Syllabus: GS II –Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures. GS III Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.
1. What are the steps needed to prevent the Wilful defaulters which include tightening the internal and external audit systems of banks? Discuss.
Key:
The biggest banking scam in India has come to the forefront in the midst of celebrations of ‘Aazadi Ka Amrit Mahotsav’; in this case, Dewan Housing Finance Corporation Limited (DHFL) has hoodwinked a consortium of banks driven by the Union Bank of India to the tune of ₹35,000 crore through financial misrepresentation.
Steps that need to reduce the Wilful defaulters:
- Over time, bad loans lead to higher NPAs. So, banks have to exercise due diligence and caution while offering funds.
- The regulation and the control of chartered accountants is a very important step to reduce non-performing assets of banks.
- Banks should be cautious while lending to Indian companies that have taken huge loans abroad.
- There is also an urgent need to tighten the internal and external audit systems of banks.
- The fast rotation of employees of a bank’s loan department is very important.
- Public sector banks should set up an internal rating agency for rigorous evaluation of large projects before sanctioning loans.
- There is a need to implement an effective Management Information System (MIS) to monitor early warning signals about business projects.
- The CIBIL score of the borrower (formerly the Credit Information Bureau (India) Limited) should be evaluated by the bank concerned and RBI officials.
- This must also include the classification and responsibilities of the lending and recovery departments.
- Financial fraud can be reduced to a great extent by the use of artificial intelligence (AI) to monitor financial transactions.
- The adoption of digitisation beyond a point may have limits as AI provides quantitative information but does not take into account the qualitative aspects.
- The Government of India and the RBI have taken several measures to try and resolve the issue of scams in the banking industry, the fact is that there is still a long way to go.
- Rather than having to continuously write off the bad loans of large corporations, India has to improve its loan recovery processes and establish an early warning system in the post-disbursement phase. Banks need to carry out fraud risk assessments every quarter.
Way Forward
- The most effective way of preventing frauds in loan accounts is for banks to have a robust appraisal and an effective credit monitoring mechanism during the entire life-cycle of the loan account.
- Any weakness that may have escaped attention at the appraisal stage can often be mitigated in case the post disbursement monitoring remains effective.
- In order to strengthen the monitoring processes, based on an analysis of the collective experience of the banks, inclusion of the following checks / investigations during the different stages of the loan life-cycle may be carried out.
- During the course of the audit, auditors may come across instances where the transactions in the account or the documents point to the possibility of fraudulent transactions in the account. In such a situation, the auditor may immediately bring it to the notice of the top management and if necessary to the Audit Committee of the Board (ACB) for appropriate action.
~Source: The Hindu
Syllabus :GS II Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
2. Chhattisgarh’s tribals fighting back the ‘No go’ category miners in central India’s densest forest. What are the legal cases strengthening the tribal cause and also explain the ecological impacts of such mining?
Key:
Tribal and forest-dwelling communities have opposed mining in Chhattisgarh’s Hasdeo Arand, one of central India’s most dense forests. The latest chapter in the saga of resistance is how they forced the stoppage of the Parsa open cast mining (OCM) project barely two months after the Chhattisgarh government approved it
‘No-go’ category:
Miners have eyed the coal beneath the green cover for over a decade now. Hasdeo’s 23 coal blocks fall under a “No-Go” category listed in a joint study published by the Union Ministry of Environment, Forest and Climate Change and the Ministry of Coal in December 2011. The study classified unfragmented forest landscapes with a gross forest cover of over 30 per cent as “No-Go” areas for mining.
Legal violations
- Outright violations and the use of legal loopholes have marred the process of obtaining mining clearances.
- 20 gram sabhas passed a resolution stating that the auction of coal mines was in violation of the Forest Rights Act (FRA), 2006.
- Hasdeo Arand is an area listed in the Fifth Schedule of the Constitution (dealing with the administration and control of Scheduled Areas as well as of Scheduled Tribes residing in any State other than the States of Assam, Meghalaya, Tripura and Mizoram).
- Provision 4(k) of the Panchayats (Extension to the Scheduled Areas) Act, or PESA rules that “the recommendations of gram sabha shall be made mandatory prior to the grant of prospecting licence or mining lease in the Scheduled Areas”.
- Section 4(i) of the Act says that “gram sabhas shall be consulted before making the acquisition of land” in these areas.
- Naresh Singh & Ors. v. Union of India & Ors.
- It will be clear from the language used in Section 4 of the 1996 Act (i.e. PESA) that the embargo therein is not on Parliament but on Legislature of a State but the acquisition of land in the Scheduled Areas in the present case for mining by SECL is under law made by Parliament, namely, the 1957 Act (i.e. CBA Act) or the 1894 Act and Section 4 (i) of the 1996 Act does not apply to such acquisition
- Sarthak Srijanatmak Sanstha v. Union of India & Ors.
- Section 4(i) of PESA has not been incorporated into the Chhattisgarh Panchayat Act and taking into consideration the aforementioned case laws dealing with the subject matter, it may be concluded that acquisition of coal bearing lands would be governed by the CBA Act and therefore the provisions of PESA would not apply.
Ecological impact
- The project’s proponents have been accused of violating wildlife laws as well. The ecologically sensitive Hasdeo forests are located between the Achanakmar Tiger Reserve in Chhattisgarh and the Palamu Tiger Reserve in Jharkhand.
- The Wild Life (Protection) Act, 1972, entrusts the NTCA with the task of evaluating and disallowing any land use that it deems “ecologically unsustainable”, such as mining and industrial projects.
- If central India’s largest contiguous forests are fragmented, it will decrease the connectivity of migratory corridors of elephants and tigers.
- The grant of approvals despite unresolved procedural lapses, allegations of fabricated documents, and shortfalls in impact assessments set an undesirable precedent that can justify the opening of several other coal blocks in Hasdeo Arand forests.
- Activists also claim over two lakh trees will be cut for the Parsa project, despite the forest clearance stating that 95,485 trees will be axed.
- The studies also address the issue of human-elephant conflicts, noting that while Chhattisgarh has fewer elephants compared to other states, it accounts for a significant percentage of conflicts due to habitat loss or clearing of forests. Further deforestation could lead to elephant movements spilling over to urban areas, these studies have noted.
Way Forward:
- By making the women from PVTGS and other forest-dwelling communities aware of their legal and constitutional rights and human rights.
- By safeguarding and implementing Community Forest Rights (CFRs) and Habitat Rights through gender-sensitive approaches.
- By conducting training workshops to prepare the tribal society for handling unwarranted dangers.
~Source: FrontLine
