Editorials & Articles : 8 May 2024

Editorials & Articles : 8 May 2024

A dignified peaceful passing is everyone’s right

Topic: GS2 – Social Justice – Health

Context

● The article provides a comparison between the end-of-life experiences of Ronald Reagan and Atal Bihari Vajpayee, highlighting the contrasting approaches to death in Western countries and India.

● It discusses the prevalence of advanced medical directives, ethical concerns in Indian ICUs, legal ambiguities, and the importance of death literacy and palliative care.

● The role of living wills in facilitating end-of-life planning is emphasised to ensure individuals’ preferences are respected.

Ronald Reagan’s Peaceful Passing

Ronald Reagan, the 40th President of the United States, passed away in 2004 at the age of 93 after battling dementia for nine years.
His wife, Nancy Reagan, described his peaceful death at home surrounded by family as “the greatest gift.”
Reagan’s decline due to dementia allowed his loved ones to prepare for his passing and accept the natural course of his illness.

Contrasting with Atal Bihari Vajpayee’s Medical Journey

In contrast, former Indian Prime Minister Atal Bihari Vajpayee faced a different end.
Afflicted by a stroke nine years prior, he spent his final days in 2018 in the All India Institute of Medical Sciences in New Delhi, reliant on artificial life support systems.
Vajpayee’s situation starkly contrasts Reagan’s, as he endured a prolonged period of non-ambulant existence, ultimately passing away while hooked to life support.

End-of-Life Care Trends: West vs. India

The approach to end-of-life care varies between Euro-American countries and India.
In Western nations, a growing number of individuals document advance medical directives, expressing preferences for a natural death when facing terminal illness.
Studies show that in European ICUs, only 10.3% of patients die while on life support, with the rest transitioning to palliative care for a dignified passing.

Indian Reality: ICU Deaths and Ethical Concerns

In India, however, approximately 70% of critically ill patients face death on life support systems, often alone in ICUs.
Families grapple with hefty hospital bills and lack time to grieve amidst the impersonal ICU environment.

Ethical Considerations and Legal Ambiguity

Despite the Indian Council of Medical Research’s definition of a healthcare provider’s duty to mitigate suffering, the reality in Indian ICUs diverges significantly.
The routinization of intensive care deaths, a relatively recent phenomenon, reflects a societal discomfort with death and a lack of preparedness to make informed end-of-life decisions.
The absence of clear legal frameworks exacerbates the situation, leaving both healthcare professionals and the public uncertain about their rights and responsibilities.

The Need for Death Literacy and Palliative Care

A 2022 Report of The Lancet Commission emphasizes the importance of ‘death literacy’ to empower individuals to navigate end-of-life decisions confidently.
Initiatives promoting palliative care, recognized as a fundamental aspect of the right to health by the World Health Organization, aim to ensure that individuals can live their final days with dignity and peace.

Role of Living Wills in End-of-Life Planning

The concept of a living will gains significance in facilitating end-of-life planning.

What is a living will?

A living will is a legal document that outlines a person’s preferences for medical treatment in case they become incapacitated.
It specifies the type of medical care an individual wants or doesn’t want, such as life-sustaining treatments like CPR, ventilators, or feeding tubes.
It provides guidance to healthcare providers and family members about the individual’s wishes regarding end-of-life care.
A living will only become effective if the person is unable to communicate their desires due to illness or injury
It helps ensure that a person’s healthcare preferences are respected and followed, even if they are unable to express them themselves.

A living will allows individuals to outline their preferences for medical care in the event of incapacitation, ensuring their wishes are respected.
By preparing a living will, having it witnessed and countersigned by a gazetted officer, and discussing it with family members, individuals can assert their autonomy and ensure a peaceful passing aligned with their desires.

Conclusion: Advocating for Dignified End-of-Life Care

In conclusion, the contrasting experiences of Ronald Reagan and Atal Bihari Vajpayee underscore the importance of advocating for dignified end-of-life care.
By fostering death literacy, promoting palliative care, and facilitating the use of living wills, societies can empower individuals to assert their rights and preferences, ensuring that all can face death with dignity and peace.

Rules for a new dawn for the Indian legal industry

Topic: GS2 – Indian Polity, GS2 – Governance

Context

● The article encapsulates India’s legal industry’s evolution amidst globalisation, particularly focusing on the Bar Council of India’s (BCI) regulations allowing foreign lawyers limited access.

● It discusses the anticipated benefits, such as knowledge exchange and improved competition, alongside identified risks of regulatory disparities and market distortions.

● The BCI’s consultative approach suggests a cautious optimism for the industry’s future.

Background of Globalization and Indian Legal Industry

India embraced globalization in 1991, but its legal industry remained insulated.
The Bar Council of India (BCI) acknowledged the inevitability of globalisation in the legal sector.

The Bar Council of India (BCI)

● The Bar Council of India (BCI) is the regulatory body governing legal practice in India.

● Established under the Advocates Act, 1961, it regulates legal education and professional conduct.

● BCI ensures standards for legal education, admission to the bar, and discipline among lawyers.

● It sets rules for ethics, qualifications, and examinations for advocates practising in India.

● BCI plays a crucial role in maintaining the integrity and professionalism of the legal profession in the country.

Globalization aims for universalism and synchronicity, facilitating harmonious interaction among legal professionals.

Bar Council of India’s Regulations for Foreign Lawyers

BCI introduced the “Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022” in 2023.
These rules permit foreign lawyers to establish offices in India for limited purposes, focusing on transactional or corporate work.
Foreign lawyers cannot appear in Indian courts but can advise and participate in international arbitrations held in India.

Evolution from Previous Restrictions

Previously, foreign lawyers were restricted to “fly in and fly out” arrangements and barred from practising law in India.
The BCI Rules signal a significant shift, allowing a greater role for foreign lawyers within a regulated framework.

Anticipated Benefits and Risks

While the BCI Rules may impact the immediate profitability of some Indian law firms, long-term benefits are expected.
Reciprocity provisions can enhance access for Indian lawyers to foreign jurisdictions, fostering knowledge exchange.
Increased competition from foreign firms may improve work culture, remuneration, and service quality in the Indian legal industry.
However, risks include regulatory disparities between Indian and foreign law firms, potential ethical conflicts, and financial disparities favouring foreign firms.

Balancing Optimism with Caution

The BCI demonstrates awareness of the pros and cons through stringent registration requirements and exclusion from litigious work.
Ongoing dialogue between the BCI and stakeholders indicates a cautious and consultative approach.
Careful optimism is warranted, with hopes that the BCI Rules will lead to a brighter future for the Indian legal industry.

Unemployment vs wages

Topic: GS3 – Indian Economy – Issues relating to development and employment.

Context:

Recent rhetoric comparing unemployment rates between India and Pakistan has sparked debate, highlighting deeper issues within India’s labour market.
This analysis delves into the validity of these claims and the broader context of India’s employment landscape.

What is Unemployment?

Unemployment refers to the condition where individuals capable of working are actively seeking employment but are unable to secure suitable jobs.
An unemployed person is someone who is part of the labour force, and possesses the requisite skills but currently lacks gainful employment.
Basically, an unemployed person is someone of working age, jobless, able and available to work, and actively looking for a job.

Unpacking the Claims:

CMIE Consumer Pyramids Survey: The discussion around unemployment largely stems from the CMIE Consumer Pyramids Household survey, which has faced scrutiny due to methodological concerns, prompting Ashoka University to pause research utilizing this data. Claims suggesting a massive withdrawal of workers need to be critically examined in light of these challenges.
Contrast with Pakistan: Assertions that Pakistan’s labor market is more attractive to youth than India’s overlook the dynamic nature of both countries’ economies and the ongoing transformation in India’s labor market.

Diagnosing India’s Labor Market:

Focus on Wages: The discourse shifts from unemployment to the broader issue of wages, highlighting the prevalence of informal employment and subsistence agriculture. The low unemployment rate masks the reality of underemployment and inadequate wages, indicating a need for a nuanced diagnosis of the problem.

Policy Implications:

Misguided Solutions: Election promises of expanding public sector employment and wealth confiscation represent a misdiagnosis of the issue and may lead to unsustainable solutions. Prioritizing redistributive justice over contributive justice risks undermining the aspirations of young Indians and perpetuating systemic issues.
Balanced Policy Approach: The “Madhyam Marg” (middle path) between hostility towards the private sector and minimal state intervention advocates for efficiency, effectiveness, and technology-driven reforms in the welfare state. This approach emphasizes raising private employer productivity through formalization and leveraging digital infrastructure for inclusive growth.

Looking Ahead:

Progress and Challenges: Despite significant progress in areas like education and investor confidence, structural challenges persist in India’s labour market. The ASER report and Gross Enrolment Ratios indicate positive trends in education, while investment inflows reflect growing confidence in India’s economic prospects.
Market Dynamics: Economist Alfred Marshall’s framework of market periods provides insights into India’s labour market dynamics, emphasizing the role of demand in shaping labour prices over time. However, modelling long-term and secular trends presents challenges amid evolving technological and demographic shifts.
Addressing Skepticism: External skepticism regarding India’s progress underscores the need for a balanced assessment that acknowledges achievements while addressing ongoing challenges. It also highlights the importance of data-driven analysis and a nuanced understanding of labor market dynamics.

Conclusion:

Navigating the discourse on unemployment in India requires a multifaceted approach that goes beyond headline figures to examine underlying wage dynamics, policy implications, and long-term trends.
By adopting a balanced policy framework and leveraging insights from economic theory, India can address the complexities of its labor market and pave the way for inclusive growth and development.

What are the Major Causes of Unemployment in India?

Population Size:

India’s substantial population amplifies the competition for employment opportunities, putting additional pressure on the job market.
Managing this demographic challenge necessitates a comprehensive approach to economic development and job creation.

Skills Mismatch:

A predominant cause, where the skills possessed by the workforce may not align with the evolving demands of the job market. Addressing this issue requires initiatives focused on enhancing education and vocational training programs.

Informal Sector Dynamics:

The prevalence of the informal sector introduces complexities in tracking and addressing unemployment. Efforts to formalise and regulate this sector can contribute to a more accurate representation of employment conditions.

Policy Implementation Challenges:

Well-intentioned policies may face challenges in effective implementation, impacting their ability to generate employment. Streamlining policy execution and ensuring alignment with ground realities are imperative.

Global Economic Factors:

Influences from the global economy, such as trade dynamics and geopolitical shifts, can impact India’s employment scenario. Crafting policies that enhance economic resilience to external factors is essential.

Sugar and spice, not all nice

Topic: GS2 – Governance – Government policies – Issues arising out of their design & implementation

Context:

Recent incidents of food safety issues involving ground spices, infants’ and children’s foods have sparked significant concern among consumers, raising doubts about the efficacy of the Food Safety and Standards Authority of India (FSSAI).

What is the Food Safety and Standards Authority of India?

The Food Safety and Standards Authority of India (FSSAI) is a statutory body formed under the Food Safety and Standards Act, 2006.
The Food Safety and Standards Act, 2006replaced acts like the Prevention of Food Adulteration Act,1954, Fruit Products Order, 1955, Meat Food Products Order, 1973.
It operates under the Union Ministry of Health and Family Welfare.

Mandate:

The FSSAI has the mandate of regulating the manufacture, storage, distribution, sale, and import of food articles, and also establishing standards to ensure food safety.

Structure and Organization:

It is made up of 22 members and a Chairperson.
One-third of the members must be women.

Functions:

Setting Food Safety Standards: It has the power to lay down regulations to implement food safety standards in the country.
Food Testing Accreditation: It has the power to set up guidelines for the accreditation of food testing laboratories in the country.
Inspecting Authority Powers: Food safety officers have the right to enter and inspect any place where food products are manufactured, stored, or exhibited.
Food Safety Research: The Research and Development division of FSSAI is responsible for research in the field of food safety standards. They continuously try to adopt international food standards.
Identifying Threats: The FSSAI is required to collect data regarding food consumption, contamination, emerging risks, etc.

Ground Spices Safety Concerns:

Quality Control Issues: Ground spices of popular brands like MDH and Everest were rejected by multiple countries due to the presence of carcinogenic ethylene oxide and salmonella bacteria.
Call for Inspections: FSSAI ordered countrywide inspections and testing of all branded spices but consumer concerns persist due to perceived disparities in quality control for domestic versus exported products.

Infants’ and Children’s Foods Safety Concerns:

Added Sugar Controversy: Nestle’s Cerelac with added sugar contradicts WHO guidelines urging a ban on added sugar in baby food products for children under three years.
Regulatory Oversight: Despite regulations against added sugar in baby foods, reports indicate lapses in regulatory enforcement, raising questions about FSSAI’s capability to protect vulnerable groups like infants and children.

Regulatory Challenges and Recommendations:

Lack of Mandated Reductions: FSSAI’s reliance on voluntary pledges from manufacturers instead of mandating reductions in fat, sugar, and salt raises concerns about regulatory effectiveness.
Infrastructure and Oversight: Reports from various oversight bodies highlight inadequate infrastructure, staffing, and enforcement, necessitating a comprehensive overhaul of the regulatory system.
Legal Imperatives: The Consumer Protection Act and judicial rulings emphasize consumers’ fundamental right to safe and healthy food, underscoring the need for regulatory reform to prioritize citizen’s safety.

Conclusion:

A complete overhaul of the food safety and standards regulatory system is imperative to address consumer concerns, ensure compliance with international standards, and uphold citizens’ right to safe food.

Challenges Associated with Food Safety in India

Primary challenge is operational:

India’s diverse food landscape, the lack of standardized recordkeeping and intentional food fraud may prevent manufacturers from efficiently tracing ingredients and assessing potential risks.
Traceability is particularly challenging for small and medium sized businesses with limited resources.

Logistical barriers:

At least 10 States/Union Territories lack government or private notified food testing labs, as mandated under the FSS Act.
These labs are distributed unevenly across regions; have insufficient number of food safety officers; and were found to operate ineffectively due to resource constraints, showed the FSSAI Annual Report of 2021-22.
The absent accountability and consequences often mean enforcement agencies fail to penalize unscrupulous food operators, which fuels the issue.

Lack of Transparency:

FSSAI’s operations often lack transparency.
The regulator conducted another pan-India testing of spices two years ago, results of which were never put out in the public domain.
Surveys that flagged contamination in products like milk and jaggery “have not resulted in positively addressing the rampant practice of adulteration”.

ECI’s letter on deepfakes

Why in news?

In its first formal response to the use of deepfakes in this election season, the Election Commission of India (ECI) has told political parties not to share deepfake content on social media. If they find any, they must remove it within three hours and warn the person who shared it.
ECI hasn’t told parties to stop using AI for campaign material. They just want them to avoid sharing misleading or false content that impersonates someone else.

What’s in today’s article?

Deepfakes
Statement issued by the ECI

What is Deepfake?

About
- Deepfake uses deep learning techniques in AI to generate videos, photos, or news that seems real but is actually fake.
- These techniques can be used to synthesise faces, replace facial expressions, synthesise voices, and generate news.
- This technique is also used to create special effects in movies. However, more recently this technique is being widely used by criminals to create disinformation.
  - E.g., in March 2022, Ukrainian President Volodymyr Zelensky revealed that a video posted on social media in which he appeared to be instructing Ukrainian soldiers to surrender to Russian forces was actually a deepfake.
Working
- Deepfake techniques rely on a deep learning technique called autoencoder, which is a type of artificial neural network (ANN) which contains an encoder and a decoder.
- The input data is first decomposed into an encoded representation then these encoded representations are reconstructed into new images which are close to input images.
- Deepfake software works by combining several autoencoders, one for the original face and one for the new face

What the ECI has said on deepfakes?

Flagging erosion of trust
- The use of manipulated, distorted, edited content on social media platforms has the potential to influence voters unfairly, divide society, and make people lose trust in the election process.
- It does so by attacking laid out instrumentalities of the electoral steps in terms of means and material.
Protection of women
- ECI told parties not to share content on social media that included impersonation of another person, including political parties or their representatives.
- It also asked them not to post or support content that disrespects women or goes against their dignity.
Reporting of fakes
- Parties have been asked to report unlawful information and fake user accounts that look like their official handles on social media platforms.
Grievances committee
- If fake information or accounts stay on social media after reporting them, parties have been asked go to the Grievance Appellate Committee (GAC) under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
- Last year, the IT Ministry set up three GACs for users unhappy with social media platforms’ actions on their reports to get help.
Three-hour deadline
- The ECI instructed political parties to remove any deepfake audios or videos they find within three hours of noticing them.
- They should also identify and warn the person responsible within their party.

What remains unclear in ECI’s statement?

Real outcomes
- The ECI has chosen to react after two phases of the election are already over — whereas deepfakes have been shared by parties from long before that.
- Also, what real impact the ECI’s letter has in curbing the menace remains to be seen.
Uncertain language
- It is unclear what the Commission means by saying that parties should take down deepfakes when it comes to their notice, when it is the parties’ official handles themselves that are sharing the content.
- Also, the advice to warn the person responsible for sharing such content is vague.
  - It appears to be lacking teeth, besides suggesting the existence of free agents within parties with access to official handles.
Status on other social media platforms like WhatsApp
- The ECI’s letter covers content shared on social media platforms such as Facebook, X, and Instagram.
- However, it is unclear what is being done about deepfake-led disinformation being circulated on secure messaging platforms like WhatsApp.
  - WhatsApp is used by more than 500 million users in India, and is perhaps the most effective way to spread misinformation/ disinformation.
Direct AI-based calls
- Parties have been using AI-based real-time calls to voters.
- These calls happen outside the purview of social media platforms, but can be potentially weaponised by parties or candidates.
- The ECI’s letter does not deal with this aspect.

India opens up investment options for Russia to channel rupee balance

Why in news?

The RBI has allowed Russian entities to invest their rupee balance in various options like government securities, bonds, equity, and loans. This may soon end Russia’s struggles with payments to India.

What’s in today’s article?

Increasing bilateral trade between India and Russia
Existing payment settlement mechanism between India and Russia
Payment issues with Russia
New investment options for Russia

Increasing bilateral trade between India and Russia

Trade statistics
- Russia is now India’s second largest import source, after China, surpassing the UAE and US.
- In 2023-24, India’s imports from Russia increased 32.95 per cent to $ 61.44 billion, while its exports were at $4.26 billion, creating a trade deficit of $ 57.18 billion.
- Most of India’s import from Russia comprises oil, but there are also imports of defence equipment, fertilisers, edible fats and oil and precious and semi-precious stones and jewellery.
- While payment for defence equipment was largely in rupee, payment for Russian oil was taking place in other currencies.
Reasons behind the increase in bilateral trade
- Since the start of Ukraine war on February 24, 2022, Moscow has been hit by Western banking and economic sanctions.
- Against this backdrop, it found a ready market for its goods, especially crude oil, in India and offered steep discounts.
  - Russia is now the largest supplier of oil to India, displacing traditional players such as Iraq, Saudi Arabia, and UAE.
- India, unlike the West, chose to not join the list of countries formally imposing sanctions on Moscow.

Existing payment settlement mechanism between India and Russia

India and Russia put in place a rupee payment system to circumvent the Western countries’ banking and economic sanctions against Russia following its attack on Ukraine in February 2022.
Under the mechanism, a number of Russian banks, opened their rupee vostro accounts with authorised dealer banks in India for enabling rupee trade between the two countries.
- A Vostro account is a bank account that a correspondent bank holds on behalf of another bank, often a foreign bank.
- In this context, a rupee vostro account is a special account that authorized Indian banks open and maintain for the banks of their partner trading countries.
- The account holds the foreign bank’s holdings in the Indian counterpart in rupees.
- When an Indian trader wants to pay a foreign trader in rupees, the amount is credited to the vostro account.

Payment issues faced by India and Russia

Dollar and existing channel like SWIFT were not an option
- As part of war-induced sanctions on Moscow, the U.S., the EU, and the U.K. have blocked multiple Russian banks from accessing the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
  - SWIFT is a global secure interbank system whose primary function is to facilitate the secure exchange of financial messages between banks and other financial institutions.
  - These messages typically involve instructions for transferring funds, such as payment orders, securities trading information, and other types of financial transactions.
- The West had targeted one of its biggest traded goods — energy — for which transactions have traditionally been dollar-dependent.
  - Western countries did so by imposing a price cap of $60 per barrel.
- While India is not a formal signatory, it has tacitly agreed to maintain the price cap as much as possible.
- Also, banks and traders did not want to get involved in transactions that breach the oil cap over fears of repercussions for their funds.
  - Until recently, the blends of oil India was importing from Russia were largely below the price cap fixed by G-7 countries and India was able to pay for the oil using dollars.
  - However, Russia has lowered its discounts due to high demand from China and lower grade oil is now in short supply.
Challenges to rupee-rouble mechanism
- This mechanism was considered as an alternative payment mechanism to settle dues in rupees instead of dollars or euros.
- However, as per the reports, this mechanism could not take off due to factors. This includes:
  - Scepticism on the rupee-rouble convertibility as the rouble’s value is kept up by capital controls and not determined by the market.
  - Russia finds the rupee to be volatile.
- The unforeseen surge in oil trade between India and Russia in one year alone has led to a massively ballooning trade deficit.
- This has led to staggering amounts of Indian rupees in Russian banks that cannot be used by Russia in its war efforts.

New investment options for Russia

Background
- The rising unused rupee balance for Russian entities in these accounts was a big concern for Russia.
- It was trying to repatriate some of it through various means including converting it to dirhams or yuan.
- In this backdrop, new mechanism was launched to enable Russia to invest the rupee balance in India itself.
New mechanism
- The RBI enabled countries holding rupee accounts to invest in government securities’/treasury bills in India.
- Recently, a FEMA (Foreign Exchange Management Act) regulation has been amended making it easier for foreign investors to trade in derivatives.
- Russia is also being allowed to invest in equity and debt.
- India is also trying to identify projects for Russian entities to invest in, such as the Vande Bharat sleeper trains project.
  - Russian investments in India will not attract Western sanctions as these are rupee investments.

The Kotak Mahindra Bank Controversy

Why in News?

The Reserve Bank of India (RBI) barred Kotak Mahindra Bank (KMB) from onboarding new customers on its online and mobile banking channels, and issuing fresh credit cards.
It would however be allowed to provide these services to its existing customers.

What’s in Today’s Article?

Why were Actions on KMB Necessitated?
Similar Actions by RBI in the Past
What will be the Impact of RBI’s Actions on KMB?

Why were Actions on KMB Necessitated?

RBI observed “serious deficiencies and non-compliances” concerning KMB’s –
- IT inventory and user access management,
- Data leak and leak prevention strategy,
- Business continuity and
- Disaster recovery rigour and drill, etc.
This was based on the regulator’s examination of the private bank’s systems for two years (2022 and 2023).
The regulator said KMB continually failed to address concerns in a “comprehensive and timely manner”.
The bank was also deemed non-compliant with RBI’s subsequent recommendations or ‘Corrective Action Plans’ (CAPs).
- CAPs are part of an intervention scheme of the RBI to ensure robustness of regulated entities.
- As per the RBI, the compliances submitted by KMB were either “inadequate, incorrect or not substantiated”.
In the absence of robust IT infrastructure and risk management systems, KMB’s online and digital banking channels have suffered frequent and significant outages in the last two years.
- In a latest incident, the bank’s customer care representative informed that its technical servers were experiencing “intermittent slowness”.
The current measures would be reviewed in an external audit to be commissioned by the bank with RBI’s approval to assess remediation undertaken.

Similar Actions by RBI in the Past:

The RBI has been particularly wary of how digital banking and the overall financial landscape functions.
In (December) 2020, the regulator had ceased HDFC from launching any new digital products and sourcing new credit card consumers.
- This was also based on a two-year assessment that had come across recurrent incidents of outage in its internet and mobile banking platforms, alongside payment utilities.
- The restrictions were lifted more than a year later in (March) 2022 after a successful remediation.
On similar lines, the RBI in (October) 2023 directed the Bank of Baroda to suspend any fresh onboarding of customers onto its ‘bob World’ mobile application.
- This was also based on “certain material supervisory concerns” with the RBI demanding the rectification of observed deficiencies.

What will be the Impact of RBI’s Actions on KMB?

KMB’s growth trajectory for retail products was aided by a higher mix of digital sourcing and a thrust on unsecured products.
- For perspective, the private lender sold 95% of their personal loans and 99% of their (fresh) credit cards by digital means.
- The banks’ net profit in the fourth quarter rose 18% to ₹4,133 crore from ₹3,496 crore in the year-ago period. This was on the back of a 13% YoY growth in net interest income at ₹6,909 crore.
According to S&P Global Ratings, the regulatory action may set back the bank’s credit growth and profitability.
It added that credit cards are among the higher-yielding target growth segment of the bank. The portfolio grew 52% YoY as on December 31 last year compared with a total loan growth of 19%.
Action by the RBI could push the bank to rely more on physical branch network expansion to supplement growth thus entailing higher operating costs.
However, the agency maintained that RBI’s action will not “materially affect” its ratings.
- This is because credit cards accounted for only 4% of the bank’s total loans at the end of the year and it would still be able to cross-sell its products.
However, the bank’s CEO stated that while the financial impact (from the RBI action) is expected to be minimal, he was more worried about the “reputational impact”.
S&P anticipates KMB to potentially take a year to fully address RBI’s key concerns.
- While the bank has made “significant progress” on technological enhancements, implementing changes and the external audit will take time.

ByULF TEAM

By ULF TEAM

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