THE Hindu Editorials Notes – Mains Sure Shot
GS-3 Mains ( banking)
Question – Comment on the recent announcement by the government to merge 10 public sector banks into one. (250 words)
Context – The plan is to merge 10 state-owned banks into four larger ones.
What do we mean by bank merger?
- A situation in which two or more banks pool their assets and liabilities to become one bank.
How does consolidation help?
- For years, expert committees starting from the M Narasimham Committee have recommended that India should have fewer but bigger and better-managed banks to ensure optimal use of capital, efficiency of operations, wider reach and greater profitability.
- It is easier to manage fewer banks than many smaller banks.
Merits of bank mergers:
- Access to large customer base – imagine 10 banks in a city of 200 people. So in an ideal situation each bank can roughly get 20 customers. But if the number of banks is only 5 then each bank can get access to 40 customers.
- Have broader geographic footprint – imagine that bank A has branches in Delhi, Mumbai, Chennai and Kolkata. While bank B has branches in Hyderabad, Mussoorie, Hooghly and Kashmir, and bank C has branches in Punjab and Gujarat. Now if banks A and B are merged with bank C then the geographical reach of bank C will increase because the branches of both banks A and B will come under it.
- Scaling up operation – because the customer base of bank C has increased, it can increase its business and build larger profit plans.
- Benefits resulting from sharing of infrastructure of these merged banks – It will benefit customers in a way that, for example, it will give the customers a wider use of ATM networks.
- Fill product and technology gaps – because many smaller banks because of their cash, technical and other restrictions do not offer many services that are offered by the bigger banks. So when these small banks are merged with the bigger banks, they get access to wider services like Mutual Fund or some unique Insurance services etc. which the smaller banks might not have offered.
- Possibility of talent and team upgradation – the best minds of several banks can come together and work for increasing the profits of the bigger bank they are a part of.
- It is assumed to improve efficiency – because the banks that are being merged are usually those banks that are not performing well independently. So if they are merged with bigger well performing bank then it can be hoped that they will use the techniques used by the bigger banks and improve efficiency.
- The charges on cross bank ATM usage will decrease.
- And also after the merger, the larger banks will have more capital base so they can lend bigger amounts as loans on their own rather than depending on other banks.
Demerits of bank mergers:
- Smaller banks usually have local cultural characteristics which may be lost due to merger.
- Since the number of banks reduce, the career of growth of the senior management of these banks might get restricted due to fewer posts and also other HR issues.
- Larger banks though having benefits expose the economy to greater financial risk in case they fail to perform well.
Other issues with merger of banks/ challenges:
- resistance from staff and unions in the entities being merged.
- There are issues like cultural fit, redeployment of staff, and fewer career opportunities for many in a merged entity.
- Another concern could be deterioration of services and disruption in the near term as the merger process gets under way.
- It could also reflect in fewer options for customers; an easing of the personal touch which many of the midsize and smaller banks have.
- The swelling of combined bad loans with some of these mergers is also an issue.
- The RBI keeps monitoring large institutions whose potential failure can impact other institutions or banks and the financial sector, and which could have a contagion effect and erode confidence in other banks. The creation of more large-sized banks will mean the RBI will have to improve its supervisory and monitoring processes to address increased risks.
conclusion/ is consolidation of banks the solution to deal with poorly performing banks?
- No it is not the only solution because one of the main reasons for the poor performance of these banks is the issue of bad governance.
- Former RBI Governor Y V Reddy, in his D T Lakdawala memorial lecture, had said the idea that consolidation of banks will solve the problem of public sector banks is not correct. According to him, if the problem is structural and of governance, it does not matter whether the banks are large or small.
- While merger of the smaller banks with the large ones are just an initial step, there are other areas that need to be improved too.
GS-2 Mains ( Health)
Question – what is Hepatitis B? What are the issues associated with it?Analysis ( 200 words)
Context – India is not in the WHO’s list of countries in the Southeast Asia region to have successfully controlled Hepatitis B.
Why in new?
- On September 3, Bangladesh, Bhutan, Nepal and Thailand became the first four countries in the World Health Organization’s Southeast Asia region to have successfully controlled hepatitis B.
- India is not on the list.
- The virus is said to be controlled when the disease prevalence is reduced to less than 1% among children less than five years of age.
What is Hepatitis B?
- Hepatitis B is the most common serious liver infection in the world. It is caused by the hepatitis B virus that attacks and injures the liver.
- Each year up to 1 million people die from hepatitis B despite the fact that it is preventable and treatable.
How is it transmitted?
- The hepatitis B virus (HBV) is transmitted through blood and infected bodily fluids. It can be passed to others through direct contact with blood, unprotected sex, use of illegal drugs, unsterilized or contaminated needles, and from an infected woman to her newborn during pregnancy or childbirth.
- Hepatitis B is a “silent epidemic” because most people do not have symptoms when they are newly infected or chronically infected. Thus, they can unknowingly spread the virus to others and continue the silent spread of hepatitis B.
Is there any cure?
- Hepatitis B is preventable and treatable. There is a simple blood test to diagnose a hepatitis B infection. Testing is the only way to know for sure if you are infected.
- There is a safe vaccine to prevent hepatitis B. There are effective drug therapies that can manage a chronic hepatitis B infection.
Condition in India:
- Despite the introduction of hepatitis B vaccine in the Universal Immunisation Programme in 2002 and scaling-up nationwide in 2011, about one million people in India become chronically infected with the virus every year.
- According to a report by the Health Ministry, as on February 2019, at present around 40 million people in India are infected.
- A study published in 2013 found lower coverage of hepatitis B vaccine in eight of the 10 districts that it surveyed. But the coverage has increased with the passing of years.
- It was introduced on a pilot basis in Kerala and Tamil Nadu in December 2011 and national roll-out in 2014-2015.
- According to the WHO, the coverage of hepatitis B third dose had reached 86% in 2015. But despite the high vaccination coverage, disease prevalence in children aged less than five years has not dropped below 1%. And so India doesn’t feature in the recently released WHO list.
- The main reason for this in India is the low coverage of the vaccine. An infant needs to be vaccinated against Hepatitis B within 24 hours of birth but even seven years after the Health Ministry approved the birth dose in 2008, its coverage remained low — 45% in 2015 and 60% in 2016 — according to a 2019 Health Ministry report.
- This is puzzling because even in case of institutional delivery (i.e. delivery in hospitals and not at home) the birth dose vaccine coverage is low — 76.36% in 2017. So there is a need to look into the other aspects like availability of the vaccine and the awareness of those who are responsible for the vaccination.
- Also there are many children in India who are born at home or outside formal delivery units. There is no data available to know about the condition of vaccination in these children, whether they get vaccinated at all.
- One study found that the health-care workers who were responsible for vaccinating were afraid to open a 10-dose vial (i.e. the container when opened can be used for vaccinating 10 children) because of their concerns of vaccine wastage (in case there was only one child to vaccinate when it was opened). But they are unaware that opened vials of hepatitis B vaccine can be kept for a maximum duration of 28 days for use in other children if the vaccine meets certain conditions. So they avoided opening the vials altogether.
- So even if the vaccine is available still the child is not being vaccinated. There are several other similar issues.
- These issues that often go unnoticed. It is required to do a proper study of the reasons why the disease is spreading despite treatment available.