“Credit targets are sometimes achieved by abandoning appropriate due diligence, creating the environment for future NPAs. Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk. The Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a growing contingent liability and needs to be examined with urgency”.

This is one of the steps proposed by former RBI Governor Raghuram Rajan in hisresponse to a query on how to prevent recurrence of NPA crisis. The querist is Parliament’s Estimates Committee. 

Mr. Rajan’s timely alert, that hit headlines during last two months, should have prodded the Government to examine the entire business of populism-driven lending. It largely comes in 3 formats: 1) as interest subsidy on loans, 2) as loan write-offs or rescheduling & 3) as guarantees for repayment of loans on behalf of beneficiaries. Guarantees for such collateral-free loans are different from guarantees that Government gives to companies for borrowings from the capital markets. 

Where there is a Government Guarantee Policy for latter guarantees that was laid in 2010, no policy exists for credit guarantee funds (CGFs). 

An enlightened Government must provide guarantees for repayment of loans given to sectors that are prone to high risks of failure. Such sectors are also the backbone of economy and can’t thus be left starved of the capital. 

(River Erosion.Edited Image Courtesy: Central Water Commission)

 

 

Base Erosion and Profit Shifting (BEPS) project is facing massive erosion threat on multiple fronts.  The four main risks to the Project are: 1) absence of inclusivity; 2) complex challenges in plugging revenue leakages under existing tax treaties; 3) avoidance and evasion in booming digital economy due to problems in engineering customized taxation and 4) Divisive impact of different model tax conventions. All of them are supposed to achieve BEPS objectives.

Take first the inclusivity. Only 15 countries have so far ratified Multilateral Convention to Implement Tax Treaty Related Measures to prevent BEPS / Multilateral Instruments (MLI). As many as 76 countries/jurisdictions had signed or formally expressed their intention to sign on 7th June 2017. 

So far only 84 out of over 202 tax jurisdiction have joined BEPS Convention. The United States & Brazil continue to shun MLI. The 84 signatories cover over 1,400 bilateral tax treaties, which is 41.17% of total 3400 treaties signed by all tax jurisdictions. 

The bilateral treaties specified in ratification instruments would be subjected to match-making, fast-track amendments through MLI toolkit. All 1400 treaties would actually come under MLI cover only when 69 out of 84 signatories submit their ratification/approval to Organisation for Economic Co-operation and Development (OECD). 

This may take years as certain countries would have to take approval from their respective Parliament. Each signatory submits its instrument of ratification with many reservations about different articles of 49-page MLIs convention.

Reservations from all signatories can be perceived as thousands of pinpricks in BEPS umbrella. The word ‘Reservation’ appears 105 times in the text of the Convention.

(A slide from Rail Safety Presentation. Image Courtesy: RDSO)

 

“Could there have been an auditory distraction on approach to the signal”?

“Was there anything related to the cab environment that could have distracted the loco pilot”?

“Is there evidence that the loco pilot was distracted by any in cab activity, such as reading a document...”?

These are three questions out of the 57 standard questions that form part of any departmental inquiry into any accident due to signal passing at danger (SPAD).

Such questions would get rephrased if Modi Government orders an independent probe into Amritsar tragedy in which a speeding train mowed down  62 persons. The victims were watching effigies burning & fireworks at Dussehra ground adjoining railway lines.

In this instant case, a few relevant issues that must be answered to public are:

Were loco pilots distracted by light and noise of Dussehra festivities? Was Vigilance Control Device (VCD) functioning or was it deactivated by loco pilots? 

VCD records actions of loco pilots and alerts them for their deviant behavior. 

VCD can automatically apply emergency brakes, if pilots ignore its warnings.  A passenger train moving at speed of 100 Kilometres/hour requires emergency braking distance of 750 metres.