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Current Events 16 May 2016



16 MAY 2016


Monsoon to miss June 1 date with Kerala, say weathermen

The India Meteorological Department (IMD) said that the arrival of the northeast monsoon in Kerala will be delayed by at least a week beyond the normal of June 1. However, a top official said while this could lead to reduced rainfall in June, it would not affect the overall quantum of rains across the country.

Crucial for kharif

June accounts for only 18 to 20 per cent of the monsoon rains but it marks the beginning of the kharif sowing season. July and August account for about two-thirds of monsoons and are critical for a good harvest. Last year, the monsoon arrived at the Kerala coast on June 5, later than the agency’s predicted date of May 30. This was the only time, the IMD claims, its monsoon onset model failed to get the date within the model’s error margin since it began issuing such forecasts in 2005.

The delay in onset over Kerala is because of the El Nino, which, though waning, is still strong, and the waters of the Indian Ocean being warmer than usual for this time of the year. Generally rain-bearing winds begin to be drawn across the equator by this time of the year.



U.S. sanctions still block Iran payments

With less than a week to go for Prime Minister Narendra Modi’s visit to Teheran on May 22, officials are working hard to seal an agreement to repay $6.5 billion owed to Iran over the years when it was under sanctions.

New Delhi has repeatedly said it is keen to pay back Iran the $6.5 billion, most of it for oil transactions.

Instead, European banks blamed U.S. restrictions that still prevent financial transactions between American companies and Iranian entities.

Also, continuing sanctions on any transaction that could lead to Iran’s all-powerful “Revolutionary Guards” (IRGC) military have kept banks wary of establishing ties with corresponding banks in Iran.

U.S elections impact

Finally, say officials, the possibility of Donald Trump, or a Republican candidate winning the U.S. Presidential elections later this year is another dampener, as their campaigns have promised to scrap the nuclear deal with Iran hammered out last year, possibly revising the lifting of sanctions.

A group of nine international banks including HSBC and Standard Chartered met with U.S. Secretary of State John Kerry in London, and refused to consider dealing with Iran until the Washington opens up for business after decades of sanctions on Iran.

Clarifying doubts

India is pushing for the U.S. to convince U.K. banks to allow the deal for $6.5 billion to be processed as a “one-off” transaction, even as they work on finding more permanent channels of doing business with Iran.

Other significant announcements are the signing of a trilateral trade agreement which includes Afghanistan that has already been finalised, an MoU for the development of the Chabahar port, progress on Indian exploration of the ‘Farzad-B’ gas oilfields. Millions of dollars in investments are also expected to be made by Indian companies for the “Free Trade Zone” in Chabahar.


India successfully test-fires advanced interceptor missile

In its effort to have a full fledged multi-layer Ballistic Missile Defence system, India successfully test-fired its indigenously developed supersonic interceptor missile, capable of destroying any incoming hostile ballistic missile, from a test range off Odisha coast.

The interceptor was engaged against a target which was a naval version of Prithvi missile launched from a ship anchored inside Bay of Bengal, taking up the trajectory of a hostile ballistic missile.

The target missile was launched at about 11.15 hours and the interceptor, Advanced Air Defence (AAD) missile positioned at Abdul Kalam island (Wheeler Island) getting signals from tracking radars, roared through its trajectory to destroy the incoming hostile missile in mid-air, in an endo-atmospheric altitude, the sources said.

Kill effect

“The ‘kill’ effect of the interceptor was ascertained by analysing data from multiple tracking sources,” a DRDO scientist said.

The interceptor is a 7.5-metre-long single stage solid rocket propelled guided missile equipped with a navigation system, a hi-tech computer and an electro-mechanical activator, the DRDO sources said.

The interceptor missile had its own mobile launcher, secure data link for interception, independent tracking and homing capabilities and sophisticated radars, the sources added.


On-tap bank licences: 5 questions that linger

Ever since the Indian financial sector was opened up in 1991, the gates to allow a private entity to start a bank were opened only three times. The ‘stop & go’ approach has finally given way to a continuous or ‘on-tap’ licensing regime with the Reserve Bank of India (RBI) announcing draft norms for such a scheme.

After taking charge in September 2013, Raghuram Rajan, the RBI Governor, expedited the licensing process and granted licences to 23 entities during his two-and-half-year tenure. Two of them were universal banks while the rest were niche banks – payments banks and small finance banks, which were awarded differentiated licences.

The RBI has now initiated a move to the ‘on-tap’ regime for differentiated licences too.

The draft norms are itself an important milestone in the country’s banking landscape. While the norms are more or less in line with the 2013 new bank licence norms, this time the central bank has made it clear that entities involved predominantly in finance will be encouraged.

Some features of the draft norms include: a minimum capital of Rs.500 crore, a 10-year track record, requirement of 10 years’ experience for individual applicants in banking and finance, minimum 13 per cent capital adequacy ratio for three years, promoters’ stake to be reduced to 30 per cent over 10 years and to 15 per cent over 12 years and the bank to be listed on the stock exchanges within six years. Banking aspirants have raised a few questions on the draft norms and said they would seek clarifications from the regulator.

External committee needed?

The RBI had said it would form a standing external advisory committee (SEAC) that will vet the applications after the initial screening is done by central bank staffers. The committee is to have a three-year term and will comprise eminent personalities from the banking, financial and other relevant sectors.

No timeframe?

The central bank has tried to make the process on-tap licensing process transparent. For example, for the first time, it has allowed unsuccessful candidates to appeal to the central board of the RBI. Unsuccessful candidates can also apply again, after three years from the date of rejection.

While the RBI has said it will communicate its decision to the unsuccessful candidates as well, it has not specified any timeframe by which a licence will be awarded or declined. 

Reasons for rejection?

Applicants from past rounds feel that the central bank, known to be a conservative regulator, seldom communicates the cause for rejection. During the recent universal bank licence process, the central bank had rejected over 20 applications, but did not communicate the reason for rejecting those applications, it is learnt. The same was repeated for differentiated bank licences where more than 90 applications were rejected. There is a demand from bank aspirants, in order to ensure transparency, that the central bank should make public reasons for rejecting bank licence applications.

Not to all eligible?

In the draft norms, the RBI had said entities or individual promoters would be found be fit and proper if they had 10 years of banking experience or running their respective businesses, sound credentials and integrity, sound financials, and diversified shareholding pattern among promoting entities.

Prospective applicants said if the objective is to allow financial services to reach the remotest part of the country, adding only a few banks will not solve the problem.

Why not business houses?

It is clear from the guidelines that the central bank wants entities that are predominantly in financial services.

Diversified business houses such as the Tata group, Birla group and the Mahindra group had earlier applied for bank licences (The Tata group had withdrawn its application later). Many of these groups may now find themselves ineligible because the regulator has stipulated that “the non-financial business of the group does not account for 40 per cent or more in terms of total assets / in terms of gross income.”


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