Hindu Editorial Analysis 21st December 2017

Hindu Editorial Analysis 21st December 2017 - Dailygkaffairs

Another Tool of Resolution :- 

Why we need a special law to deal with the demise of a bank?

  • The reason we need bank resolutions and also a special law to deal with the demise of a bank is simply because banks are special
  • They have become a repository of public faith in the financial system
  • So long as consumers have unrestricted access to deposits, their faith in the banking system is maintained

The Financial Resolution and Deposit Insurance Bill

  • It is an attempt to make the system more credible, less chaotic, and systematic in times when credibility is at risk, by treating banks differently from regular corporations.

    The issue of ‘Bail in’ clause

  • The Bill brings in a system of risk-based monitoring of financial institutions
  • At the stage of ‘critical’ risk to viability, when the proposed Resolution Corporation takes the decision to use a particular method of resolution which includes the tool of a ‘bail-in’
  • It is the Corporation that takes all decisions, and not the bank
  • A bare reading of the relevant provisions of the Bill shows that the Resolution Corporation can use this tool only in consultation with the regulator
  • It is an exaggeration to suggest that the Reserve Bank of India (RBI), along with the Resolution Corporation, will ‘bail-in’ depositor’s money to recapitalise the bank
  • Especially when the Bill is designed to take away power from the failed financial institution at the stage of failure

‘Bail in’ clause: Safeguards in the law

  • The Bill makes it explicitly clear that only such liabilities may be cancelled where the liability/instrument contains a bail-in provision
  • It makes it abundantly clear that the Resolution Corporation will specify the liabilities to be bailed in
  • Creditors/depositors will need to consent in advance to have their liabilities bailed-in
  • Even when liabilities are being bailed in, the Bill makes it incumbent upon the Resolution Corporation to follow the prescribed route
  • Lastly, the Bill gives aggrieved persons a right to be compensated by the Resolution Corporation
    (if any of the safeguards have not been followed during a bail-in or in the conduct of any other resolution action)

The way forward

  • When the rest of the world is finding ways to make its financial system more robust, we seem to be continuing with public discourse using incomplete information
  • The Bill simply adds another tool of resolution without taking away from the government’s implicit guarantee to depositors.

New Wetland Conservation Rules Notified :-

Context :-

It is worth noting that wetlands, the other major water-based ecosystem apart from rivers, are at a moment of policy transition in the country.

  • This year, a new legal framework for wetlands was passed, the Wetland (Conservation and Management) Rules, 2017, replacing the earlier Rules of 2010.
  • Also this year, the Supreme Court passed an order directing States to identify wetlands in the country within a stipulated time frame.

2017 Wetland Rules Criticism :-

  • First, the 2017 Wetland Rules have been criticised for doing away with strong wetland monitoring systems.
  • Second, These rules omitted important wetland types.
  • Third, At the same time, the Supreme Court order directs States to come forward and notify wetlands. 
The 2010 and 2017 Rules for wetlands both emphasise that the ecological character of wetlands ought to be maintained for their conservation. ‘Ecological character’ refers to processes and components which make the wetland a particular, and sometimes unique, ecosystem.
Difference Between 2010 & 2017 Wetland Rules ..
2010 Wetland Rules :-
  • In the 2010 Rules, some related criteria were made explicit, such as natural beauty, ecological sensitivity, genetic diversity, historical value, etc.
  • Salt Pans were identified as wetlands in 2010 rules as they are often important sites of migratory birds and other forms of biodiversity.

2017 Wetland Rules :-

  • Criteria related to Natural beauty, ecological sensitivity, genetic diversity, historical value, etc. have been omitted in the 2017 Rules.Problems :-
    =>> First, there is multiple interest around wetlands. Multiple interests also have governance needs, and this makes it absolutely necessary to identify and map these multiple uses.
    =>> Second, it is crucial to identify ecological criteria so that the wetlands’ character can be maintained. The key to wetland conservation is not just understanding regimes of multiple use — but conserving or managing the integrity of the wetland ecosystem.
    ==> Third, restriction of activities on wetlands will be done as per the principle of ‘wise use’, determined by the State wetland authority. Under the New Wetland Rules 2017, no authority to issue directions, which are binding in nature to desist from any activity detrimental to wetland conservation, has been prescribed to State wetland authorities.
  • Salt pans as ‘wetlands’ have been omitted from the new Wetland Rules 2017. The omission in the 2017 Rules suggests that while Salt Pans do exist as wetlands but they do not require any conservation or ecological balance.

The Case of Deepor Beel :-

  • Deepor Beel is a Ramsar site and a part of it is also wildlife sanctuary in Guwahati, Assam. (‘Ramsar Sites are designated because they meet the criteria for identifying wetlands of international importance’). This wetland harbours a wide variety of biodiversity.

What is happening there ?

  • The city’s municipal waste is dumped close to the Beel.
  • The fact that Deepor Beel (Beel means water body) exists as a wetland does not prevent garbage dumping, this is a fate faced by many wetlands.
Conclusion :-
There are challenges ahead in identifying wetlands – multiple and competing use is just one of them. Understanding the historic spread and ecological character will be an important bulwark for the way forward. Setting clear governance systems should be the priority. Without either, we are looking at a complete dilution of wetlands in the country.

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