DAILY CURRENT AFFAIRS IAS | UPSC Prelims and Mains Exam – 23rd September 2024
Archives (PRELIMS & MAINS Focus) THE DEPOSIT ISSUE: WHY BANKS ARE STRUGGLING TO LEND Syllabus Prelims & Mains – ECONOMY Context: Banks are currently experiencing a deposit crunch, which is limiting their ability to extend credit. Background: – The Reserve Bank of India Governor Shaktikanta Das had, in July, raised concerns over slower deposit mobilisation compared to credit growth stating that as it may create structural liquidity issues. Key takeaways India is among the fastest-growing large economies of the world largely driven by the government’s elevated expenditure on infrastructure development. While government capital expenditure has spurred the growth rate, job creation remains a concern with youth unemployment touching 17 per cent, as highlighted by the World Bank. Private investment, measured by private Gross Fixed Capital Formation (GFCF), has been subdued, declining to a four-quarter low of 6.46 per cent in Q4FY24, down from 9.7 per cent in the previous quarter. The Economic Survey 2023-2024 also highlighted that between FY19 and FY23, the share of private non-financial corporations in overall GFCF increased only by 0.8 percentage points from 34.1 per cent to 34.9 per cent. In a worrying trend, S&P Global forecasted that year-on-year credit growth is set to decline during the current financial year to 14 per cent, compared to 16 per cent in the previous fiscal year. One key reason for this is the reduced risk appetite from banks for lending to the private sector, which is the economy’s largest job creator. S&P Global also said that “regulatory actions to tame unsecured lending” are also slowing credit growth. The RBI recently increased risk weights for unsecured loans which has moderated loan growth in this segment in recent months. Widening Credit-Deposit Gap A healthy credit growth rate is essential to maintain economic growth, especially in India where bank credit is a key component. However, for banks to extend credit, deposits must grow in tandem. But banks are currently experiencing a deposit crunch, which is limiting their ability to extend credit. This has led to a widening gap between bank deposits and credit growth. Current and savings accounts (CASA) – the banks’ primary low-cost funding sources, account for 41 per cent of total deposits, down from 43 per cent last year. Changing investment habit The slowdown in deposit growth comes amid an outflow of household savings from banks to capital markets. Following the Covid pandemic, the Indian capital markets have seen a meteoric rise. However, economists say that the shift in households’ saving behaviour towards alternative saving instruments have not alone lowered bank deposits as a move to alternate saving instruments would still imply that the money finds its way into bank deposits. “A shift in the savings portfolio of a household alone does not lead to a fall in deposits. It does, however, change the composition of deposits – for instance, a shift to CASA from term deposit or a move towards shorter tenure term deposits compared to longer tenure. This in turn could have an adverse impact on the money multiplier and the deposit creation process,” HDFC Bank said in a research report. Low government spending in the run up to the election has also exaggerated the deposit problem in recent months. Government spending remained low in the run up to the elections over the last few months and this led to an increase in government cash balances with the RBI. Source: Indian Express NATIONAL INVESTIGATION AGENCY (NIA) Syllabus Prelims & Mains – POLITY Context: To improve the information network on a national level against “organised criminals”, the National Investigation Agency (NIA) will make a database of gangsters, criminals running their gangs from behind jails, and their associates. Background: – Sharing some of the key features of the database, a source said it would have the latest photographs of the criminals, biometric details, interrogation report, their logistics provider, weapon suppliers, and harbourers. Key takeaways Established: 2008 under the NIA Act, 2008, in response to the 26/11 Mumbai terror attacks. The NIA, with its headquarters (Hqrs) at New Delhi, has 18 Branch Offices in the country. Mandate: Investigation and prosecution of offenses affecting national security such as terrorism, financing of terrorism, and related activities. Special Jurisdiction: Unlike state police forces, the NIA can investigate and prosecute cases across states without special permission, overriding the federal division of powers in normal criminal law. Key Features: Investigative Scope: The NIA can investigate and prosecute offences under the Acts specified in the Schedule of the NIA Act. NIA deals with offenses related to: Terrorism under Unlawful Activities (Prevention) Act (UAPA) Bomb blasts, hijacking, human trafficking, cyber terrorism, and counterfeit currency Special Acts like the Atomic Energy Act, 1962, and Anti-Hijacking Act, 2016 etc Powers: Similar to a state police force but operates across states. It also has the power to investigate matters referred by the central government or with cross-border implications. NIA Amendment Act, 2019 focussed on three main areas: OFFENCES OUTSIDE INDIA: The original Act allowed NIA to investigate and prosecute offences within India. The amended Act empowered the agency to investigate offences committed outside India, subject to international treaties and domestic laws of other countries. The amended section reads: “Where the Central Government is of the opinion that a Scheduled Offence has been committed at any place outside India to which this Act extends, it may direct the Agency to register the case and take up investigation as if such offence has been committed in India.” The NIA special court in New Delhi will have jurisdiction over these cases. WIDENED SCOPE OF LAW: The Schedule originally had The Atomic Energy Act, 1962, The Unlawful Activities (Prevention) Act, 1967, and The Anti-Hijacking Act, 1982, among other entries. The amendment has allowed the NIA to investigate, in addition, cases related to (i) human trafficking, (ii) counterfeit currency or banknotes, (iii) manufacture or sale of prohibited arms, (iv) cyber-terrorism, and (v) offences under the Explosive Substances Act, 1908. SPECIAL COURTS: The 2008 Act constituted Special Courts for conducting the trial of offences under the Act. The 2019
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