Daily Mains Practice Questions 13-04-2023

KEY POINTS

·        India is rapidly emerging as a strategically preferred trade partner for the European Union, thanks to India’s neutral stand in the rapidly emerging multi-polar world.

·        The EU is India’s third largest trade partner whereas India is EU’s tenth largest.

·        Interestingly, India had a trade deficit with the EU in 2018-19 that turned into a trade surplus of $13 billion during April-February 2022-23.

·        India-EU FTA is likely to be more comprehensive than India’s recent deals with Australia and the UAE, as it has an ambitious aim to liberalise 94 per cent of the trade in goods.

·        Technically, an FTA can be approved by the European parliament, but the investment protection agreements need to be ratified not only by the EU parliament but also by the parliaments of individual member-countries.

·        India’s spectacular GDP growth rate of 6.9 per cent in 2022, almost double that of the EU’s 3.5 per cent, makes India a lucrative market as well as an attractive investment destination for the EU

·        India-EU FTA is likely to pave way for enormous opportunities not only in trade and investment but also in forging strategic international partnership at the world fora, making it a win-win deal.

KEY POINTS

·        Its major contribution is in making available credit to the unreached segments of society, in a hassle-free manner, that too without collaterals.

·        Today, MFIs are operating in all States and Union Territories, but their spread is not uniform.

·        Unfortunately, the growth of MFIs is concentrated in 10-12 States. The data for 2021-22 shows that 82 per cent of the portfolio of microfinance sector is concentrated in 10 States and may be 100 districts.

·        The first requirement is to have a conducive environment in the States for MFIs to operate freely and here the government must play an important role in creating this environment.

·        Two, there should be fiscal incentives for microfinance activities in less developed geographies like aspirational districts or hilly tracts.

·        Third is to spread financial literacy in these regions so that the borrowers are made aware of the proper utilisation of the loans and timely repayment.

·        Fourth, there is a need to bring awareness among the various stakeholders like District administration including law enforcing agencies about the activities of MFIs. Fifth, support for enabling facilities in these regions for easy movement, internet connectivity etc is required.

·        These enabling factors can help the microfinance sector to expand in new geographies and benefit millions of underserved people.

KEY POINTS 

·        RBI issued a ‘Master Directions of Frauds’ that specified a list of 45 Early Warning Signals (EWS) to identify possible risks in a loan account in advance.

·        It must be noted there are other more grevious signals that require swift and stringent actions by banks.

·        In the absence of audited accounts, banks are clueless regarding the financial position, including details on fixed assets of those companies.

·        While outside borrowing, apart from the sanctioned limit, temporarily for a genuine emergency is acceptable, if the amount exceeds 10 per cent of the limit and that too for longer duration, it necessitates investigation.

·        These include: lower valuation of the company as the correct assets and liabilities of the company is unknown; the day-to-day operations of the company gets affected post CIRP , as the ‘payables and receivables’ are not known;

·        Dismantling that barrier is imperative, since, currently, even if a property is attached by the income tax/PF authority, the same is not known to other regulators/lenders .

·        Hence, it is important that the portals of the regulators Ministry of Corporate Affairs, IT, GST, MSME are linked through a common Corporate Identification Number (CIN), assigned by the RoC, and also seamlessly linked to the banking system.