Banks, it is often said, are the fulcrum of a robust economy. Healthy banks are an essential prerequisite for placing the economy on a higher growth orbit. The banking scene in India, however, presents an absolutely scary picture. A combination of factors ranging from poor credit appraisal to political interference and mismanagement by borrowers have conspired to push the banking industry into a messy cobweb. Bank after bank, especially the government-owned, has come out with poor third-quarter results. The stressed assets (comprising gross non-performing assets plus written-off assets and restructured assets) account for 14.1 per cent of total bank loans as of September 2015, up from 13.6 per cent in March 2015. For public sector banks, the stressed assets were in the vicinity of 17 per cent at the end of September, while the figure for private sector banks stood at 6.7 per cent. The rising stress level, or increase in bad loans, has yielded a twin fallout — of declining profitability at banks and poor credit disbursal. The double effect is already telling on the economy in various ways. For long, banks have either managed to, or rather been allowed to, keep the stress invisible, giving the outside world very little clue as to the happenings inside the industry. The Reserve Bank of India under Raghuram Rajan’s stewardship, however, has decided to clean up banks’ books rather than letting them camouflage the real picture. “There are two polar approaches to loan stress,” he said at the CII Banking Summit in Mumbai this week. “One is to apply band-aids to keep the loan current, and hope that time and growth will set the project back on track. Sometimes this works. But most of the time, the low growth that precipitated the stress persists. The fresh lending intended to keep the original loan current grows. Facing large and potentially un-payable debt, the promoter loses interest, does little to fix existing problems, and the project goes into further losses.” Indeed, legacy problems should be given a burial, and should not be allowed to persist. So hinting, Dr. Rajan articulated the need for surgical action to retrieve the health of the industry.
Forcing banks to recognise a problem is one thing, and finding a viable long-term solution to it is quite another. That requires not just holistic thinking but an out-of-the-box approach as well, especially in the evolving global context. A meaningful fix can happen only if banks are given functional autonomy at various levels. Restricted freedom inevitably leads to a blame game, making it even more difficult to fix responsibility. The concept of arm’s- length relationship especially needs to be clearly defined and implemented in letter and spirit in the banking industry. It is not just about how much money the Central government will freshly pump into stressed banks. The litmus test for the government lies in its ability, and capacity, to let go of control. The banking system indeed needs a change in the way it is managed.
1.fulcrum : a thing that plays a central or essential role in an activity, event, or situation.
2.robust : (of an object or system) strong and unlikely to break or fail.
3.prerequisite : a thing that is required as a prior condition for something else to happen or exist.
4. scary :frightening; causing fear.
5.appraisal : an act of assessing something or someone.
6.conspired : make secret plans jointly to commit an unlawful or harmful act.
7.messy : (of a situation) confused and difficult to deal with.
8.cobweb : the network spread by a spider .
9.assets : a useful or valuable thing or person.
10.vicinity : the area near or surrounding a particular place.
11.disbursal: amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures).
12.stewardship: the management or care of something, particularly the kind that works.
13.camouflage : consists of things such as leaves, branches, or brown and green paint, which are used to make it difficult for an enemy to see military forces and equipment.
14.precipitated : cause (an event or situation, typically one that is undesirable) to happen suddenly, unexpectedly, or prematurely.
15.persists :continue in an opinion or course of action in spite of difficulty or opposition.
16.lending : grant to (someone) the use of (something) on the understanding that it will be returned.
17.intended : planned or meant.
18.articulated : having two or more sections connected by a flexible joint.
19.viable : capable of working successfully; feasible.
20.holistic : characterized by the belief that the parts of something are intimately interconnected and explicable only by reference to the whole.
21.evolving : develop gradually.
22.spirit : the non-physical part of a person which is the seat of emotions and character; the soul.
23.litmus : a crucial and revealing test in which there is one decisive factor.
TOPIC-2: A wave of awe and opportunity
The detection of ripples in space-time, known as gravitational waves, here on Earth marks a watershed moment for astronomy and for science as a whole. The detection at once improves our understanding of the workings of the universe and, more important, throws open a big opportunity to study it from completely new angles. It opens the way to get information about the evolution of galaxies and black holes. There is also a symmetry to the timing of the discovery: it comes a century after Albert Einstein’s general theory of relativity held that acceleration of massive bodies should produce gravitational waves, which travel through the universe at the speed of light. The gravitational waves detected, and announced to the world on Thursday, were produced more than a billion years ago by a cataclysmic collision of two black holes, one of them with a mass 36 times that of the Sun and the other slightly smaller at 29 times, into one black hole. The gravitational waves give scientists insights into the final moments before the merger. The signals of gravitational waves were detected on September 14, 2015 by twin Laser Interferometric Gravitational-wave Observatory (LIGO) detectors located about 3,000 km apart at Hanford, Washington and in Livingston, Louisiana, in the United States. Though the observatory is capable of picking up gravitational waves produced by binary neutron stars colliding and merging, signals from such a collision from the same distance would have been extremely weak for LIGO to pick up; neutron stars are much smaller in size than black holes and produce weaker signals. The successful capture of gravitational waves by LIGO is a testimony to humankind’s scientific and engineering expertise to build extraordinarily sensitive instrumentation capable of detecting variations of the order of a thousandth of the diameter of a proton.
Fittingly, this giant step for science is the result of truly global cooperation. About 60 researchers from more than a dozen institutions in India were part of the over-1,000-strong army of scientists in the collaboration. Nearly 35 Indian scientists are co-authors of the landmark scientific paper that describes the results. The way to find the signal buried in the noise came from an Indian scientist. Similarly, the oscillation of cosmic bodies after a collision was predicted by an Indian scientist back in 1971. Several observatories widely separated from one another will help in determining the direction of any event with greater accuracy and also confirm the genuineness of the signal. Quick approval to construct the proposed Rs.1,260-crore gravitational wave observatory in India could help obtain unique information about the universe; unlike light, gravitational waves can pass through the universe unobstructed and hence carry otherwise unobtainable information. The facility would also provide a much-needed technological boost and immensely benefit researchers based in India. And for years to come, we will continue to listen to the ‘chirp’ sound produced by the gravitational waves, and marvel at science’s capacity to detail ever more minutely the place of humankind in the vastness of space and time.
1.detection : the action or process of identifying the presence of something concealed.
2.ripples : a small wave or series of waves on the surface of water, especially as caused by a slight breeze or an object dropping into it.
3.Wave: a sudden occurrence of or increase in a phenomenon, feeling, or emotion.
4.evolution: the process by which different kinds of living organism are believed to have developed from earlier forms during the history of the earth.
5.cataclysmic : causing sudden and violent upheaval.
6.merger :a combination of two things, especially companies, into one.
7.Interferometric : IT is a family of techniques in which waves, usually electromagnetic, are superimposed in order to extract information about the waves.
8.Fittingly: the act of a person or thing that fits.
9.giant : an imaginary or mythical being of human form but superhuman size.
10.collaboration : the action of working with someone to produce something.
11.cosmic : relating to the universe or cosmos, especially as distinct from the earth.
12.predicted: say or estimate that (a specified thing) will happen in the future or will be a consequence of something.
13.unobstructed: not blocked by anything.
14.immensely : to a great extent; extremely.
15.chirp :(of a small bird or an insect) make a short, sharp, high-pitched sound.
16.marvel : be filled with wonder or astonishment.
17.vastness : unusual largeness in size or extent or number.