skill-based education. “Introduction of compulsory vocational subjects from class eight in all schools, public and private is the need of the hour.” Similarly, the youth in the rural and semi-urban areas have lack of exposure to industrial nittygritties, have very less opportunity to attain education and marketable skills based on which any industry could absorb them. Their financial incapacity adds to their woes.

NGOs to help implement the skill development programs. Introduce two to three variable models of vocational education to suit the geography, local needs and convenience of India’s diverse population, said Kher adding that the industry should provide residential and boarding facilities at a reasonable rate as most jobs are in informal sectors where migration is the only option.

Means and schemes are all there, what is lacking is thoughtful and honest execution. Corrupt and lousy implementation of any scheme is our biggest weakness.

Going by statistics, we find that our para-nursing beautician tailoring courses have nearly 80 to 90 per cent wage or self employment.

Activists agree that there will be problems and difficulty at the initial level in allocating trainers; however, attractive salary structure, perks and congenial work environment can help overcome these initial hiccups.

A pilot in hospitality has over 90 per cent job placements. Cottage industries and small scale industries can help the rural untouched corners to be a part of the economic growth of the country.

But all has to start early, from toddlers. Skills can be best imbibed when educational basis is strong enough. “If NGOs and government organizations or departments provide skill training followed by mentoring and guidance to prepare for workplace, the individual will for sure be an asset for the nation,” said Kher.These kids and youth need handholding approach to change our struggling to-get-skilled India into skilled India. Schools can tie up with local ITI’s, private institutes,

However, the sad part is that all these schemes, policies and benefits fails to percolate down to those for whom it was actually introduced.

Corruption eats it all. Locals across several villages allege that books, uniforms, mid-day meals and even stationeries are either sold off or never bought. The money is then distributed amongst the school staff and at times, actually most of the times; even senior administrative officials grab their share. Execution of India’s skill development programs is relying on a handful of corrupt staff, tattered infrastructure and basics-devoid youth. So how far will these cherries on the stale bread maintain the beauty of the cake of skill development is something we need to be watchful of. edit@governancetoday.co.in

www.governancetoday.co.in

June 2015

Governance Today

75

INTERVIEW

WOMEN’S SAFETY IS OUR TOPMOST PRIORITY

DESPITE BEING the capital of India, Delhi is no different from any other part of the country in terms of violence against women.

The situation touches nadir sometimes when the capital city becomes a focal point of debate across the country – December 16 2012 gangrape of a student is a prime example in this regard.

In the midst of all these odds, Delhi Commission for Women has established its own position as a monitoring body of the issues that disturb women the most.

The commission was recently in limelight when it became the battleground between Lieutenant Governor Najeeb Jung and Chief Minister Arvind Kejriwal over the appointment of Swati Maliwal as the new chairperson. After much tussle the dust finally settled down.

RAMESH KUMAR RAJA talked to Maliwal to discuss her plans and priorities and her stress to revamp the commission’s image. It may

Swati Maliwal Chairperson, DCW 62 I September 2015

www.governancetoday.co.in

be noted that Maliwal previously worked as an adviser to Delhi CM Kejriwal on public grievances and handled his Janta Samwad.

Married to Navin Jaihind, a key Aam Aadmi Party leader from Haryana, she has been associated with Kejriwal since his days with the India Against Corruption movement. Edited excerpts:

How do you look at your role as DCW chief?

It’s a very big responsibility for me because working for the cause of women is not as easy as one thinks.

It’s very unfortunate that no special work has been done at DCW for the last eight years. It has been used more as a wrestling ring of politics.

Everything is disordered. There is no proper system of work – from how a complaint is lodged to how the case is resolved, nothing is in good shape.

Now I am spending sleepless nights to chalk out a plan of action to empower women through this institution. Since there are high expectations from us, we need to do a lot in a very short span of time.

So how do you intend to overhaul the system?

There is a need to work out the system. Although I believe in the system, I want to remove the grey areas. I believe an individual is not as important as the system and its dignity must be restored. I can neither look into all cases nor will everyone come to me personally.

Rectifying the system is the only option that can significantly bring about a change to make the DCW more effective, which I am doing now for the larger interest of the people. For this, we have contacted the best lawyers in Delhi. We are also in the process of meeting and building alliances with nongovernment organizations.

What are the major issues you want to focus on during your stint at DCW? Our

topmost

priority

www.governancetoday.co.in

is

women’s safety. We want to make Delhi as safe for women. I think we need to create an environment in which even if a woman has to come out at 12 in the night, she feels safe. It’s not something that we can achieve overnight; we have to work very hard for it. We would like to work for women who are being forced to live on the streets, women in Tihar Jail and protection homes and of course, for the women living in the dirty lanes of GB Road (Delhi’s red light area).

A controversy broke out between LG Najeeb Jung and CM Arvind Kejriwal ahead of your appointment.

Didn’t it shake up your spirit?

No, not at all. No one has shaken my morale in my life till now, about which I had even tweeted during the time of controversy. More the difficulties higher the energy.

Thankfully, those controversies are now finished and I am now more determined and stronger to prove myself through my works.

Could you share any campaign that you have started under DCW? Definitely. Actually a number of campaigns and programs are in the pipeline and these include working for the cause of women living in very pathetic conditions in red light areas and acid attack victims. In a very short period of time, we have set an example of working for the welfare of acid attack victims. I, along with some acid attack victims, met Delhi Health Minister Satyendar Jain and Deputy Chief Minister Manish Sisodia to discuss their issues. Now onwards, acid attack victims will be provided free treatment in private hospitals by the Delhi government.

The government will also bear the cost of all corrective surgeries to be performed on the victims. The health minister has appointed his OSD as the nodal authority to coordinate with the DCW team in order to ensure best of treatment for all victims.

What improvements you want to bring to the lives of women at GB Road red light area in New Delhi?

There are more than five thousand women living out there.

Most of them are the victims of human trafficking, they have been brought there at the tender age of 1216 years and tortured and forced into trade where there is no life. When I talked to them, they complained of repeated sexual assaults indoors.

There is no hygiene at their place and all sorts of bad practices go on.

The thing which I want to highlight is that nobody bothers to take cognizance of this hellish cruelty, not even the Parliament which is nearly three kilometres away from the infamous brothel street. If a leader or official takes notice of the situation, it is quickly brushed under carpet as the matter is a taboo in the society. These are the things I would work upon in order to make them feel that they are very much part of our society.

How can you make a difference when there is no regulatory body to monitor their pathetic lives?

We are doing proper studies on the issue and looking at possibilities for bringing those women in mainstream of society. For this, we even met Union Women and Child Development Minister Maneka Gandhi, who too sought our assistance in bringing amendments.

Instead of preaching moral policing, we are finding out ways of their rehabilitation but not at the cost of their livelihood. We hope our endeavours would bring some positive change in their life.

Delhi is said to be the rape capital of India. Is there any plan to break this perception?

Delhi has a very complex issue that it’s not a full state. There are a number of agencies which pass the buck to one another that it doesn’t come under their prerogative. We September 2015 I

63

are planning to constitute a panel which will look into each and every aspect of what is whose jurisdiction and what needs to be done. It will however need a long time to resolve the issue of blame game.

What challenges you see ahead in the coming times?

What are your expectations from the Kejriwal government?

I have expectations from all – CM Arvind Kejriwal, PM Narendra Modi and LG Najeeb Jung as well as police. I am strongly confident that neither I’ll let anyone to do politics over the issues of women nor will I do. I am hopeful that I’ll achieve whatever I wished over the issues of women, if it doesn’t happen I’ll go to court for the larger interest of the integrity of the institution.

How does the DCW distinguish itself from other women bodies and also Delhi Police’s women’s cell?

HOW DELHI TREATS WOMEN Total sexual offences under IPC Crime rate: 86.96 (higher than national average) Kidnapping and Abduction Incidence of total cognizable offence ( 22 per cent of country) Incidence of crime against woman Total rape cases Number of cases where offenders were known to the victims

2013

Victims of rape (also incest rape cases) under different age-groups Below 6 yrs 6 yrs-12 yrs 12 yrs- 16 yrs 16 yrs-18 yrs 18 yrs- 30 yrs 30 yrs- 45 yrs 45 yrs- 60 yrs 60 yrs and above

71 128 386 423 806 272 15 1

DCW is simply a monitoring organisation which acts as a watchdog to check the functions of agencies and government departments dealing with the women-related issues. We also keep a tab on the cases handled by women’s cell of police.

post to lodge a case in a police station or have to move court directly and spend lots of money in litigation. So is there any awareness campaign in your mind for such people?

There are many places in Delhi where women don’t know about DCW and they have to run from pillar to

I acknowledge this problem and we’ll definitely work on it.

Right now we are in the process of launching a 27x7 helpline for women and its monitoring will be done very effectively. We’ll

64 I September 2015

7849 7143 1.39,707 15,256 2096

Source: NCRB

Although I don’t foresee any, it’s definitely going to be a difficult task to deliver results in a small time as we wished to correct the system at DCW level. Complains are pouring in, in addition to the already backlogged cases but everything is in a very sad state to amend so quick. Had the things been in place, it would have been a smooth ride for us to deliver results. I want to give relief to all the complainants coming in.

not launch it until we get a very strong back-end support so that a logical conclusion could be drawn after registering the matter in a proper format. Good and humble people will be at our end to listen to grievances from the other side.

Besides, we are planning to revamp the ongoing program, Mahila Panchayat, at the community level so that everybody does not need to come to the DCW. It’ll help in resolution of some of the cases at the community level only.

www.governancetoday.co.in

EVERYONE DESERVES A SECOND CHANCE AND BEHOLD WHAT THEY CAN DO!

LET’S TOUCH ONE LIFE Prayas JAC Society is a national level non-profit organization registered in 1988 under Society Registration Act, 1860 is working towards the rights and protection of children, youth and women.

Touching million lives through education, nutrition, health services, vocational training, life skill building and social and economic empowerment. Presently, working in Delhi, Bihar, Assam, Rajasthan, Gujarat, Haryana, Jharkhand, Arunachal Pradesh and Andaman & Nicobar Islands.

Support us to touch many lives to create difference‌Contribution can be made from abroad through FCRA Account. State Bank of India, Jahangirpuri New Delhi-110033, Account No: 10666744245, Swift Code: SBININBB544. All support will be exempt from tax under Section 80 G and Section 35 AC.

Prayas JAC Society, 59 Tughlakabad Institutional Area, New Delhi-110062 Telephone: 011-29956244, 2995505, Website: www.prayaschildren.org Email: prayas@prayaschildren.org, kanth_amod@rediffmail.com.com

STATE IN FOCUS

Marching towards progress Chhattisgarh is making strides in socio economic development GT Bureau CHHATTISGARH IS the 9th largest state of India in terms of area with 1,35,000 sq. kms and population of 2.6 crore as per 2011 census.

With a per capita GDP is Rs 69,000, the state is one of the fastest growing states in India. Chhattisgarh is also among the richest states in terms of mineral resources. Moving forward, the State acknowledges that electronics, IT and ITeS sector will have an unprecedented impact on the Indian economy and its contribution to the country’s GDP. Towards this end, it has wholeheartedly accepted ‘Make in India’ and ‘Digital India’ programs which are propelling the growth of manufacturing and technology sectors in the state. Also, Chhattisgarh aims to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing and information technology infrastructure which will establish the state as a hot destination for high end businesses.

Chhattisgarh is now focussing on critical infrastructure sectors and keeping in view the advantages in terms of resources and business environment it offers to the industry, it is poised to become a major IT, ITeS and ESDM hub of the country.

The state also provides unique advantages offered by the state to the electronics, IT and ITeS sector: Chhattisgarh provides for a unique locational advantage with direct physical access to markets of 7 states: Telangana, Andhra Pradesh, Uttar Pradesh, Madhya Pradesh, Maharashtra, Jharkhand and Odisha. This gives the industry unique market accessibility to over 509 mn people.

The state also has amongst the soundest industrial infrastructure.

66 I September 2015

CHHATTISGARH – AT A GLANCE Chhattisgarh is the best fiscally managed state. The development expenditure of the state as per cent of GDP is highest in the country Contribution by services sector to the state GDP is largest followed by industry Chhattisgarh has received the maximum number of proposals in the country for setting up industrial projects. The state has received investment proposals (IEM) to the tune of $ 25.5 billion (highest in the country) The state’s growth rate is 7.05 per cent, which is significantly higher than the national average since last two years Chhattisgarh has the lowest unemployment rate across the country. unemployment rate of the state is 1.4 per cent against 4.7 per cent for the country Chhattisgarh has the 2nd largest deployment

For example, it has the highest freight loading capacity and generates 1/6th of Railways’ revenues; apart from excellent and seamless rail and road connectivity, the state has existing airport with new and modern terminal in Naya Raipur which has received the ‘National Tourism Award 2012-13’ for best

Raman Singh Chief Minister of fixed WiMAX in the country, providing access to 3,000 locations in the State An Ernst & Young Analysis shows Chhattisgarh has a 20 per cent lower setting up and operating cost and 30 per cent enhanced return on capital investment compared with other states

airport in India in non-metro category. Two additional airports are also proposed in the state.

Energy is the most important resource when it comes to setting up an IT, ITeS and electronics manufacturing unit and Chhattisgarh it is one of the very few power surplus states in the country. It provides www.governancetoday.co.in

stable power at economical rates from redundant grids which results in availability of power throughout the year without outages and power spikes. Future strengthening the energy availability, the state is establishing new power plants to produce 1/3rd of national target of 90,000 MW as envisaged under the 12th Five Year Plan.

The state also has abundant land and available rental space options that can cater to both large IT industries and MSMEs along with support vendor ecosystem for smooth and continuous operations. An Electronics Manufacturing Cluster of 28.3 hectares is being built in Naya Raipur aimed at providing one stop integrated facilities with manufacturing support, welfare and common infrastructure facilities to the prospective electronics manufacturing industries. Naya Raipur Development authority (NRDA), a planning and development authority established by Govt of Chhattisgarh for the New Capital City has sent a Project Proposal for establishment of ITIR to the Central Government. The State already has a Software Technology Park of India (STPI) in Steel City, Bhilai with 17,000 sq. ft. state-of-art facilities.

Additionally, a multi-modal logistics hub is being Setup by CONCOR in Naya Raipur which will add a new dimension to the logistics in state One more resource which is the most crucial for success of any sector and industry is the human resource. The state has an excellent educational ecosystem with IIM, IIIT, NIT, AIIMS, National Law University which are successfully operational and an IIT and Centre of Excellence in IIIT under planning stage. Around 30,000 professionals pass out annually from these and other institutes of higher education which provides for a quality workforce with a significant wage differential. Chhattisgarh is the first state to have provided the ‘Right to Skill.’ The state is also setting up finishing schools for graduates in mission mode across the state.

Chhattisgarh has outpaced others by establishing Naya Raipur as www.governancetoday.co.in

ENCOURAGING IT/ITeS SECTORS The state is a fast emerging attractive destination for investors in IT, ITeS and Electronics sector due to the comprehensive policies related to the sector. These policies provide for subsidies and bespoke incentives for early investors which are highest in the country and are customizable for large Aman Singh investors. Over last few years, Principal Secretary, the state has come up with Electronics, IT and Energy specific policies to cater to the high tech sectors. These are Electronics & IT/ ITeS Policy 2014-19, Automotive Policy 2012, Solar Policy 2012 and Industrial Policy 2014-19. the first greenfield SMART city of the 21st century, with a gross area of 237 Sq. Km. the highly planned and designed city is to focus on socio-economic and cultural life of Chhattisgarh. An investment of around $1 billion has already been done in Naya Raipur which is being followed by further investment of $2 billion in next 5 years.

Encouraging IT/ ITeS investment With its best in class policy impetus and sound institutional framework for investment facilitation, Chhattisgarh has walked the extra mile to build a robust ecosystem for electronics, IT & ITeS industries so that they experience a hassle free, cost effective and value adding investment experience and continued ease of doing business.

Keeping pace with the fast growing startup culture in the country and world over, an Innovation Policy is slated to be released for making Chhattisgarh as a startup hub. Under the policy, there is an extensive plan of making Incubators, Accelerators, Co-working spaces and workshops with skill rapid prototyping, VLSI design tools, testing facilities

and certification labs.

Because of the incentives provided by the state, multiple electronics, IT & ITeS companies like Patra Corporation and Forstar Industry Limited have confirmed investing into the State and setting up their business units. Leading insurance outsourcing expert, Patra Corporation is expanding its India BPO Wing by opening its new office at Raipur, Chhattisgarh. The set up in Raipur will be an addition to Patra’s current U.S. and India-based operations centres at California, Vishakhapatnam and Bengaluru.

Forstar Industry Limited is an innovative PC company which is qualified to design, manufacture, market, sell and support a range of computer systems and services that can be customized to customer requirements. Forstar is extending its manufacturing capability by opening a unit in Naya Raipur which will manufacture Tablet PCs. The recent investments are promising forward strides by the prudent investors and the government of Chhattisgarh to achieve its vision of being among the top electronics, IT & ITeS investment destinations in India.

September 2015 I

67

ADVERTORIAL INTERVIEW

TIME FOR A NATIONAL PROGRAM TO CURB DECLINING PRACTICE OF BREASTFEEDING

WHO KNOWS a child better than the mother? It is only she, who understands the predicament of her kid, right from the womb till the baby matures to be an adult. But nurturing a kid is not that easy. It begins with the most pertinent practice of ‘breastfeeding,’ which in fact, is a biological norm and also a true sustainable nectar providing exercise that almost all mothers have to go through on the planet. It’s a bond between a mother and child. Besides being a nutritional and preventive health package for infants, breastfeeding is also a very significant public health issue. Many parts of the world are still struggling with low rates of exclusive and continued breastfeeding. Women are not able to breastfeed successfully mainly because of lack of support from family and fast life, among many others. Also with modernization, the economic activity took over all priorities resulting in more and more women joining the workforce, which prevented them from breastfeeding.

Besides, baby food industry has created a huge market for the ‘infant formula’ and other baby foods as a substitute or complement to breastfeeding, using all sorts of persistent endorsement techniques to persuade parents. This led to the rise of formula feeding.

Dr. Arun Gupta Co-founder BPNI

68 I September 2015

Breastfeeding Promotion Network of India (BPNI), a two decade old non-profit national organization works to reverse this unhealthy trend. Its aim is to protect, promote and support breastfeeding and appropriate complementary feeding of infants.

Contributing through advocacy, social mobilization, information sharing, education, research, training and monitoring the companies compliance with the IMS Act, the organization is also the regional focal point in South Asia for the World Alliance for Breastfeeding Action (WABA) and regional coordinating office for International Baby Food Action Network (IBFAN), winner of the 1998 Right Livelihood Award (also known as the Alternative www.governancetoday.co.in

Nobel Prize). To discuss the novel work of the organization and its flagship campaign in India and abroad, RAMESH KUMAR RAJA talked to DR ARUN GUPTA, the co-founder of BPNI. A pediatrician by profession, Gupta gave up his lucrative private practice to promote the cause of breastfeeding.

He also happens to be a member of Prime Minister’s Council of India’s Nutritional Challenges and Chairman of the global Breastfeeding Initiative for Child Survival (gBICS). Edited excerpts:

The practice of breastfeeding seems to be on secular decline especially with the culture of women preferring office over child nursing. How do you look at this trend?

Work outside home is an increasing reality although women work at home all the time. It is the concept of caring society and recognition of the value of breastfeeding, which we are losing.

Breastfeeding is protective for an infant’s health and development as 90 per cent of brain develops during the first two years. Breastfeeding provides the opportunity of bonding between mother and child apart from high nutritive value it has for brain development; formula industry is trying to make a copy of it. But formula feeding is associated with higher risk of disease among children and adults besides diabetes and obesity etc. Women must get all these information and guidance on breastfeeding such as exclusive breastfeeding for the first six months.

This is why every woman should get six months leave at least.

Besides, work places should be breastfeeding-friendly with private rooms and crèches. Corporate sector is going to gain by this, as women who have their babies close to them will be more productive at work. Many IT corporates have announced maternity protection measures recently; more should follow. It is a long-term investment. www.governancetoday.co.in

What is the importance of first breastfeeding after childbirth?

Beginning breastfeeding within one hour of childbirth is a global recommendation. It is because skinto-skin contact during the first hour is so critical for emotional bonding as well as it initiates a good process of successful lactation. Over the first few days, thick milk called colostrums is rich in “live” cells and antibodies to protect the baby.

Then, baby should receive exclusive breastfeeding for the first six months and timely and appropriate complementary feeding after six months along with continued breastfeeding till 2 years or beyond.

Till six months breast milk is all that a baby needs. After six months baby needs some extra foods, homemade foods that family eats, slowly the quantity is increased to meet the growing demands of the baby.

In rural areas poor health is largely a common issue among the women, which in fact affects the biology of lactation. How can government help in this situation?

While it is critical that women’s health and nutrition be given utmost importance, the state of nutrition of mother is not related to lactation performance. Government of India has a crucial role to play here, not only to ensure food security for women but also to provide caring health workers to counsel mothers both in rural and urban areas, as lactation performance depends on two hormones, one ‘Prolactin’, which makes milk, and the other ‘Oxytocin’ that makes the milk flow from breast to the baby. Both are initiated by sucking of the baby, the key is sucking. Oxytocin flow depends on state of mind of the mother, it depresses if she is not confident, has pain, doubts, anxiety etc. What you need is “confidence building measure” rather than information shoots. For this, you need well-trained and caring health

workers. This knowledge and skill is lacking. Currently, what we are doing is a bit of lip service, gains can rapidly fall off. It is this factor that calls for a special training of workers and government’s attention must be drawn to it.

How far is it fair to promote the ‘commercialization of baby food’ at a time when the child mortality rate refuses to die down?

It is not at all fair to promote baby foods. In fact, there is a law in the country that bans all kind of promotion of baby foods, meant for children under the age of two.

It also bans baby food industries’ sponsorship of conferences of doctors or any incentives for them.

Companies continue to break the law. It is recognized that promotion of commercial baby foods actually undermines breastfeeding and cause morbidity and mortality.

The government needs to be very strict in enforcing this law that was enacted in 1992.

What is the impact of breastfeeding on IQ and long-term health and development?

It is shown by scientific studies that higher the breastfeeding, better the IQ (intelligence quotient).

Recent studies also reveal that it enhances the earning ability at 30 years. It is also known that Pneumonia and Diarrohea are more in children who are sub-optimally fed, means not exclusively breastfed for the first six months. WHO has analyzed that breastfeeding is effective in the long term in reducing obesity, diabetes and blood pressure.

Awareness level of breastfeeding is still not up to the mark. What should be done to improve it?

Government of India should run a national program with an objective to enhance rates of breastfeeding an September 2015 I

69

Gupta says baby food supliments are harmful

infants, which have been static for 20 years. Each state should take this on a war-footing to put in place a “breastfeeding counselor” for a population of 5000. They should be women and be able to provide ‘oneto-one’ counseling. Additionally, adequate maternity leave, supportive work environments for day care, and crèches are essential.

The government should earmark a “budget” for programs related to protection, promotion and support of breastfeeding and infant feeding.

Above all, strict enforcement of the Infant Milk Substitutes Feeding Bottles, and Infant Foods (Regulation of Production, Supply and Distribution) Act 1992, and Amendment Act 2003 is critical.

Is there a governance issue linked to breastfeeding?

Yes, there is clearly one.

According to a recent assessment of India’s policy and programs done by us, there is no policy, no plan of action and no budget attached to it. Government of India has a National Breastfeeding Committee but it rests on the website of Government of India. If this begins 70 I September 2015

working, things can change. This committee can coordinate multisector actions which are required in all states. Several policy areas such as maternity protection, enforcing the law to protect breastfeeding from aggressive promotion of baby foods, health system support to women, and breastfeeding during disasters etc. in need of urgent attention. Breastfeeding rates can go up only if we invest in multiple policies and programs; we have to make a beginning from somewhere.

Could you share with our readers how BPNI is associated with the cause of breastfeeding and its achievements?

We are involved in advocacy of better policies and imparting skill training to health workers. The major achievements are the IMS Act in 1992 and Amendment Act 2003, as well as Cable TV Regulation Act banning promotion of baby foods, bottles etc. The Mid Term Assessment of 11th Five Year Plan recognized this gap and we hope that the 12th Five Year Plan would

address this issue. BPNI is consulted in many child health and nutrition committees of Government of India. BPNI carries out an India assessment of policy and programs every three years using World Breastfeeding Trends Initiative (WBTI) tools in line with Global Strategy for Infant and young child feeding. BPNI has developed a skill-training program for health workers that combines all kinds of skills required for breastfeeding counselling or growth monitoring.

BPNI monitors the law enacted for regulating the marketing of baby foods. BPNI advocates for sustainable solutions to child malnutrition through comprehensive food based approaches, not through market product based ad hoc solutions.

BPNI has clear ethical policy on conflict of interest for its own funding and does not accept funds from companies manufacturing baby foods, feeding bottles etc. and from organizations/industry having conflict of interest.

BPNI raises conflict of interest concerns in policy and programs at all levels.

www.governancetoday.co.in