1. E1: Wilful defaulter?
    1. Vinod wisdom on wilful defaulters
  2. E2: Coinage Act & right to issue Rs.1 note
  3. E3: Gold account scheme
  4. E4: MNREGA: Sweeping changes
    1. Proposed: MNREGA only for backward districts?
    2. Proposed: Changing labor to material ratio
  5. E5: MPLADS & toilet building
  6. E7: PDS Reforms: Lessons from Delhi 
  7. E8: Commerce Ministry on IPR and FDI
  8. E9: Global competiveness index 2014
  9. E10: MSME speech: fodder material
  10. E11: BSNL, MTNL merger
  11. E12: India’s Sovereign rating

E1: Wilful defaulter?

Who is wilful defaulter?

Person/company, who has taken loan from any scheduled commercial bank or financial institution, and

  1. Has capacity to repay the loan / installment but not repaying the loan.
  2. Has diverted loan money for other purpose.
  3. Has not utilized the loan money for the actual purpose (for which they had taken the loan)
  4. Has sold off the mortgaged assets (in exchange of which, they had taken the loan.)

In simple terms: Has the moolah + but doesn’t want to pay + used the money in desi liquor + makes the collateral vanish = Wilful defaulter.

Why in news?

  • Mallya owes ~7,000 crores in loan repayment to total 17 banks.
  • September week1: United Bank of India became the first bank to Kingfisher Airlines and its promoter Vijay Mallya as wilful defaulters.

Implication after Wilful defaulter branding?

  1. Once a lender announces as person/company as “wilful defaulter’- their names are sent to RBI and credit information companies such as CIBIL.
  2. This way, all other banks and NBFCs are warned not to lend any more money to such totally awesome person.
  3. As per SEBI order: Willful defaulters can’t raise money from capital market i.e. they cannot issue fresh IPO or bonds.
  4. In Sep-2014, Rajan issued new directive- from nowon, if person doesn’t repay loan then extract it from ‘guarantors’. And if those guarantors don’t repay the loan then declare them as wilful defaulters as well.

Vinod wisdom on wilful defaulters

Former Comptroller and Auditor General (CAG) Vinod Rai gave following commentary:

  1. Public sector banks have large NPA because cronies have used political connections to get loans- even for unviable business projects.
  2. These cronies didnot have the financial knowledge or business acumen to deliver the product / service.
  3. Kingfisher loan default is just a small trickle- many others like him.
  4. Solution: need to make bank board members’ appointment more transparent

E2: Coinage Act & right to issue Rs.1 note


Who prints what?
RBI Union Government
issue bank notes from Rs. 2 till Rs. 10,000 sole right to mint coins of all denominations.
Hum notes mein jeethe hain Hum chillar party hain

Then who prints notes less than Rs 2?

  • 1940: Currency ordinance empowered Government to print one rupee note.
  • Later, ordinance was repealed. And in 2011: new Coinage act came.
  • Under this act, union Government can mint coins upto Rs.1000
  • And as per law ministry’s interpretation – one rupee is included in it.
  • Besides, as per RBI act 1934- RBI doesn’t have the power to issue one rupee note.
  • Side note: they have stopped printing one rupee and two rupee notes. Only the existing notes in circulation.

E3: Gold account scheme

Who? MMTC-PAMP- one of the gold refining companies in India.
What? Gold Metal account scheme. Yet to obtain all clearances though.
Features You can deposit gold jewelry, coin, biscuit etc. Company will melt and sell it. You get interest payment (in gold). Thus, on maturity, you get a heavier coin /biscuit.
Benefit Junta deposits gold- company utilizes it for productive purpose. Thus gold supply will increase. Lower gold imports. Lower current account deficit.

E4: MNREGA: Sweeping changes

  • Rural Development ministry has updated MNREGA guidelines.
  • To mitigate drought and water scarcity in rural India.

As per new guidelines:

  • 50% of all MNREGA works should be for water conservation works like check dam construction, de-silting of traditional water bodies, minor irrigation tanks and canals.
  • 51% of the wagepayment must be made to unskilled laborers. Remaining upto 49% – may be done by Skilled laborers. (if skilled laborers are required for check dams, minor irrigation tanks with machinery)
  • Fund transfer to states via E-payment platform
  • Fund transfer “just in time basis” so that laborers’ wage payment are not delayed beyond one week in any case.

Proposed: MNREGA only for backward districts?

  • Rural development minister said that MNREGA should not be required in areas having high growth rate, high percapita income.
  • MNREGA is required only in areas with large tribal or poor population.
  • In other words, Modi Government is planning to confine MNREGA only to backward areas.
  • Although they’ll need to amend the act for this, but they’ve began ground exercise of identifying the blocks using 2011 Census and planning commission’s Backwardness index.

Proposed: Changing labor to material ratio

Labour to material ratio
Components UPA Rural ministry’s New proposal
Labor 60 51
Material 40 49
Total 100 100


Proposed changes
Favor Against
Will permit greater use of (permanent) material. Perhaps paving way for machinary and contractors- so that ‘permanent’ durable assets can be created.
  • Most states have not even used the 40% material quota Expenditure. So increasing it to 49% won’t benefit.
  • Will decline poor people’s wage share in the scheme.

E5: MPLADS & toilet building

  • Under the MPLADS, each MP can recommend works to the tune of Rs 5 crore annually to the district collector in his or her constituency.
  • 2nd Administrative reform commission: absolish MPLADS because it breaches the separation of powers between executive and legislature. But SC ruled in 2010 it is not a breach.

Topic in news because

  • Planning and statistics ministry urged all MPs to make toilet construction their top priority this year.
  • PM has repeatedly emphasized the importance of separate toilet facility for girl child education.
  • MPLADS funds could also be used to install bio-digesters (DRDO) for sarkaari schools.
NSS survey: Households without toilets
Hindu 47%
Muslim 31%
Christian and Sikhs 16%

Challenges ahead:

  1. Since ’86, we’ve provided money to build toilets in rural India.
  2. But rural men consider it’s more ‘healthier’ to go out. until that mentality is fixed, merely throwing money won’t help.
  3. Same even in schools, if toilets are built but not cleaned properly, the children will still go out.

E7: PDS Reforms: Lessons from Delhi

What Why
  • Delhi Government decided to allow ration shop owners to sale non-PDS items from their outlets
  • Mobile recharge coupens, DTH cards, consumer durables, even ATM and railway tickets.
To solve shopkeepers’ problems:

  • Low profit margin on foodgrain and other subsidized items.
  • Shop Rent and labour cost too high in Delhi.
  • Hence they wanted to sell non-PDS items. Now they’ll keep the shop open throughout business hours. Poors will benefit.

E8: Commerce Ministry on IPR and FDI

Regarding IPR

  • At present, India has a strong IPR framework, fully compliant with WTO norms.
  • But we don’t have a separate IPR policy.
  • American pharma, solar companies, Special-301 reports keep rasiing the issue of intellectual property rights (IPR)

Therefore, Commerce ministry decided two things

  • Separate IPR policy in next four months.
  • Setup a think tank to handle IPR matters more effectively.

Regarding Multibrand FDI

  • UPA Government permitted 51% FDI in multibrand retail, with certain caveat.
  • So far only one proposal cleared: Tesco(UK).
  • The new Commerce minister says we are against multibrand FDI. But no formal notification yet given to scrap the FDI.
  • Her reason- there are no pending applications for FDI approval. (hence no need for notification, because everyone knows we are against it so other MNCs won’t waste time in applying anyways.)

E9: Global competiveness index 2014

  • World Economic Forum (WEF) releases Global competitiveness index. (HQ: Geneva, Switzerland).
  • (as expected), India lost 11 places than previous report. Current rank 71st.
  • Among BRICS nations: China>Russia>South Africa>Brazil>India
  • Top three: Switerland, Singapore, USA
  • It can be taken as a measure of knowing the sustainability of the growth.
  • When GCI 2013 was released, govt. was defensive against the rankings. It said, the indicators keep changing and it targets mostly MSME sector. It is not right to single out a single measure.
  • But now govt is taking steps to ease doing business- formed the Damodharan committee to give recommendations to improve business climate in the country.

Some of the reasons, why we suck in this report?

  1. Complex taxation structure.
  2. Obtaining business permits and plant construction permits.
  3. Multiple tax rates and complex paper work in various states. Procedure far burdernsome than international standards.
  4. Complicated procedures to get environment clearance and building permissions.

E10: MSME speech: fodder material

Some fodder points from Minister’s speech

Why MSME important Obstacles before MSME
  • MSME sector vital – 90% of non-farm workforce
  • 45% of manufacturing output and 40% of total exports of country.
  • PM I-day address stressed to have “Make in India” environment.
  • Lack of skilled workforce.
  • Skilled youth moving towards service sector and MNCs.
  • Unorganized nature and poor work conditions
  • Compared to Thailand, Brazil etc. we have very low number of new start up companies in MSME segment.
  • Lack of collaboration between MSME vs training institutions.

Reforms taken:

  • Skill India Mission
  • Make in India campaign.
  • 31 Sector Skill Centres to set standards for job profiles.
  • Government began amendments in Apprenticeship Act and factories act.

E11: BSNL, MTNL merger

BSNL Serves All India except Delhi and Mumbai
MTNL Serves Delhi and Mumbai
  • Government wants to merge BSNL and MTNL – into a national telecommunication services company.
  • Deadline: 2015, June-July.

Challenges to this merger

  1. MTNL has large debt. Government will have to give it soft loans to clear the debts first, before merging with BSNL.
  2. MTNL is a listed company. Its shares will have to be de-listed from the stock-exchange. Need clearance under SEBI and Companies Act 2013.
  3. MTNL employees get higher salary than BSNL.
  4. Both MTNL and BSNL are overstaffed, if you compare their salary as % of company
  5. revenue. (Compared to private telecom companies of similar revenue).
  6. Therefore, Atleast 1 lakh BSNL employees and 20,000 MTNL employees need to be given VRS- imagine the legal and trade union hurdles!

E12: India’s Sovereign rating

Agency Rating Meaning
Moody’s BAA3 Stable outlook.
S&P BBB- Lowest investment grade. Negative outlook.
Fitch BBB- Stable outlook.

Why in news? Fitch representatives met with Finance ministry officials. They’d inspect the database and reforms and may upgrade the rating.