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Insights Daily Current Events, 20 August 2015

Insights Daily Current Events, 20 August 2015


India Post, 10 others get nod for payments banks

The Reserve Bank of India (RBI) has given its approval in principle for 11 entities to set up payments banks.

  • The 11 entities are: India Post, Reliance Industries Ltd., Aditya Birla Nuvo, Tech Mahindra, Sun Pharma, National Securities Depository Ltd., Airtel M Commerce Services Ltd., Vodafone m-pesa Ltd., Cholamandalam Distribution Services Ltd., Fino PayTech Ltd. and Paytm.
  • RBI has said that it has selected entities with experience in different sectors and with different capabilities so that different models could be tried.
  • These entities are required to have an initial capital of Rs 100 crore each and will have to start operations within 18 months.

All about Payment Banks:

Payment Bank is a step towards financial inclusion.

  • Capital requirement : The minimum paid-up equity capital for payments banks is Rs. 100 crore.
  • The payments bank should have a leverage ratio of not less than 3%, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).
  • Promoter’s contribution: The promoter’s minimum initial contribution to the paid-up equity capital of such payments bank shall at least be 40% for the first five years from the commencement of its business.
  • Foreign shareholding: The foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.
  • Apart from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities, it will be required to invest minimum 75% of its “demand deposit balances” in Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25% in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.

What are the scopes of activities of Payment Banks?

  • Payments banks will mainly deal in remittance services and accept deposits of up to Rs 1 lakh.
  • They will not lend to customers and will have to deploy their funds in government papers and bank deposits.
  • The promoter’s minimum initial contribution to equity capital will have to be at least 40% for the first five years.
  • They can accept demand deposits.
  • Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer.
  • Can issue ATM/debit cards but not credit cards.
  • Can carry out payments and remittance services through various channels.
  • Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.

This is for the first time in the history of India’s banking sector that differentiated licences are being given out by the central bank for undertaking specific activities. The move is seen as a major step in pushing financial inclusion in the country. Bringing more people into the formal banking system has been a stated objective of both RBI and the government.

Sources: The Hindu, RBI, IE, ET.

Government issues final notification demarcating ESZ around Okhla bird sanctuary

Union Government has issued the final notification demarcating the Eco Sensitive Zone (ESZ) around Okhla bird sanctuary giving a big relief to thousands of home buyers in Noida and its vicinity as their apartments will now fall out of the new notified area.

  • The ESZ in the Okhla Bird Sanctuary will be the area up to 100 metres from the eastern, western and southern boundary and up to 1.27 km from the northern boundary of the Okhla Bird Sanctuary, which extends up to DND flyover across the riverbed situated in Uttar Pradesh’s Gautam Buddh Nagar district and southeast district of NCT Delhi.

About Okhla sanctuary:

  • Okhla Bird Sanctuary is situated at the Okhla barrage over Yamuna River in Noida, Gautam Buddh Nagar district, on Delhi-Uttar Pradesh state border. The site is located at the point where the river enters Uttar Pradesh.
  • It is known as a haven for over 300 bird species, especially waterbirds.
  • The most prominent feature of the sanctuary is the large lake created by damming the river, which lies between Okhla village to the west and Gautam Budh Nagar to the east.

Sources: The Hindu, Wiki.

SC deals body blow to FSSAI

The Supreme Court has ruled in favour of food companies in a case questioning the product approval advisories issued by the Food Safety & Standards Authority of India (FSSAI).

  • This decision has a far-reaching implication for packaged food majors, as it clears the air on product approvals pertaining to proprietary or non-standardised food items.


  • Packaged food companies and FSSAI have been at loggerheads over product approvals pertaining mainly to proprietary foods. At least 700 product approvals are said to be held up for over a year and a half, as FSSAI has issued repeated clarifications and advisories to companies — most of those for product approvals sought for proprietary foods.
  • The matter had come to a head when a Mumbai-based company, Vital Neutraceuticals, approached the Bombay High Court last year, challenging FSSAI’s powers to issue product-approval advisories. The company had alleged that the advisories were issued on the basis of arbitrary guidelines.
  • The Supreme Court, which was hearing an appeal filed by FSSAI in this case, upheld the Bombay High Court verdict, and lifted the interim stay given in the matter earlier.

About FSSAI:

The Food Safety and Standards Authority of India (FSSAI) has been established under Food Safety and Standards Act, 2006 which consolidates various acts & orders that have hitherto handled food related issues in various Ministries and Departments.

  • It was created for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to ensure availability of safe and wholesome food for human consumption.
  • Ministry of Health & Family Welfare, Government of India is the Administrative Ministry for the implementation of FSSAI.
  • The Chairperson and Chief Executive Officer of Food Safety and Standards Authority of India (FSSAI) are appointed by Government of India.
  • The Chairperson is in the rank of Secretary to Government of India.

Important functions performed by the authority:

  • Framing of Regulations to lay down the Standards and guidelines in relation to articles of food and specifying appropriate system of enforcing various standards thus notified.
  • Laying down mechanisms and guidelines for accreditation of certification bodies engaged in certification of food safety management system for food businesses.
  • Laying down procedure and guidelines for accreditation of laboratories and notification of the accredited laboratories.
  • To provide scientific advice and technical support to Central Government and State Governments in the matters of framing the policy and rules in areas which have a direct or indirect bearing of food safety and nutrition .
  • Collect and collate data regarding food consumption, incidence and prevalence of biological risk, contaminants in food, residues of various, contaminants in foods products, identification of emerging risks and introduction of rapid alert system.
  • Creating an information network across the country so that the public, consumers, Panchayats etc receive rapid, reliable and objective information about food safety and issues of concern.
  • Provide training programmes for persons who are involved or intend to get involved in food businesses.

Sources: BS, Wiki, FSSAI.

Majority of ecologically sensitive zones still not notified

According to a recently released data by the Union Environment Ministry, of the 629 national parks and wildlife sanctuaries in India, the Union environment ministry has been able to provide a protective buffer zone, called ecologically sensitive zones (ESZs), to only 26 so far.

  • According to the national wildlife policy, all wildlife zones should have a protective zone demarcated around it, where polluting and detrimental activities would be restricted.

Ecologically sensitive zones (ESZs):

  • The ESZ is based on the principles of providing sanctity to protected areas and strengthening the buffer zones and corridors around such areas.
  • All forms of infrastructure projects of commercial or public purpose, including mining, industries and hydro-power projects are prohibited within such zones, according to the ministry guidelines.
  • According to a 2006 Supreme Court order, all states and Union Territories are required to send proposals detailing the site-specific geographical extent of ESZs around environmentally protected areas falling within their boundaries.

State-wise proposals:

  • Data from the Environment ministry show 452 proposals have been sent so far. The highest number of proposals has been received from Madhya Pradesh followed by Himachal Pradesh, Maharashtra, Tamil Nadu and Karnataka.
  • All UTs other than Andaman and Nicobar have proposed one zone each. Larger states have on an average, proposed higher number of zones.
  • Of those, which have been notified till date, most fall in four states — Gujarat, Goa, Sikkim and Odisha. Haryana, Jharkhand, Karnataka and Andhra Pradesh have one zone each notified.
  • Several states such as Himachal Pradesh, Rajasthan and Goa have consistently raised concerns about creating ESZs. Based on such complaints the Union government consistently asked for site-specific proposals.

According to Supreme Court orders, unless site-specific ESZs are declared a 10-km area around each of these wildlife zones is treated as an ESZ. But despite repeated deadlines the states failed to submit their proposals.

Guidelines issued in 2011 said a committee, comprising a field staff of the forest, revenue and panchayati raj departments and an ecologist — would identify an ESZ. The chief wildlife warden of the state was required to send these to the environment ministry.

Sources: BS.

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