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20th November – Editorials/Opinions Analyses


  1. Another bailout
  2. East Asia Summit signals India will pursue bilateral pacts with ASEAN countries
  3. Analysis of the Aatma Nirbhar Bharat Abhiyaan (Agriculture)



RBI has imposed a moratorium on Lakshmi Vilas Bank and drafted a scheme for a merger.


GS Paper 3:  Indian Economy (issues re: planning, mobilisation of resources, growth, development, employment); Inclusive growth and issues therein.

Mains Questions

  1. Overall banking sector health is a concern despite the RBI’s pre-emptive rescue efforts. Discuss. 15 marks

Dimensions of the Article

  • Status of Banking Sector in India
  • What are stressed asset and NPAs
  • What are the issues facing banks in India?
  • Measures taken by the government and the RBI
  • Way forward

Status of Banking Sector in India

The RBI had in its Financial Stability Report in July pointed out that its stress tests indicated that the gross NPA ratio of commercial banks could worsen to 14.7% by March 2021, from 8.5% a year earlier, if the pandemic’s adverse economic impact caused the GDP to contract by 8.9% in the current fiscal. Moreover, following issues show the problem in banking sector in India.

  • The RBI said the financial position of the Chennai-based Lakshmi Vilas Bank, has undergone a steady decline, with continuous losses over the last three years eroding the bank’s net-worth. Almost one fourth of the bank’s advances have turned bad assets. Its gross non-performing assets (NPAs) stood 25.4% of its advances as of June 2020, as against 17.3% a year ago.
  • The RBI had earlier this year bailed out Yes Bank through a scheme backed by State Bank of India and other banks.
  • The collapse of IL&FS in 2018 had set off a chain reaction in the financial sector, leading to liquidity issues and defaults.
  • Punjab & Maharashtra Co-op Bank was hit by a loan scam involving HDIL promoters and the bank is yet to be bailed out.

What are stressed asset and NPAs

Stressed Assets is a broader term and comprises of NPAs, restructured loans and written off assets.

  • Restructured Loans: Assets/loans which have been restructured by giving a longer duration for repayment, lowering interest or by converting them to equity.
  • Written off Assets: Assets/loans which aren’t counted as dues, but recovery efforts are continued at branch level – done by banks to clean up their balance books.

Non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days or more. In case of Agriculture/Farm Loans, the NPA varies for short duration crop (interest not paid for 2 crop seasons) and long duration crops (interest not paid for 1 Crop season). Banks are required to classify NPAs further into Substandard, Doubtful & Loss assets.

  • Substandard assets: Assets which have remained NPA for a period less than or equal to 12 months.
  • Doubtful assets: Assets which have remained in the substandard category for a period of 12 months
  • Loss assets: It is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.
What is SMA, NPA and Provisioning for NPA? RBI Grade B 2020, Did You Know  Question

What are the issues facing banks in India?

Borrower’s side

  • Domestic economy slowdown – Lack of demand for their products as foreseen by the industrialists
  • Wilful default
  • Diversion of funds by borrowers for purposes other than mentioned in loan documents.
  • Global economy slowdown
  • Volatility in prices of raw material and the shortage in availability of power etc. impacts the performance of the corporate sector

Bank’s side

  • Bad lending practices. Sometimes banks provide loans to borrowers with bad credit history. There is high probability of default in these cases.
  • Inadequate Capacity to evaluate projects – poor credit appraisal system
  • Absence of regular industrial visits.

Other external factors:

  • Economic condition of a region effected by natural calamities
  • Ineffective recovery tribunals
  • Change in government policies – For example – any government scheme diverting manpower of PSBs for its implementation affecting the regular activities of banks.
  • Administrative hurdles – delay in getting permits and other clearances affects the cost of project.

Measures taken by the government and the RBI

Government has taken comprehensive steps under its 4R’s strategy of

  • Recognising NPAs transparently: through Asset Quality Reviews and Joint Lenders’ Forum. Banks are now required to acquire Legal Entity Identifier (LEI) number from the borrower and report it to Central Repository of Information on Large Credit.
  • Resolving and recovering value from stressed accounts-
    • New Insolvency and Bankruptcy Code, 2016 (IBC), has been enacted, which has provided for the taking over management of the affairs of the corporate debtor at the outset of the corporate insolvency resolution process
    • Amendment to the Banking Regulation Act, 1949 to empower the RBI.
    • Amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to make it more effective
    • Project Sakshat: to resolve the problem of NPAs through a market-led approach.
  • Recapitalising:
    • Government of India announced recapitalization of PSBs to the tune of Rs. 2.11 lakh crore in October 2017, through infusion of capital by the Government and raising of capital by banks from the markets.
    • Deposits with the banking system, both demand and time has recorded acceleration in their growth, leading to an increase in aggregate deposits by 9.6 percent in 2018-19.
  • Reforms in banks and financial ecosystem to ensure a responsible and clean system.
    • Comprehensive framework for transforming the PSBs under Mission Indra Dhanush, 2015.
    • Under the PSB Reforms Agenda, PSBs have created Stressed Asset Management Verticals to focus attention on recovery and entrusted monitoring of loan accounts of above Rs. 250 crore to specialised monitoring agencies.
    • Fugitive Economic Offenders Act, 2018: It has been enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.
    • With a view to removing the regulatory arbitrage between banks and non-banks, the Reserve Bank has been aligning the regulatory and supervisory frameworks for NBFCs with that of SCBs.
    • Owing to the sharp deterioration in finances of state-owned banks on the back of rising NPAs, 11 public sector banks were put under Prompt Corrective Action (PCA) last year.
    • The consolidation of Banks is also seen as a way out of the NPA issue through the “strong” banks absorbing the strain on the books of weaker banks.

Way forward

  • Managing Risks: Risk management processes still need substantial improvement in PSBs. Compliance is still not adequate, and cyber risk needs greater attention.
  • Improve the process of project evaluation: and monitoring to lower the risk of project NPAs. Significantly more in-house expertise can be brought for project evaluation.
  • Strengthen the recovery process further: Both the out of court restructuring process and the bankruptcy process need to be made faster and strengthened.
  • Infusion of Capital: The government must infuse at one go whatever additional capital is needed to recapitalise banks providing such capital in multiple instalments is not helpful.



External Affairs Minister Dr. S. Jaishankar represented India at the 15th East Asia Summit (EAS) on 14 November 2020.


GS Paper 2: Important International institutions, agencies, for a (structure, mandate); Bilateral, Regional, Global groupings & Agreements (involving and/or affecting India).

Mains Questions

  1. Evaluate the economic and strategic dimensions of India’s Look East Policy in the context of the post-Cold War international scenario. 15 Marks
  2. Indian Diaspora has an important role to play in South-East Asian countries’ economy and society. Appraise the role of Indian Diaspora in South- East Asia in this context. 15 marks

Dimensions of the Article

  • About ASEAN and East Asia Summit
  • Evolution of India and ASEAN relationship
  • Significance of ASEAN for India
  • Significance of India for ASEAN
  • Issues between India & ASEAN
  • Way forward

About ASEAN and East Asia Summit

  • Association of South East Asian Nations is a political and economic organization aimed primarily at promoting economic growth and regional stability among its members. 
  • It was founded in 1967 by the five South-East Asian nations of Indonesia, Malaysia, Philippines, Singapore and Thailand.
  • There are currently 10-member states: Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Laos, Myanmar, Cambodia and Vietnam.
ASEAN Needs Stronger Commitment to Address Challenges | SME &  Entrepreneurship Magazine

The East Asia Summit (EAS) is the main summit in the Indo-Pacific region, where all the powers that be gather annually in November. It is a leaders-led forum with informality built into it. It is usually held just after the second ASEAN summit of the year when the ASEAN also meets its dialogue partners, including India.

Evolution of India and ASEAN relationship

After its Independence in 1947, India followed a policy of Non-Aligned Movement (NAM) and became a champion of decolonisation, including in Southeast Asia. However, during the 1970s, India’s perceived tilt towards the Soviet Union led Southeast Asia to drift away from India as both followed different economic and political ideologies.

  • In a major shift away from policies of the Cold War era, India adopted the “Look East Policy” (LEP) soon after economic liberalization in 1991 to increase economic and commercial ties with East and Southeast Asian nations such as China. Over the years the policy has also concentrated on building closer ties on the strategic and security aspects in the region.
  • One of the major consequences of India’s engagement with ASEAN has been the ASEAN-India Free Trade Agreement (AIFTA), which was seen as an essential step towards deeper economic integration.
  • In 1992, India became a dialogue partner across limited sectors in ASEAN and in 1995 it achieved the status of full dialogue partnership.
  • In 1996, India was given the opportunity to appear in the ASEAN Post Ministerial Conference (PMC) and became a full member of the ASEAN Regional Forum (ARF). While in 2012 the relations were upgraded to strategic partnership.
  • For the past few years India has joined the ASEAN “plus six”, including China, Japan, South Korea, Australia and New Zealand, to discuss the RCEP free trade agreement.
  • The “ASEAN-India Partnership for Peace, Progress, and Shared Prosperity” in 2004 and the “Plan of Action” in 2012 highlighted the growing confluence in various areas between ASEAN and India.

Significance of ASEAN for India

1: In terms of Economy

  • The bloc represents a key trade and investment partner for India. Over the past 20 years, ASEAN’s portion of India’s total exports and imports is around 9.22 percent and 8.93 percent, respectively, which is a considerable chunk.
  • Investment from ASEAN to India has been over $70 billion in the last 17 years accounting for more than 17 per cent of India’s total Foreign Direct Investment or FDI.
  • The ASEAN economies have a wide experience in manufacturing which can be utilized by India in its Make in India endeavour.

2: In terms of Security

  • ASEAN platform allows India to discuss non-traditional security issues in Indian Ocean Region(IOR) like piracy, illegal migration, and trafficking of drugs, arms, and human, maritime terrorism, etc. which can only be resolved on a multilateral level.
  • India has also scored several diplomatic successes at ARF, including maintaining ties after its nuclear test of 1998, isolating Pakistan during the Kargil War, and lobbying against Pakistan’s entry in the forum till 2002.

3: Connectivity is another important issue of convergence, with India working toward formalizing its transit agreements and establishing better connectivity infrastructure with this region through land, water, and air, example- India-Myanmar-Thailand Trilateral Highway and the Kaladan Multimodal Project.

4: The aggressively rise of China, both economically and militarily, has caused suspicion among the countries in the region. This provides an opportunity to India which seeks to balance China and gain cooperation in the region.

Significance of India for ASEAN

  • Economically, the ASEAN nations can utilize their relation with India, which is an emerging economic power. One of the objectives of the CECA signed between the two is to facilitate the more effective economic integration of the new ASEAN member states and the bridging of development gap among the parties.
  • The recent loss of US market by the ASEAN nations can be compensated with the domestic demand in India which has been increasing with the rise of middle class in the country.
  • In terms of security challenges, both ASEAN and India are faced with grave vulnerabilities with regard to terrorism and it is in their common interest to work together to build peace and security in the region.
  • With the withdrawal of US troops from strategic locations in the region, ASEAN countries justifiably perceive India, with the largest Naval forces in the Indian Ocean and nuclear capabilities, a strategic partner to balance China’s growing power in the region
  • While East Asia is on the verge of entering a phase of lower share of working age population India is entering a phase with a higher share of working age population which can prove to be a human resource base for East Asia.

Issues between India & ASEAN

  • There is an imbalance between many ASEAN nations and India because many of them are industrialized with manufacturing bases primed for exports, while India’s export sector remains weak and the government’s focus has shifted to boosting manufacturing domestically.
  • While the ASEAN member states have been disappointed that India does not take a proactive role in the region, India’s expectations regarding a more robust support for its regional outreach too have not been met.
  • India continues to privilege bilateral partnership rather than pursuing ASEAN as a multilateral forum.
  • India’s capacity to provide development assistance, market access and security guarantees remains limited and ASEAN’s inclination to harness India for regional stability remains circumscribed by its sensitivities to other powers specially China.

Way forward

  • Service & Manufacturing can be worked upon to balance trade and investment relationship by drawing on each other’s inherent strength ASEAN nations like Vietnam are well-integrated with global value chains which India can use to give its own manufacturing sector a boost.
  • India can facilitate greater Indian service sector exports to ASEAN as well as supporting freer movement of people.
  • Digital technologies- Given the reluctance of ASEAN states to take help from Chinese giants in the field (due to concerns regarding china’s ability to own data), Indian IT sector may take some advantage.
  • Effective delivery of projects- India needs to focus on more effective delivery of projects it is already committed to. Example India-Myanmar-Thailand Trilateral Highway (The plan is to extend this highway to Cambodia, Laos and Vietnam).



Emphasising that the special economic package would focus on land, labour, liquidity and laws, PM Modi said it would benefit labourers, farmers, honest tax payers, MSMEs and cottage industry.


GS Paper 3: Storage, transport & marketing of agro-produce and related issues & constraints; Economics of animal-rearing.

Mains Questions:

  1. Atmanirbhar in agriculture will require incentives for export of high-value agri-produce. Explain. 15 marks
  2. In agri-inputs, govt should free private sector from unnecessary controls and regulation. Discuss 15 marks

Agriculture under Aatma Nirbhar Bharat Abhiyaan

To ensure ‘Atma Nirbhartha’ (self-reliance) at the grass-root level, the Government came out with a comprehensive package for agriculture sector including barrier-free inter trade of agriculture produce and taking out six ley agriculture produce from the ambit of Essential Commodities Act.

Aatma Nirbhar Bharat In Agriculture Sector – Free PDF

Strengthen access to formal credit for farmers

  • Kisan Credit Cards (KCC): Farmers will be provided institutional credit at a concessional rate through KCC.  KCC was introduced in 1998 and aims to provide adequate and timely credit through a single window system.  This scheme will provide credit of Rs 2 lakh crore rupees to 2.5 crore farmers.
  • Emergency working capital: Rs 30,000 crore will be released as emergency working capital to approximately three crore small and marginal farmers to meet their crop loan requirements.

Provide relief to farmers under the PM KISAN scheme:

  • The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme aims to provide income support of Rs 6,000 per year to farmer families.

Strengthen post-harvest farm-gate infrastructure:

  • A fund of Rs one lakh crore was approved by the Cabinet in July 2020 to provide credit for development of agricultural infrastructure projects at the farm-gate level. The fund will be disbursed as loans by banks and financial institutions, on which the government will provide a 3% interest subsidy, up to Rs two crore for seven years.

Formalise micro-food processing enterprises:

  • The Cabinet approved a scheme for formalisation of micro food processing enterprises aiming to assist 2 lakh micro-enterprises with credit linked subsidy in May 2020. Micro enterprises will get credit linked subsidy at 35% of the eligible project cost, up to a total of Rs 10 lakh.

Incentivise private investment in infrastructure in the livestock sector:

  • The establishment of the Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore was approved by the Cabinet in June 2020. The Fund aims to incentivise private investment in infrastructure for dairy and meat processing. Eligible beneficiaries, including private companies, MSMEs, food processing organisations, and individual farmers must contribute at least 10% of the total investment. The central government will provide 3% interest subsidy.  Beneficiaries can repay the principal loan amount over a period of six years, after the completion of the two-year moratorium period.

Provide support to fishermen under the Pradhan Mantri Matsya Sampada Yojana (PMMSY):

  • The Cabinet approved the PMMSY scheme to provide Rs 11,000 crore for marine, inland fisheries and aquaculture and Rs 9,000 crore for developing infrastructure (such as fishing harbours, cold chain, markets).

Amend the Essential Commodities Act, 1955 to enable better price realisation for farmers:

  • The Essential Commodities (Amendment) Ordinance, 2020 was promulgated in June 2020.[127]  The Ordinance provides:
    • Regulation of commodities by the central government permitted only under exceptional circumstances such as war, famines and natural calamities,
    • Stock limits imposed must be based on price rise and may be imposed only in case of an increase in retail price by 50% (non-perishable agricultural food items) or 100% (horticultural produce).

Bring a central law to give farmers choice to sell at remunerative prices, remove barriers to inter-state trade, and create a framework for e-trading:

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 was promulgated in June 2020.127  The Ordinance:
    • Permits intra-state and inter-state trade of farmers’ produce outside of Agricultural Produce Market Committee (APMC) markets and markets notified under state APMC Acts, 
    • Permits inter-state and intra-state trade, only by a farmer producer organisation, agricultural cooperative society or a PAN card holder,
    • Permits electronic trading,
    • Prohibits levying of fees for trade on farmer, trader or electronic platforms.

Establish a facilitative legal framework for farmers with provisions for risk mitigation, assured returns, and quality standardisation:

  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 was promulgate in June 2020 to establish this framework. Its key features include:
    • Provision for farming agreements aimed at enabling farmers to sell through agreements with specified pricing, details for payments and delivery,
    • Exemption for participating farmers from state Acts regulating sale, purchase and stock limit obligations for produce under such agreements,
    • Establishment of a three-tier system for dispute resolution, consisting of a Conciliation Board, the Sub-Divisional Magistrate, and the appellate authority (Collector/ Additional Collector).

Way forward

Self-reliance is directly connected to quality. It is widely accepted that the developed nations are able to dominate global markets because of their innovative products and their quality. It is clear that the prime minister wants India to produce goods of a quality that not only reduces our dependence on imported goods, but also makes them well sought after globally while placing India amongst the foremost exporters of the world.

February 2024