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Indian Express

25-November-2023

1) CURBING EXUBERANCE

Context:

  • As stated in the Reserve Bank of India’s (RBI) July financial stability report, there is growing cause for concern regarding the recent spike in consumer lending, especially unsecured loans.
  • Over the last two years, retail loans have increased at an unsettling rate that is almost twice as fast as gross advances.
  • During this time, there has been a change in the proportion of secured to unsecured loans, with an increase in the former and a consequent rise in concerns regarding possible risks.

Changing Composition and Disturbing Trends

  • According to the financial stability report, the percentage of special mention accounts in public sector banks where the principal or interest is past due is 9.8% for unsecured advances and 9.2% for secured advances, respectively.
  • The percentages in private sector banks are 4% and 5.4%, correspondingly.
  • Concerns over the ability of borrowers in both sectors to repay debt are raised by this data.
  • In the October monetary policy statement, RBI Governor Shaktikanta Das highlighted particular concerns about the quickly expanding personal loan market and urged banks and non-banking financial institutions (NBFCs) to bolster their internal monitoring systems and mitigate any possible threats.

Regulatory Response and Increased Risk Weights

  • The RBI has taken action to reduce the exuberance observed in loans to select groups, especially in the sub-Rs 50,000 category of unsecured loans, in response to these concerns.
  • The central bank raised the risk weights for consumer loans made by banks and NBFCs last week (with the exception of loans for homes, education, cars, and gold).
  • This action is a calculated attempt to reduce the possible risks linked to a high degree of exposure in the mainly bank-funded NBFC industry.

Impact on Cost of Capital and Supply-Demand Dynamics

  • Both the supply and demand sides of the market may be impacted by the regulatory actions, especially the increase in risk weights, which may have an effect on the cost of capital for these loans.
  • The RBI reports that household loans/borrowings from NBFCs increased significantly between 2021–2022 and 2022–2023—from Rs 21,432 crore to Rs 2.39 lakh crore.
  • There are worries about a possible downturn due to the increased risk of non-payment in the unsecured lending market, particularly for customers with less favorable credit profiles.

The Need for Vigilance and Targeted Regulatory Measures

  • Vigilance is necessary as signs of stress and potential hazards in the financial system become apparent.
  • The UBS analysis, which shows an increase in the likelihood of unsecured loan default, emphasizes how urgently focused and well-crafted regulatory actions are needed.
  • To ensure the stability of the financial system in the face of changing consumer credit dynamics, the central bank must continue to closely monitor the market and respond to any indications of stress.

2) The Forgotten Citizens

Context:

  • Recently, an under-construction Silkyara-Barkot tunnel along the Yamunotri National Highway in Uttarkashi district, Uttarakhand, collapsed, trapping a significant number of workers inside.
  • This article will highlight the plight of the migrant workers and labourers whose significant contribution is overlooked.

Invisible Contributions, Visible Neglect

  • Even with the magnificent displays of statues, stadium namings, and celebrity celebrations, the unsung heroes of the country—migrant laborers who build homes, factories, and infrastructure remain unknown.
  • Only during televised disasters do migrant workers, who are frequently placed in difficult environments, come to the attention of the public, underscoring their overlooked place in the fabric of the country.

Products of Migrant Exertion vs. Lack of Care

  • The country recognizes the achievements of migrant labor, such as expressways and sculptures, but it does not adequately convey its concern for the people who make these achievements possible or the policies that should be in place for them.
  • Driven out in times of crisis, exposed to mishaps, and frequently ignored, the migrant worker is a peripheral figure in the national imagination, having been thrust from rural poverty into remote urban settings.

Internal Migration Complexity and Ignorance

  • India has a wide range of internal migration patterns, including intrastate and interstate, long- and short-distance, rural-to-urban, rural-to-rural, cyclical, and seasonal movements.
  • Even with this complexity, migrant workers are frequently viewed as permanent outsiders.
  • An estimated 35–40% of Indians migrate within their country, moving from less developed to more developed states.
  • The prevalence of peripatetic labor in Indian society is a result of the low level of employment in the official sector.

Lack of Legal Protections and Deteriorating Living Conditions

  • The majority of migrant workers lack legal protections since labor regulations do not take into consideration their unique demands.
  • One of the few initiatives to address the needs of this people is the Interstate Migrant Workmen Act of 1979, which includes provisions for housing, healthcare, minimum pay, and the prohibition of discriminatory behaviors.
  • These clauses, meanwhile, are frequently not followed.
  • In cities, where infrastructure and construction heavily depend on migrant labor, migrant workers endure a hostile and discriminating environment that does not meet their fundamental human requirements.

Urban Purgatory and Thoughtless Cities

  • Without access to organized healthcare, financial integration, decent housing, safety precautions, or childcare services, migrant workers live in an urban purgatory.
  • A cycle of disadvantage is maintained when there are no possibilities for meaningful education.
  • Although migrant workers’ material and human dignity should be prioritized in thoughtful city development, the emphasis is frequently placed on creating “smart cities” rather than taking into account the complicated lives of mobile labor.

Media Hype vs. Genuine National Greatness

  • The workers in the Silkyara tunnel have been engulfed in the collapsed rubble and the media fuss around their role as ambassadors of togetherness and diversity for the country, following the recent tragedy.
  • Less media nationalism and longer-term focus on laws that meet the complex lives of mobile workers are demanded.
  • In the purest sense, national greatness is about coming up with ways to lessen the effects of catastrophes that befall the hundreds of millions of people who are unseen until they play a major role in personal and family tragedies.

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