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The Hindu 31 August 2019

UPSC - Daily Current Affair







Liberalism runs into national populism



10 public sector banks to be merged



Collegium names judges for SC vacancies



Can 10 ‘weak’ banks together create four large, strong banks?




1. Liberalism runs into national populism  (The Hindu, Page 10)


G.S. I in Philosophy


Critique of Western Liberalism


Defining liberalism:

  • The author considers three fields of liberalism: economic liberalism which emphasises free competition and the self-regulating market, and which is commonly associated with globalisation and minimal state intervention in the economy. 

  • Second is is political liberalism, which is founded on belief in progress, the essential goodness of the human being, the autonomy of the individual, and standing for political and civil liberties.

  • Lastly there is social liberalism, ‘linked to the protection of minority groups, and such issues as LGBTQ rights and same-sex marriage’, etc.


What has happended?

  • Russian President Vladimir Putin during the recent G-20 meeting had said to a newspaper that liberalism has become obsolete. 

  • He further said that liberal ideas about refugees, migration and on various other issues were now being opposed by majority of the population around the world and multiculturalism as a policy is currently not effective. 


Interpretation of view:

  • The author asserts that criticism of Vladimir Putin is directed mainly towards social and political liberalism of Western countries. 

  • Now this view of Vladamir Putin was indirectly against the policies of the European Union, whereby the policy of Germany and EU to admit 1 million Syrian refugees was highly opposed by several EU countries. Similarly, a major reason for Brexit was the influx of migrants from European countries into Britain and the fear in Britain of loss in jobs, etc.  

  • Apart from this, multiculturalism is a word that describes a society where different cultures, races, and ethnicities, live together. Multiculturalism within EU has been criticised on the basis that liberal policies of EU assumes that minority groups deserve special measures so as to protect them from the dominant culture. This however creates the image of appeasement by government towards minorities and therefore resentment in majority community.



  • Countries like Russia, China, India and others prefer that State sovereignty and national stability is more important than that of individual liberty, whereby needs of the many outweigh the needs of the few. 

  • While, Western countries prefer to balance individual liberties with States interests but have not been able to find an effective balance leading to decline of liberalism and rise of other countries to critique western liberalism and promote their own Russian or Chinese model.



2. 10 public sector banks to be merged (The Hindu, Page 01)


Prelims: Economy

Mains: G.S. II in Economy


Bank merger


Merger of Public sector Banks 

  • The government has announced a mega amalgamation plan of public sector banks. 

  • It merged ten public sector banks into four larger entities, alongside board level governance reforms.

  • This step is aimed at improving their financial health and enhancing their lending capacity to support growth.

  • The merger announcement was followed by an equity infusion move of Rs 55,250 crore in these banks to enable them to grow their loan book. 

  • This is third merger announced by the government. With these series of mergers, the number of state-owned banks is down to 12 from 27.


Which banks have been merged?

  • Punjab National Bank, Oriental Bank of Commerce and United Bank of India to merge to form the country’s second-largest lender. These three banks are technologically compatible as they use Finacle Core Banking Solution (CBS) platform.

  • Canara Bank and Syndicate Bank to amalgamate. It will create the fourth largest public sector bank 

  • Union Bank of India to acquire Andhra Bank. It will create India’s fifth largest public sector bank

  • Corporation Bank; and Indian Bank to merge with Allahabad Bank. It will create the seventh largest public sector bank with strong branch networks in the south, north and east of the country.


Logic behind mergers

  • Banks have been merged on the basis of likely operating efficiencies, better usage of equity and their technological platform.

  • Main objective is to create banks of global level that can leverage economies of scale and balance sheet size to serve the needs of a $5-trillion economy by 2025.

  • It will create banks of scale — there are too many banks in India with sizes that are minuscule by global standards with their growth constricted by their inability to expand.



  • Although It enables the consolidated entities to meaningfully improve scale of operations and help their competitive position

  • However at the same time, there will not be any immediate improvement in their credit metrics as all of them have relatively weak solvency profiles. 

  • Current mergers may face more friction. In the present case, the mergers are mostly among larger banks, with absorbing bank not necessarily in strong health. However, given the merged banks are on similar technology platform, the integration should be smoother. 

  • Further initially there will be more focus on management streamlining, which would impact the loan growth and reduce focus on strengthening asset quality in the short term.

  • While there may be some geographical synergies between the banks being merged, unless they realise cost synergies through branch and staff rationalisation, the mergers may not mean much to them or to the economy. 

  • Narasimhan Committee in late 1990s had recommended shutting down of the weaker banks and not merging them with the strong ones as is being done now.

  • Along with merger the focus should be on adequate reforms in governance and management of these banks

  • The key reforms to be made are at the board level, including in appointments, especially of government nominees. Professionalism in governance is a key to the success not just the size of the banks.

  • It has been argued that a failure of a very large bank may have adverse impact on the economy as witnessed during the financial crisis of 2008. The 2008 crisis highlighted that presence of large financial institutions pose systemic risk to the economy and such institutions are "too big to fail".

  • Further, in event of any such crisis in future, the onus would lie on the government to bail out the institutions, thus posing a moral hazard.


3. Collegium names judges for SC vacancies (The Hindu, Page 09)


Prelims: Polity

Mains: G.S. II in Polity 


Appointment of Judge to Supreme Court


Strength of Supreme Court

  • Originally, the strength of Supreme Court was fixed at eight. At present, the Supreme Court consists of 31 Judges.

  • The Parliament is empowered to increase the strength of Supreme Court Judges through a simple amendment to the constitution. However, such an amendment is not deemed to be a constitutional amendment under Article 368.


What is a Collegium?

  • The Collegium System is one where the CJI and a forum of four senior-most judges of the Supreme Court recommend appointment and transfer of judges of higher judiciary.  

  • The collegium system evolved through three different judgments which are collectively known as the Three Judges Cases.


1st Judges Case

  • In 1982, Supreme Court in S.P Gupta vs. Union of India heard a Public Interest Litigation (PIL) regarding appointment of judges of High Court and Supreme Court. The main question before the court was as to whose opinion amongst various participants should have primacy in the process of selection of judges.

  • Supreme Court held that opinions of Chief Justice of India (CJI) and Chief Justice of respective High Courts were merely “consultative” and the power of appointment resides solely and exclusively with the Central Government.

  • Central government “could” override the opinions given by the Judges. Thus, the opinion of Chief Justice of India did not have primacy and his opinion was made inconsequential in matters of appointment of High Court Judges under Article 217(1).


2nd Judges Case

  • In 1993, a PIL was filed as a writ petition in S.C. Advocates on Record Association v. Union of India in Supreme Court by Lawyers Association.

  • Referring to ‘Consultative Process’ as envisaged in Article 124(2), Court emphasized that Government does NOT enjoy primacy or absolute discretion in matters of appointment of Supreme Court judges.

  • Court said that provision for consultation with Chief Justice was introduced as CJI is best equipped to know and assess the worth and suitability of a candidate and it was also necessary to eliminate political influence.

  • Thus, selection should be made as a result of ‘Participatory Consultative Process’ where Executive has the power to act as a mere check on the exercise of power by CJI to achieve constitutional purpose.


Third Judge’s Case

  • Supreme Court on a reference made by the President under Article 143 has laid down the following proposition with respect to appointment of Supreme Court judges.

  • In making his/her recommendation, CJI shall consult four senior most Judges of Supreme Court. Thus, the Collegium to make recommendation for appointment shall consist of CJI and four senior most judges.

  • If majority of the Collegium is against the appointment of a particular person, that person shall not be appointed. Even if two of the judges have reservation against appointment of a particular Judge, CJI would not press for such appointment.



4. Can 10 ‘weak’ banks together create four large, strong banks?  (The Hindu, Page 15)


Prelims: Economy

Mains: G.S. III  in Economic Development


Prompt Corrective Action


  • The PCA framework specifies the trigger points or the level in which the RBI will intervene with corrective action. These trigger points are expressed in terms of certain parameters for the banks. The parameters that invite corrective action from the central bank are: 

  • Capital to Risk weighted Asset Ratio (CRAR)

  • Net Non-Performing Assets (NPA) 

  • Return on Assets (RoA)

  • Leverage ratio

  • When these parameters reach the set trigger points for a bank mentioned by the RBI, the RBI initiates certain structured and discretionary actions for the bank.

  • Under PCA, the RBI can place certain restrictions based on these parameters. The restrictions may include the following: 

  • Halting branch expansion 

  • Stopping dividend payment 

  • Cap a bank’s lending limit to one entity or sector. 

  • Undertake special audit, restructuring operations and activation of recovery plan. 

  • Banks’ promoters can be asked to bring in new management.

  • The RBI can also supersede the bank’s board.