6. Why ‘Rs 21 lakh crore stimulus’ is bad news for banks

May 29, 2020

6. Why ‘Rs 21 lakh crore stimulus’ is bad news for banks
6. Why ‘Rs 21 lakh crore stimulus’ is bad news for banks
  • What: Incremental bank lending makes up the bulk of the government’s nearly Rs 21 lakh crore stimulus package to kickstart the economy hit by the Covid-19 pandemic and the subsequent nationwide lockdown. However, forcing banks to lend could increase their bad loan burden significantly over the next two years, warns a Fitch Ratings report.
  • How: The stimulus measures announced by the government include measures like extension of the 90-day moratorium on recognition of bad loans to 180 days and several relaxations in lending limits. This may lead banks to lend to even weak borrowers from whom recovery of the loans may be doubtful “due to a one-year moratorium on registering fresh insolvencies amid weaker future incomes,” Fitch said. The impact of forced lending on banks’ impaired-loan ratios can be anywhere between 2% and 6%, depending on the severity of stress and banks’ individual risk exposures and the higher regulatory provisions, the report said.
  • Who: “These measures will put a heavy onus particularly on state-run banks which already have very weak balance sheets to bail out the affected sectors,” the report said. State-run banks account for a bulk of the non-performing assets (NPAs), with some of them like IDBI Bank reporting more than a third of total loans as NPAs.

GDP growth data for Jan-Mar quarter to be released; Delhi high court to hear plea claiming woman’s arrest under UAPA for anti-CAA protest is illegal; Air India flight to bring back Indians stranded in Sri Lanka; Women’s Bundesliga to resume; International Day of UN Peacekeepers

1. India rises to 9th among Covid-hit nations
1. India rises to 9th among Covid-hit nations
  • India’s Covid-19 daily case count hit another new single-day high of 6,926 on Thursday. And 177 fatalities were reported during the day, the third highest till date. India climbed to the ninth spot among countries with the highest Covid-19 caseloads, overtaking Turkey, according to the Johns Hopkins Hospital website. India’s overall case count stood at 161,067, with 4,708 deaths; 70,900 people have recovered from the infection, per data from state governments.
  • Maharashtra, at the top, added 2,598 cases on Thursday (Mumbai alone recorded 1,467). The state’s overall Covid-19 case tally is now close to 60,000, at 59,546. With 85 deaths, its overall fatalities totalled 1,982. Also, states reporting their highest single-day case counts on the day were Delhi (1,024), Bengal (344), Telangana (158), Haryana (123) and Kerala (84). Tamil Nadu recorded 12 deaths — its highest single-day Covid-19 toll — and with 827 fresh cases, its total count rose to 19,372.
  • Union home minister Amit Shah on Thursday spoke to all chief ministers on the lockdown amid indications that states will continue to have a major say in deciding the curbs and opening-up measures. (The fourth phase ends on May 31.) And while there has been speculation over Lockdown 5.0, discussions are still on. The negative list, barring activities in areas with high incidence of the disease, is expected to be further pruned. It is felt that it will take another week to 10 days for a fuller assessment of the impact of migration of lakhs of workers to their home states in recent weeks — a key factor going ahead though the graded exit seems likely to continue.
  • Finally, India has identified at least six local vaccine candidates with 30 groups trying to develop a vaccine for Covid-19. Besides, around 10 drugs are being re-purposed for use in treatment of the disease and are under different stages of trials, the government said while also highlighting that it was working on guidelines to prioritise distribution of the vaccine once it is available. Principal scientific advisor K Vijayraghavan also made it clear that a vaccine was not going to be available to everyone at once, besides taking time to develop.
2. Migrant crisis: SC lays out interim guidelines
2. Migrant crisis: SC lays out interim guidelines
64 days after the central government imposed, with just four hours notice, a nationwide lockdown for the first time and after thrice extending it, albeit with more relaxations each time, the Supreme Court on Thursday issued interim directives to ensure proper repatriation of India’s internal migrants. A bench of Justices Ashok Bhushan, SK Kaul and MR Shah said:

  • No fare either by train or bus will be charged from migrant workers. Railways to share fare.
  • All migrants who are stranded shall be provided food by the concerned state at places publicized and notified to them, so that they can make both ends meet. While they wait for their turn to board trains or buses, they can survive this way.
  • Originating state should provide food and water and thereafter, food to be provided by Railways. Receiving state shall give transport, food and meals from stations to their villages.
  • States shall speed up registration of migrant workers and build help desks near places where they are stranded. Complete information needs to be publicized so that migrants are aware of this.
  • Whenever a migrant is found walking on the road they will be taken to the camps at the earliest and provided with facilities.

Justice Bhushan also observed that “there needs to be a time in place which the migrant worker has to wait within which he will be transported and also be provided food and facilities in the interim,” reports the Bar and Bench. The court then called for a “uniform policy” on the matter to avoid confusion between the states, centre and the railways. The matter will be taken up next on June 5.

“But… it is a sad situation that some lawyers and retired judges are trying to run down the institution,” the bench observed. The SC took suo moto cognisance of the migrant crisis after several retired judges and senior advocates wrote to Chief Justice SA Bobde criticising the court for its “deference” to the executive even “in the face of an unfolding human disaster”. On Thursday, in the audience were Kapil Sibal, P Chidambaram and Indira Jaising, who were among the signatories of the letter.

3. NIA’s ‘unseemly haste’ in ‘whisking away’ an accused means…
3. NIA’s ‘unseemly haste’ in ‘whisking away’ an accused means…
  • The haste: The Delhi high court has pulled up the probe agency, NIA (National Investigation Agency), for acting in “unseemly haste” in taking away civil rights activist Gautam Navlakha, accused in Bhima Koregaon violence case, from the national capital to Mumbai even when his interim bail plea was pending with it. In August 2018, Navlakha was arrested by the Pune Police from his Delhi residence following the violence at Koregaon Bhima village in Pune district on January 1, 2018.
  • The story: Navlakha had surrendered before the NIA on April 14 on Supreme Court’s direction and was lodged in Tihar jail. His interim bail application on medical grounds (67-year-old Navlakha has cited his advanced age to say he was vulnerable to catching coronavirus or other infections in a crowded environment like prison) was slated to be heard by the Delhi HC on May 27. However, on May 23, on NIA’s request a Delhi court extended his judicial custody till June 22 and on May 24, a Sunday, NIA approached a Mumbai court and got Navlakha’s production warrants. On May 25, a gazetted holiday for Eid, the agency got a transit order from Tihar jail to shift Navlakha from Delhi to Mumbai. On May 26, Navlakha was put on a train and taken to Mumbai where he is lodged in Taloja jail.
  • The problem: The Delhi high court said: “While ordinarily this court would not see too much cause for hurry in this case, in view of the inexplicable, frantic hurry shown by the NIA in moving the applicant from Delhi to Mumbai while this matter was pending and the NIA had itself sought time to file status report, this court does get a sense that all proceedings in this jurisdiction would be rendered utterly infructuous if an element of urgency is not brought to bear on the present proceedings”. The court also said that the NIA has acted in “unseemly haste” to “remove the applicant out of the very jurisdiction of this court”. The matter will next be taken up on June 3.
4. One week of lockdown + 12 weeks of slowdown = ?
4. One week of lockdown + 12 weeks of slowdown = ?
  • A number: The gross domestic product (GDP) numbers for the January-March quarter (Q4 2019-20) will be released today. While the data is being released at the fag end of the fourth lockdown, only the last seven days of the quarter overlapped with the nationwide lockdown announced on March 25.
  • The meaning: Apart from highlighting, once again, the sorry state the economy has been in since the last couple of quarters, the numbers will give a glimpse of the severity of the impact of the nationwide lockdown that brought all economic activity to a standstill. It may also mark the beginning of a series of bad GDP numbers in the coming quarters adding up to a full year of negative GDP growth (according to the Reserve Bank of India), a first in 41 years.
  • The signs: Just one week of lost production due to the lockdown had pulled down India’s industrial activity as represented by Index of Industrial Production (IIP) by a massive 16.7% in March. Since industrial production is an important part of the total output and income in the economy (gross value added), its subdued performance would translate into a weaker GDP growth.
  • Any guesses? A Reuters poll of 52 economists indicated that the economy expanded by a mere 2.1% in the fourth quarter of 2019-20, the weakest in at least eight years. Credit rating agency ICRA has estimated that the economy will grow by 1.9% in the January-March quarter. CRISIL’s estimates are more dismal at just 0.5%. An SBI research report predicts 1.2% growth.

Meanwhile, Finance Minister Nirmala Sitharaman on Thursday chaired the first meeting of the Financial Stability and Development Council (FSDC), which has the RBI governor and other financial sector regulators, since the coronavirus outbreak.

7. In his ‘revenge’ against Twitter, Trump targets China
7. In his 'revenge' against Twitter, Trump targets China
US President Donald Trump, who has been bristling for the last couple of days after Twitter put a fact check on his tweets, finally hit back at the company with an executive order (EO), which could open the floodgates to lawsuits against not just Twitter, but also Facebook and Google, for content carried on their platforms. It’s a different matter that even Trump acknowledged that the EO is “going to be challenged in court”.

  • It’s personal: While Trump’s initial threat of shutting down Twitter, which was countered by the company’s CEO Jack Dorsey who said they would continue to point out “incorrect or disputed information about elections globally”, may have been just bluster, the fact that the EO was motivated by his ‘personal feelings’ being hurt was apparent from his singling out of Twitter, that it “now selectively decides to place a warning label on certain tweets in a manner that clearly reflects political bias”. As if that weren’t enough, his favourite bogey — China — too was in the EO, with an entire paragraph devoted to it, saying “several online platforms are profiting from and promoting the aggression and disinformation spread by foreign governments like China”. This, according to Trump. also included companies allowing the use of “their platforms to spread misinformation regarding the origins of the COVID-19 pandemic, and to undermine pro-democracy protests in Hong Kong”.
  • Shield removal: Perhaps the biggest change Trump’s EO brings is in the scope of Section 230 of the US Common Decency Act, which states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”. In other words, sites such as Twitter, FB, Instagram and YouTube —which have been named in the EO — as also Google can not be held liable for hosting or publishing text on their platforms. The ambit of this law may also extend to Vimeo and Amazon, among others, plus bloggers, for any comments left on their sites by their users. Trump’s EO removes this protection and asks the Federal Communications Commission (FCC) to propose regulations within 60 days that “when an interactive computer service provider removes or restricts access to content”, it will be tantamount to engaging in “editorial conduct” and as such, make them liable to be sued “like any traditional editor and publisher“.
  • Free-for-all: The order also calls for re-activating the White House Tech Bias Reporting Tool, whose sole job will be to collect complaints of online censorship and pass them on to the Department of Justice and the Federal Trade Commission who in turn “shall consider taking action” based on whether any law was violated by the social media company and if so, write a report detailing the complaint and make it publicly available.
  • Big brother: The order also entails the US Attorney General to establish a working group comprising state attorney generals whose job, among other things, will be to check “otherwise impermissible behaviour, when committed by accounts associated with the Chinese Communist Party”.

Meanwhile, Facebook founder Mark Zuckerberg sought to play it safe with Trump by defending his company’s policy of not interfering with a politician’s post on the social media site, saying that “internet platforms in general should (not) be arbiters of truth” as it would be a “dangerous line to get to in terms of deciding what is true and what isn’t”.

8. China passes Hong Kong bill, spars with US
8. China passes Hong Kong bill, spars with US
Chinese President Xi Jinping votes on a proposal to draft a security law on Hong Kong during the closing session of the National People’s Congress at the Great Hall of the People in Beijing on Thursday (AFP)

  • At UN: The United States and China on Wednesday clashed at the United Nations over the former’s request for a Security Council meet over the new national security legislation Beijing introduced in Hong Kong, bypassing the city’s legislative body. The U.S. mission to the UN said the issue was “a matter of urgent global concern that implicates international peace and security” and therefore warranted the immediate attention of the 15-member council. China retorted. Its U.N. Ambassador Zhang Jun said Hong Kong was an internal matter and “has nothing to do with the mandate of the Security Council”. This follows US Secretary of State Mike Pompeo’s statement at the US Congress that Hong Kong no longer qualifies for its special status under US law because China had undermined its autonomy,
  • In Beijing: The latest faceoff, however, did not deter Beijing from approving the controversial law. On Thursday, China’s National People’s Congress, the rubber-stamp parliament, voted in favour of a proposal to draft a national security law on Hong Kong. As per the official tally, it passed 2,878 to one, with six abstentions, reports Reuters. Details of the law are expected to be drawn up in the coming weeks. “The law will not affect the rights and freedoms enjoyed by Hong Kong residents,” insisted Hong Kong’s chief executive Carrie Lam, who is deeply unpopular in the city.
  • In Hong Kong: Three pro-democracy lawmakers were ejected from Hong Kong’s legislative chamber during a debate over a different bill that would criminalise insulting or abusing the Chinese national anthem. The vote on the bill was suspended after the pro-democracy lawmakers hurled a rotten plant at the head of the legislative chamber.
9. Premier League to return after 100-day break on June 17
9. Premier League to return after 100-day break on June 17
  • The Premier League is set to resume on June 17 after the clubs gave ‘Project Restart’ the green light at a shareholders meeting on Thursday, British media reported. And both BBC and Sky Sports say there will be a doubleheader on the day with Manchester City playing Arsenal and Aston Villa hosting Sheffield United.
  • That will take all teams to 29 matches played. The remaining 90 games (the 30th round of fixtures onwards) will then continue from the following weekend, with a match likely to be moved for television on Friday, June 19, preceding a full programme.
  • The aim is to complete all fixtures by Aug. 1. After that, the FA Cup final is anticipated to take place on Aug. 8, in addition to the remaining Champions League and Europa League fixtures, assuming the Covid-19 pandemic has subsided to the extent that international travel is allowed.
  • No matches have been played since Leicester’s 4-0 win over Aston Villa on March 9, with Liverpool just two wins away from securing the title. So far, 12 people have tested positive for Covid-19 after 2,752 tests across the Premier League.
  • Germany’s Bundesliga resumed earlier this month and La Liga in Spain hopes to return from June 11, while Serie A is set to resume on June 20, Italy’s sports minister announced on Thursday.
  • A cricket update: The International Cricket Council Board on Thursday deferred a decision on all agenda items, including the fate of the T20 World Cup in Australia, till June 10.
10. Bad weather delays NASA-SpaceX mission
10. Bad weather delays NASA-SpaceX mission

The highly-anticipated Crew Demo-2 Mission wherein a SpaceX rocket, Falcon 9, was to take two NASA astronauts to the International Space Station, originally scheduled for Wednesday, was postponed due to bad weather. Thunder and lightning storms sat over Cape Canaveral on Wednesday. “We gave it a good try, but we just couldn’t get there,” a SpaceX spokesman, John Insprucker, said. “We’ll come back another day.” NASA and SpaceX will now try to launch the rocket on Saturday (May 30) 3.22 pm Eastern Time. The human spaceflight mission would be the first to be launched by a private rocket and the first to take off from the Kennedy Space Center, Florida, since 2011.


Kerala. The southwest monsoon is likely to hit the state by June 1 or 2, aided by a cyclonic circulation forming over the Arabian Sea, the India Meteorological Department (IMD) said on Thursday. This after the IMD, in its earlier forecast on May 15, had said the monsoon is likely to hit Kerala on June 5, with an error margin of four days. (June 1 is the normal date of monsoon’s arrival over Kerala, the first stop in its march into the Indian mainland.) The country is likely to receive normal monsoon this year.

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Written by: Rakesh Rai, Judhajit Basu, Sumil Sudhakaran, Tejeesh N.S. Behl
Research: Rajesh Sharma

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