Topic of the day – “Raghuram Rajan’s suggestions on preventing a financial crisis must be heeded”
Former RBI Governor Raghuram Rajan’s note of caution on the next financial crisis that could be building up needs to be taken in all seriousness. In his note to Parliament’s Estimates Committee on bank non-performing assets (NPAs), Mr. Rajan has flagged three major sources of potential trouble: Mudra credit, which is basically small-ticket loans granted to micro and small enterprises; lending to farmers through Kisan Credit Cards; and contingent liabilities under the Credit Guarantee Scheme for MSMEs, run by the Small Industries Development Bank of India. The disbursement under Mudra loans alone is ₹6.37 lakh crore, which is over 7% of the total outstanding bank credit. These loans have been sanctioned under the Pradhan Mantri Mudra Yojana, which aims to ‘fund the unfunded’, and is a signature scheme of the NDA government. Given that these are small loans up to ₹10 lakh each, with the borrowers mostly from the informal sector, banks have to monitor them very closely. It is debatable whether banks have the resources and manpower to do this when they are chasing the bigger borrowers for business and, increasingly these days, recoveries. The risk is that these small-ticket loans will drop under the radar and build into a large credit issue in course of time. The same logic holds true for crop loans made through Kisan Credit Cards.
Mr. Rajan’s advice on loan waivers has been made by him and others in the past. But the political class has chosen to turn a deaf ear to this advice, vitiating the credit culture and creating a moral hazard where farmer-borrowers assume that their loans will invariably be waived off. The former RBI Governor has strongly defended the RBI against criticism, often unfair, over its policies on NPA recognition and resolution. He rightly termed as “ludicrous” the allegations that the economy slowed down because of the RBI. Recognition is the first step in a clean-up, and unless banks are cleaned of their non-performing loans, they cannot make fresh loans. The Central government should also take note of some forward-looking statements that Mr. Rajan has made on the governance of banks. Among his suggestions to avert a recurrence of the current mess are, professionalising bank boards with appointments done by an independent Banks Board Bureau; inducting talent from outside banks to make up for the deficit within; revising compensation structures to attract the best talent; and ensuring that banks are not left without a leader at the top. It is a comment on the state of our polity that despite the important issues that Mr. Rajan raised, political parties have chosen to pick only the points that are convenient to them — about the period when these bad loans were made and the purported inaction over a list of high-profile fraud cases highlighted by him.
Interpreting the Constitution –
The question of how to interpret a constitution, any constitution, is an age-old one. The Indian Constitution couches its guarantee of fundamental rights in abstract terms. For instance, the Constitution doesn’t expressly tell us what equality, in Article 14, means. Does it mean merely a formal equality, or does it promise a more substantive equality, demanding the state’s proactive participation?
Until now, in the absence of a coherent theory of interpretation, judges have vacillated in answering such questions. But the four separate opinions in Navtej Singh Johar, written respectively by Chief Justice of India Dipak Misra and Justices R.F. Nariman, D.Y. Chandrachud and Indu Malhotra, collectively espouse an interpretive model that gives to India’s history its full consideration. The Constitution “was burdened with the challenge of ‘drawing a curtain on the past’ of social inequality and prejudices,” Justice Chandrachud wrote, invoking Professor Uday Mehta. The document, therefore, was an “attempt to reverse the socializing of prejudice, discrimination and power hegemony in a disjointed society.” Or, as Chief Justice Misra put it: “The adoption of the Constitution was, in a way, an instrument or agency for achieving constitutional morality and [a] means to discourage the prevalent social morality at that time. A country or a society whichembraces constitutional morality has at its core the well-founded idea of inclusiveness.” The idea, therefore, is, similar to what the South African courts have held, to eliminate all forms of discrimination from the social structure, and to usher society from degrading practices of the past into an egalitarian future.
There is a danger, many believe, that this theory of interpretation could allow judges to turn into philosopher-kings, allowing them to impose their moral convictions on society. But, as Ronald Dworkin has observed, a strategy of interpretation which partakes a consideration of both text and history is really a “strategy for lawyers and judges acting in good faith, which is all any interpretive strategy can be”.
Future disputes will certainly have to be guided by the court’s general rule prescribed in Navtej Singh Johar. The court has already reserved its judgment in a number of cases that will tell us how it intends on applying this theory. Its decision in cases concerning the entry of women into the Sabarimala temple, on the practice of female genital mutilation of minor girls in the Dawoodi Bohra community, on the validity of the Indian Penal Code’s adultery law, will all prove telling. Yet, much like the challenge to Section 377, the issues at the core of these cases are scarcely controversial as a matter of pure constitutional interpretation. Ultimately, therefore, the true value of Navtej Singh Johar will only be seen when the court sees this theory as integral to its ability to judge clashes between the naked power of the state and personal liberty, to cases such as the challenge to the Aadhaar programme, which seek to reverse the transformation that the Constitution brings. There too, as Chief Justice Misra has written, the court must be “guided by the conception of constitutional morality”.
WORDS AND MEANINGS –
1) disbursement
Meaning : the payment of money from a fund.
Synonyms : expenditure , spending
Antonyms : deposit
Example : “they established a committee to supervise the disbursement of aid”
2) radar
Meaning : a system for detecting the presence, direction by sending out pulses of radio waves which are reflected off the object back to the source.
Synonyms : sonar
Antonyms : noticeable
Example : “keep your radar tuned to changes at work”
3) waivers
Meaning : an act or instance of waiving a right or claim.
Synonyms : postponement , remission
Antonyms : allowance
Example : “their acquiescence could amount to a waiver”
4) vitiating
Meaning : spoil or impair the quality or efficiency of.
Synonyms : annihilate , negate
Antonyms : help
Example : “development programmes have been vitiated by the rise in population”
5) criticism
Meaning : the expression of disapproval of someone or something on the basis of perceived faults or mistakes.
Synonyms : comment
Antonyms : heedlessness
Example : “he received a lot of criticism”
6) ludicrous
Meaning : so foolish, unreasonable, or out of place as to be amusing.
Synonyms : bizarre , farcical
Antonyms : common
Example : “it’s ludicrous that I have been fined”
7) allegations
Meaning : a claim or assertion that someone has done something illegal or wrong, typically one made without proof.
Synonyms : charge accusation
Antonyms : exculpation
Example : “he made allegations of corruption against the administration”
8) avert
Meaning : turn away (one’s eyes or thoughts).
Synonyms : avoid , deter
Antonyms : aid
Example : “she averted her eyes while we made stilted conversation”
9) purported
Meaning : appear to be or do something, especially falsely.
Synonyms : connotation , core
Antonyms : exterior
Example : “she is not the person she purports to be”
10) interpret
Meaning : explain the meaning of (information or actions).
Synonyms : construe , enact
Antonyms : confuse
Example : “the evidence is difficult to interpret”
11) Mere
Meaning : used to emphasize how small or insignificant someone or something is.
Synonyms : minor , pure
Antonyms : indefinite
Example : “questions that cannot be answered by mere mortals”
12) vacillate
Meaning : waver between different opinions or actions; be indecisive.
Synonyms : dither , fluctuate
Antonyms : remain
Example : “I vacillated between teaching and journalism”
13) espouse
Meaning : adopt or support (a cause, belief, or way of life).
Tamil Meaning : மணம்புரி
Synonyms : adopt
Antonyms : attack
Example : “the left has espoused the causes of sexual and racial equality”
14) embraces
Meaning : hold (someone) closely in one’s arms, especially as a sign of affection.
Synonyms : grasp
Antonyms : free
Example : “Aunt Sophie embraced her warmly”
15) egalitarian
Meaning : believing in or based on the principle that all people are equal and deserve equal rights and opportunities.
Synonyms : equitable , democratic
Example : “a fairer, more egalitarian society”
16) conviction
Meaning : a formal declaration by the verdict of a jury or the decision of a judge in a court of law that someone is guilty of a criminal offence.
Synonyms : faith , principle
Antonyms : distrust
Example : “she had a previous conviction for a similar offence”
17) mutilation
Meaning : the action of mutilating or being mutilated.
Synonyms : abuse
Antonyms : praise
Example : “a culture which found any mutilation of the body abhorrent”
