Daily Current Affairs: Mains:

Deposit Insurance and Credit Guarantee Corporation coverage for bank deposits

Relevance: Mains: G.S paper III: Indian Economy: Banking

Context

• The Reserve Bank of India (RBI)’s capping of withdrawals from the Punjab and Maharashtra Cooperative (PMC) Bank at ₹1,000, it did not take long for tragic stories to start pouring in.
• The death count had risen to three by the time the HDIL angle was discovered.
• With the Non-Performing Assets (NPA) situation not improving in most banks, the advent of another major crisis brought into focus, once again, the deposit insurance cover provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI.
• The insurance limit of ₹1 lakh, set in 1993, needs to be raised to a higher amount, with some suggestions being made to raise it to ₹15 lakh, which will cover 90% of the accounts completely.

DICGC coverage

• The lack of DICGC coverage for deposits at NBFCs (many of whom the RBI regulates) and primary cooperative societies is one such aspect.
• These entities often serve vulnerable sections and their depositors must not be left in the lurch in case of a crisis.
• Further, customers who want more coverage than the statutory cover on their deposits should be able to purchase this by paying additional premium.
• This option should be extended directly to banks that wish to increase the coverage of deposits to above the statutory requirements.

Freeze in withdrawal

• The current DICGC cover is that the ₹1 lakh insurance amount only needs to be released if a bank goes belly up.
• Without liquidation of the bank, no liability accrues on the insurance company to pay such a claim.
• The flaw in this scheme is obvious today — the ‘freezes’ in withdrawal directed by the RBI essentially cut the depositor’s access to his money.
• This will go a long way in preventing bank runs, which could be triggered when customers get alarmed about the ability of banks to repay their deposits.
• The DICGC charges a flat 0.1% insurance premium on the deposits of banks. However, as suggested by an RBI panel in 2015, premium should be based on differential risk based on the lending practices of the bank, among other things.
• An SBI report states that 93% of the premium collected by the DICGC in 2018-19 came from commercial banks (public sector: 75%, private sector: 18%), but over 94% of the claims settled (ever since the inception of the DICGC) have been those of cooperative banks.
  • Poor governance in cooperative banks has been cross-subsidised by the better-performing commercial banks.
• The DICGC must draw inspiration from standard insurance practices and charge higher premiums from banks with a past history of higher claims, so that public sector banks (PSBs) — which have made zero claims so far — need not foot the bill for someone else’s mistake.
• This will also provide a level-playing field for PSBs which are often disadvantaged due to tight government control and inflexibility.

Bringing in private insurers

• Another possibility that needs to be analysed is that of bringing private sector insurers and re-insurers into the deposit insurance segment, which could drive down premium prices.
• In FY19, the DICGC collected ₹12,043 crore as premium and settled ₹37 crore worth claims.
• Clearly, this is a lucrative area for private players who can bring in more accurate risk-based pricing of these policies.
• And since underwriting such policies entails significant risk-bearing on which the country’s economy
  thrives.
• It needs to be reinsured by credible entities even beyond traditional re-insurers like Lloyd’s of London.

Way forward

• India today has the lowest deposit insurance cover to per capita income ratio, at 0.9 times.
• Denying people the right over their hard-earned money is a colossal hazard for the financial system, which runs on the trust of depositors.
• Already, trust in banks could be waning — in FY18, growth in bank deposits fell to a five-decade low.
• If the government is serious about formal financial inclusion, the stated objective of flagship schemes like the Pradhan Mantri Jan Dhan Yojana.

Conclusion

• It must realise that an immediate availability of funds is as important as the insurance coverage of funds to increase the confidence of citizens in the banking system.
• Hence, it must take purposeful strides in expanding and rectifying the deposit insurance scheme as a safety net of the financial system.

 

Reforms in AYUSH scheme

Relevance: Mains: G.S paper II: Health: schemes and policies

Context

• Revival of the Indian systems of medicine, which comprises Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy (AYUSH), served as one of the sub-themes of the cultural nationalistic reassertion in the early 20th century against the imperialistic British reign.
• Little wonder then that there are high hopes that the Narendra Modi government and its seeming nationalistic ardour will spell good times for the perennially neglected alternative medicine sector, especially Ayurveda. Much in line with the expectations,

No of initiatives to promote AYUSH

• To creating AYUSH wings in defence and railway hospitals;
• To giving soft loans and subsidies for the establishment of private AYUSH hospitals and clinics and building institutes of excellence in teaching and research in AYUSH.
• Also, 12,500 dedicated AYUSH health and wellness centres are planned to be set up under the Ayushman Bharat mission.

Two important areas presenting significant policy concerns:

• One persistent tendency in our key strategies to mainstream AYUSH medicine has been to regard that the problem lies simply in there being ‘less’ of AYUSH.
• Integration of AYUSH into the health-care system has been largely conflated with having more number of AYUSH facilities or having them in place where there aren’t any.

A fraught relationship

• AYUSH’s relationship with modern medicine has been fraught with multiple issues — including quackery by AYUSH practitioners;
• Ridicule of AYUSH treatments and procedures by many; and
• Mindless cosmeticisation and export promotion of AYUSH products.
• However, has little by way of a concrete harmonising strategy has been devised to address these concerns.
• These issues are reflective of a sharp status gap between modern medicine and AYUSH that is highly detrimental for the optimal deployment of AYUSH resources.
• Merely expanding AYUSH’s framework will only expand the present list of problems.

Requires improvement

• True integration would require a concerted strategy for facilitating meaningful cross-learning and collaboration between the modern and traditional systems on equal terms. This is the only way to address the subservient status of AYUSH and to foster its legitimate inclusion into mainstream health care.
• The Chinese experience of integrating Traditional Chinese Medicine with Western medicine makes for a good example.
• An Indian parallel could envision the integration of education, research, and practice of both systems at all levels.
• This can include training of AYUSH practitioners in modern medicine through curriculum changes and vice versa.
• However, this would entail substantial groundwork with respect to the prerequisites of such integration: namely, building a strong traditional medicine evidence corpus;
• Delineating the relative strengths, weaknesses, and role of each system; negotiating the philosophical and conceptual divergences between systems.
• To standardising and regulating AYUSH practices and qualifications and addressing the unique issues
  associated with research into AYUSH techniques.

National Medical Commission Act 2019

• The National Medical Commission Act, 2019 was passed in the face of much opposition from the orthodox medical community, apparently signifying political will.
• While an earlier proposal for a bridge course for AYUSH graduates was shelved, there is no reason why the opposition to integration of traditional and modern systems cannot be nullified, particularly in view of the vast potential of AYUSH to contribute to universal health-care in India.
• It attempts at integration have been foiled by parties from both within and outside the AYUSH sector.
• In keeping with the recommendations of the Chopra Committee (1948), baby steps were taken to integrate the teaching of traditional and modern systems of medicines, proposals that were later scrapped.
• While the AYUSH lobby feared a loss of identity following such integration, the allopathic lobby alleged that standards of medical care would be diluted.
• This kind of isolationist approach goes against the cherished ideal of modern medicine to embrace concepts that are backed by evidence.

Way forward

• In the case of traditional medicine, an isolationist attitude could deter scientific scrutiny and block some potential value addition.
• An integrated framework should create a middle path fusing the two systems, while still permitting some autonomy for each.
• A medium- and long-term plan for seamless integration should be developed expeditiously in view of the massive drive for achieving universal health care already under way in the country.

 

Public employment status in India

Relevance: Mains: G.S paper III: Indian Economy: Employment

Context

• Central government employment, and showed how the number of people employed by the Central government stagnated between 2006 and 2014 while the number employed by Central public sector enterprises declined.
• The number of vacancies in public employment increased sharply over this period, amounting to more than one-fifth of the number employed.

Employment pattern

• The evidence from the labour force surveys shows that public employment actually increased in the period between 2011-12 and 2017-18.
• Total public employment went up by nearly 200 lakh workers, which is definitely a significant increase . This was distributed among both rural and urban areas, with the bigger increase in rural areas.
• The bulk of the increase was in regular salaried employment.
• Indeed, casual employment in public works like the MNREGA actually appears to have fallen over this period.
• Regular public employment is seen across Indian society as something to be desired, for its security and often higher-than-market wages for many functions.

Gendered view

• Most of the increase in regular public employment has been of women, in both rural and urban areas.
• Yet they are the ones who are more likely to be employed in these schemes, and are paid well below minimum wages with very poor working conditions.
• In rural areas, around 45 per cent of regular women workers in public employment are either illiterate or
  have only basic education, suggesting that they must indeed be scheme workers.

Way forward

• However, even here, a sizeable gap exists, although not as extreme as that for regular public employment.
• This suggests that the increase in public employment over this period need not really reflect a genuine expansion of good quality public services through the expansion of decent work by the government.
• Rather, it points to a continuation and intensification of a terrible failing of official policy in the past two decades: the attempt to provide essential social services on the cheap by exploiting the underpaid labour of women.