The Reserve Bank of India (RBI) had constituted a Committee (Chair: Dr. Harsh Vardhan) on the Development of Housing Finance Securitisation Market in May 2019. The Committee aimed to review the existing state of mortgage securitisation market in India. The Committee submitted its report to the RBI on September 5, 2019.

The Committee observed several challenges related to housing finance. It noted that eight to ten crore of additional housing units will be required by 2022 to achieve India’s “Housing for All” target. These will cost between 100 to 115 lakh crore rupees. Housing finance companies (HFCs) play a major role in providing credit for home loans to economically weaker sections. However, home loans suffer from a structural asset liability management challenge for the lenders due to mismatch in the maturity period of home loans (typically, long term maturity) and funding sources for HFCs (typically, short term maturity). To overcome this, HFCs raise funds by pooling the home loans to issue securities backed by these loans. This process is known as securitisation.

The regulatory framework of securitisation covers two types of transactions: (i) direct assignment (DA) and (ii) pass through certificates (PTC). Both involve pooling of loans and selling to a third party, thereby transferring credit risk. However, in case of securitisation through PTC, the pooled loans are sold through an intermediary, set up as a special purpose vehicle. The Committee observed that the growth in securitisation market has been dominated by DA transactions (PTC transactions were just a quarter of total transactions in 2019). The Committee noted that securitisation done through the DA route involves customised, bilateral transactions which keeps the details of transaction (such as valuation, pool performance, prepayment) in private domain. This inhibits other participants (such as mutual funds, insurance and pension funds) from participating in transactions. Further, these transactions have very little standardisation.

Another major challenge associated with securitisation is the added transaction cost which arises from legal and regulatory requirements, uncertainty in taxation, and accounting standards. In view of these challenges, the Committee made the following recommendations:

Relaxing stamp duty and registration requirements: The central government can exempt mortgage based securitisation transactions from stamp duty. Further, the government can exempt registration of mortgage loans as they are essentially movable assets, unlike the underlying assets.

Separation of regulatory guidelines: Regulatory treatment should be different for mortgage-backed securitisation and asset-backed securitisation. For mortgage-backed securitisation, the regulatory norms for minimum holding period (MHP) and minimum retention requirement (MRR) should be relaxed. MRP is the minimum period for which the originator (i.e. the original lender of the loan) must hold its assets for it to be included in the securitisation pool. MRR is the minimum amount of interest which the originator must have in the securitised asset pool.

The regulatory treatment for DA and PTC should be distinct with separate guidelines. Guidelines on securitisation should only apply to PTC transactions. DA transactions should not be treated as securitisation as it does not involve issuance of securities. Further, PTCs issued in mortgage-based securitisation should be mandatorily listed if the securitisation pool is over Rs 500 crore.

Government sponsored intermediary: An intermediary should be setup through the National Housing Bank to promote housing finance securitisation. The intermediary will be responsible for market making and standard setting.

Standardisation: To improve standardisation, specific standards should be setup for loan origination, loan servicing, loan documentation, and loan eligibility for securitisation. Further, standard formats should be established for data collection and aggregation for housing loan related data.

Bankruptcy remoteness: Currently, securitisation transactions are bankruptcy remote, which means that in the event the originator of loans becomes insolvent and undergoes bankruptcy, the securitised pool of assets is excluded from the assets of the originator during the liquidation process. The Committee recommended that any law for resolving bankruptcy of financial firms should ensure that assets underlying a securitisation transaction are bankruptcy remote, to ensure that investors are not discouraged from participating in securitisation transactions.

Last week, the Departmentally Related Standing Committees were reconstituted for the first year of the 17th Lok Sabha. In this context, we discuss the functioning and role of Standing Committees.

The visible part of Parliament’s work takes place on the floor of the House. Parliament meets for three sessions a year i.e., the Budget, Monsoon, and Winter Sessions. This part of Parliament’s work is televised and closely watched. However, Parliament has another forum through which a considerable amount of its work gets done. These are known as Parliamentary Committees. These Committees are smaller units of MPs from both Houses, across political parties and they function throughout the year. These smaller groups of MPs study and deliberate on a range of subject matters, Bills, and budgets of all the ministries.

During the recently concluded first Session of the 17th Lok Sabha, Parliament sat for 37 days. In the last 10 years, Parliament met for 67 days per year, on average. This is a short of amount of time for MPs to be able to get into the depth of matters being discussed in the House. Since Committees meet throughout the year, they help make up for this lack of time available on the floor of the House.

Parliament deliberates on matters that are complex, and therefore needs technical expertise to understand such matters better. Committees help with this by providing a forum where Members can engage with domain experts and government officials during the course of their study. For example, the Committee on Health and Family Welfare studied the Surrogacy (Regulation) Bill, 2016 which prohibits commercial surrogacy, but allows altruistic surrogacy. As MPs come from varying backgrounds, they may not have had the expertise to understand the details around surrogacy such as fertility issues, abortion, and regulation of surrogacy clinics, among others. The Committee called upon a range of stakeholders including the National Commission for Women, doctors, and government officials to better their understanding of the issues, before finalising their report.

Committees also provide a forum for building consensus across political parties. The proceedings of the House during sessions are televised, and MPs are likely to stick to their party positions on most matters. Committees have closed door meetings, which allows them to freely question and discuss issues and arrive at a consensus.

After a Committee completes its study, it publishes its report which is laid in Parliament. These recommendations are not binding, however, they hold a lot of weight. For example, the Standing Committee on Health made several recommendations to the National Medical Commission Bill in 2017. Many of these were incorporated in the recently passed 2019 Bill, including removing the provision for allowing a bridge course for AYUSH practitioners.

There are 24 such Departmentally Related Standing Committees (DRSCs), each of which oversees a set of Ministries. DRSCs were set up first in 1993, to ensure Parliament could keep with the growing complexity of governance. These are permanent Committees that are reconstituted every year. They consist of 21 Members from Lok Sabha, and 10 Members from Rajya Sabha, and are headed by a Chairperson. The DRSCs primarily look at three things: (i) Bills, (ii) budgets, and (iii) subject specific issues for examination. Other types of Standing Committees include Financial Committees which facilitate Parliament’s scrutiny over government expenditure. Besides these, Parliament can also form ad hoc Committees for a specific purpose such as addressing administrative issues, examining a Bill, or examining an issue.

To ensure that a Bill is scrutinised properly before it is passed, our law making procedure has a provision for Bills to be referred to a DRSC for detailed examination. Any Bill introduced in Lok Sabha or Rajya Sabha can be referred to a DRSC by either the Speaker of the Lok Sabha or Chairman of the Rajya Sabha. Over the years, the Committees have immensely contributed to strengthen the laws passed by Parliament. For example, the Consumer Protection Act, 2019, overhauling the 1986 law, was recently passed during the Budget Session. An earlier version of the Bill had been examined by the Committee on Food and Consumer Affairs, which suggested several amendments such as increasing penalties for misleading advertisements, making certain definitions clearer. The government accepted most of these recommendations and incorporated them in the 2019 Act.

Besides Bills, the DRSCs also examine the budget. The detailed estimates of expenditure of all ministries, called Demand for Grants are sent for examination to the DRCSs. They study the demands to examine the trends in allocations, spending by the ministries, utilisation levels, and the policy priorities of each ministry. However, only a limited proportion of the budget is usually discussed on the floor of the House. In the recently dissolved16th Lok Sabha, 17% of the budget was discussed in the House.

Committees also examine policy issues in their respective Ministries, and make suggestions to the government. The government has to report back on whether these recommendations have been accepted or not. Based on this, the Committees then table an Action Taken Report, which shows status of the government’s action on each recommendation.

While Committees have substantially impacted Parliament’s efficacy in discharging its roles, there is still scope for strengthening the Committee system. In the 16th Lok Sabha, DRSCs examined 41 Bills, 331 Demands for Grants, 197 issues, and published 503 Action Taken Reports.

However, the rules do not require that all Bills be examined by a Committee. This leads to some Bills being passed without the advantage of a Committee scrutinising its technical details. Recently, there has been a declining trend in the percentage of Bills being referred to a Committee. In the 15th LS, 71% of the Bills introduced were referred to Committees for examination, as compared to 27% in the 16th Lok Sabha.

With the DRSCs now constituted for the first year of the 17th Lok Sabha, they will soon begin their meetings to select the subjects they are going to examine. Some Committees already have Bills to examine that were referred to them during the 16th Lok Sabha. Some of these Bills are: (i) the Cinematograph (Amendment) Bill, 2019, (ii) the Allied and Healthcare Professions Bill, 2018, and (iii) the Registration of Marriage of Non- Resident Indian Bill, 2019. So far in the 17th Lok Sabha no Bill has been referred to a Committee yet.

On Wednesday, the government promulgated an Ordinance to ban electronic cigarettes in India. In this context, we look at what are electronic cigarettes, what are the current regulations in place, and what the Ordinance seeks to do.

What are electronic cigarettes? The Ordinance defines electronic cigarettes (e-cigarettes) as battery-operated devices that heat a substance, which may or may not contain nicotine, to create vapour for inhalation. These e-cigarettes can also contain different flavours such as menthol, mango, watermelon, and cucumber. Usually, e-cigarettes are shaped like conventional tobacco products (such as cigarettes, cigars, or hookahs), but they also take the form of everyday items such as pens and USB memory sticks.

Unlike traditional cigarettes, e-cigarettes do not contain tobacco and therefore are not regulated under the Cigarettes and Other Tobacco Products Act, 2003. This Act regulates the sale, production, and distribution of cigarettes and other tobacco products in India, and prohibits advertisement of cigarettes.

What are the international regulations for e-cigarettes? India is a signatory to the WHO Framework Convention on Tobacco Control (WHO FCTC) which was developed in response to the globalisation of the tobacco epidemic. In 2014, the WHO FCTC invited all its signatories to consider prohibiting or regulating e-cigarettes in their countries. This was suggested due to emerging evidence on the negative health impact of these products which could result in lung cancer, cardiovascular diseases, and other illnesses associated with smoking.

Since then, several countries such as Brazil, Mexico, Singapore, and Thailand have banned the production, manufacture, and sale of e-cigarettes. Recently, the states of New York and Michigan in USA banned the sale of flavoured e-cigarettes. Whereas, in UK, the manufacture and sale of e-cigarettes has been allowed based on certain conditions. Further, the advertisement and promotion, and the levels of nicotine in e-cigarettes is also regulated.

Prior to the Ordinance, were e-cigarettes regulated in India? In August 2018, the Ministry of Health and Family Welfare had released an advisory to all states requiring them to not approve any new e-cigarettes and restrict the sale and advertisements of e-cigarettes. Based on this advisory, 15 states including Delhi, Maharashtra, and Uttar Pradesh have since banned e-cigarettes. However, this advisory was challenged in the Delhi High Court in March 2019, which subsequently imposed a stay on the ban.

What does the Ordinance do? The Ordinance prohibits the production, manufacture, import, export, transport, sale, distribution and advertisement of e-cigarettes in India. Any person who contravenes this provision will be punishable with imprisonment of up to one year, or a fine of one lakh rupees, or both. For any subsequent offence, the person will be punishable with an imprisonment of up to three years, along with a fine of up to five lakh rupees.

Additionally, storage of e-cigarettes will be punishable with an imprisonment of up to six months, or a fine of Rs 50,000 or both. Once the Ordinance comes into force (i.e., on September 18, 2019), the owners of existing stocks of e-cigarettes will have to declare and deposit these stocks at the nearest office of an authorised officer. Such an authorised officer may be a police officer (at least at the level of a sub-inspector), or any other officer as notified by the central or state government.

Note that, the Ordinance does not contain any provisions regarding possession or use of e-cigarettes. The Ordinance will be in force for the next six months, and must be approved by Parliament within six weeks of the commencement of the next session of Parliament. If it is not passed within this time frame, it will cease to be in force.

Raksha Mantri Shri Rajnath Singh today said, the Government is making concerted efforts to modernise the Navy and equip it with the best platforms, weapons and sensors to deal with any conventional and unconventional threats to India’s maritime interests.

Shri Rajnath Singh was speaking at the launch of INS ‘Nilgiri’, the first of the Navy's seven new stealth frigates, at Mazagon Dock Shipbuilders Limited in Mumbai.

He said, 70% of India’s trade by value and 95% by volume is taking place through the sea route and even a slight disruption of seaborne trade due to piracy, terrorism or conflict, could have serious repercussions on the economic growth and well-being of the nation.

The proposed legislation was cleared by the Lok Sabha in January, 2019 but not tabled in the Rajya Sabha.

WHAT IS THE CITIZENSHIP AMENDMENT BILL 2016? It seeks to allow illegal migrants from certain minority communities in Afghanistan, Bangladesh and Pakistan eligible for Indian citizenship by amending the Citizenship Act of 1955.

It seeks to grant citizenship to people from minority communities — Hindus, Sikhs, Buddhists, Jains, Parsis and Christians —after 6 years of stay in India even if they do not possess any proper document. The current requirement is 12 years of stay.

The Bill provides that the registration of Overseas Citizen of India (OCI) cardholders may be cancelled if they violate any law. The Bill, however, does not extend to illegal Muslim migrants. It also does not talk about other minority communities in the three neighbouring countries, such as Jews, Bahais etc.

However, the bill is being criticised for the following reasons: It violates the basic tenets of the Constitution. Illegal immigrants are distinguished on the basis of religion.

It is perceived to be a demographic threat to indigenous communities. The Bill makes illegal migrants eligible for citizenship on the basis of religion. This may violate Article 14 of the Constitution which guarantees the right to equality.

It attempts to naturalise the citizenship of illegal immigrants in the region. The Bill allows cancellation of OCI registration for violation of any law. This is a wide ground that may cover a range of violations, including minor offences.

What is the Citizenship Act 1995? Under Article 9 of the Indian Constitution, a person who voluntarily acquires citizenship of any other country is no longer an Indian citizen. Citizenship by descent: Persons born outside India on or after January 26, 1950, but before December 10, 1992, are citizens of India by descent if their father was a citizen of India at the time of their birth.

From December 3, 2004, onwards, persons born outside of India shall not be considered citizens of India unless their birth is registered at an Indian consulate within one year of the date of birth. In Section 8 of the Citizenship Act 1955, if an adult makes a declaration of renunciation of Indian citizenship, he loses Indian citizenship.

Focus: The framework, to be in place from 2019 to 2029, will ensure that people sustain their usage of toilets. It will also focus on proper implementation of solid and liquid waste management (SLWM) — plastic waste, organic waste, grey water, and faecal sludge — in rural areas.

The strategy: They include the retrofitting of single pit toilets to twin pits or making provisions to empty pits every five years, repair of defunct ones, and construction of soak pits for septic tanks wherever not already present.

A district-level training management unit (TMU) will be set up to provide oversight and support to gram panchayats (GPs) so that they ensure the operation and maintenance of sanitation infrastructure. The gram panchayats (GPs) are also supposed to conduct rapid assessment of water and sanitation gaps.

Alternative funding: The government funding is the primary source of financing in the sanitation sector. Alternative self-financing by gradual leveraging of community resources in the form of tariffs for ODF plus activities is also suggested.

It will follow the same 60:40 financing model as being followed till now in Swachh Bharat. It will be finalised after the cabinet’s approval. The framework also talks about state-specific strategies on menstrual hygiene management, including menstrual waste management, which may be supported under the ODF plus strategy.

Need To End Open Defecation: At the time Swachh Bharat Abhiyan was launched, India had 450 million people defecating in the open, which according to the World Health Organisation (WHO) accounted for 59 per cent of the 1.1 billion people in the world practising open defecation. In the absence of toilets, people tend to use open spaces like fields, bushes, forests, banks of water bodies, or other open spaces rather than using a toilet to defecate and relieve themselves.

Need of the hour: Merely building new toilets is not going to change the game. India needs to move beyond that and take steps towards efficient faecal sludge management for a safer environment which does not pose any threat to the health of its people.

Post construction of toilets, the government should establish a monitoring system that makes sure that the latrines are emptied regularly when they fill up and the waste is decomposed safely, and not into nearby rivers or oceans.

In rural areas, focus needs to be laid upon panchayati raj institutions, which can be used as a platform to promote sustainable sanitation practices and creation of public-supported frameworks of organic disposal and utilisation of human waste.

What is UNGA? Popularly known as the parliament of the world, where all the 193 UN member states are represented, the UNGA is the deliberative, policymaking and representative organ of the UN.

Roles and functions: Takes a decision on important matters such as peace and security, discusses various global issues and budgetary matters. Decides on matters such as the admission of new members. Decisions are taken through a vote. Admission of new members and budgetary matters require a two-thirds majority, while the decision on other issues are taken by a simple majority.

Each sovereign state gets one vote and the votes are not binding on the membership, except in budgetary matters. The Assembly has no binding votes or veto powers like the UN Security Council. The UNGA can express world opinion, promote international cooperation in various fields and make recommendations to the UNSC and elect the Security Council’s non-permanent members.

Which countries are not a part of UNGA? Among the world’s 196 countries, 193 are UN member states and three nations- Palestine, the Vatican City and Taiwan are not a part of the international organization as their country status is not recognized globally due to political and religious reasons.

According to the Charter of the United Nations, the General Assembly may: Consider and approve the United Nations budget and establish the financial assessments of Member States;

Elect the non-permanent members of the Security Council and the members of other United Nations councils and organs and, on the recommendation of the Security Council, appoint the Secretary-General;

Consider and make recommendations on the general principles of cooperation for maintaining international peace and security, including disarmament; Discuss any question relating to international peace and security and, except where a dispute or situation is currently being discussed by the Security Council, make recommendations on it;

Discuss, with the same exception, and make recommendations on any questions within the scope of the Charter or affecting the powers and functions of any organ of the United Nations;

Initiate studies and make recommendations to promote international political cooperation, the development and codification of international law, the realization of human rights and fundamental freedoms, and international collaboration in the economic, social, humanitarian, cultural, educational and health fields;

Make recommendations for the peaceful settlement of any situation that might impair friendly relations among countries; Consider reports from the Security Council and other United Nations organs.

The proposal: The profits of MNEs are generated collectively at the group level. Hence, unitary taxation should be applied by combining it with a global minimum effective corporate tax rate on all MNE profits.

Such an approach would simplify the global taxation system and is expected to increase tax revenues for all countries.

Need for and significance: There was a dire need for this change, as the current international corporate taxation norms consider affiliates of MNEs as independent entities and treat taxable transactions between different entities of MNEs as unrelated.

The fiscal revenues of a country could be augmented through fair taxation of the digital economy.

Concerns: The tax-motivated illicit financial flows of MNEs are estimated to deprive developing countries of $50 billion to $200 billion a year in terms of the fiscal revenues.

Background: The international tax system needs a paradigm shift. The rules devised over 80 years ago treat the different parts of a multinational enterprise as if they were independent entities, although they also give national tax authorities powers to adjust the accounts of these entities. This creates a perverse incentive for multinationals to create ever more complex groups in order to minimise taxes, exploiting the various definitions of the residence of legal persons and the source of income. While states may attempt to combat these strategies, they also compete to offer tax incentives, many of which facilitate such techniques to undermine other countries’ taxes.

About United Nations Conference on Trade and Development (UNCTAD): UNCTAD is a permanent intergovernmental body established by the United NationsGeneral Assembly in 1964.

It is part of the UN Secretariat. It reports to the UN General Assembly and the Economic and Social Council, but has its own membership, leadership, and budget. It is also a part of the United Nations Development Group.

It supports developing countries to access the benefits of a globalized economy more fairly and effectively. Along with other UN departments and agencies, it also measures the progress made in the Sustainable Development Goals, as set out in Agenda 2030.

Reports published by UNCTAD are: Trade and Development Report World Investment Report Technology and Innovation Report Digital Economy Report

What is it? Now in its third year, the IMD World Digital Competitiveness Ranking measures the capacity and readiness of 63 economies to adopt and explore digital technologies as a key driver for economic transformation in business, government and wider society.

The ranking is produced by the IMD World Competitiveness Center. To evaluate an economy, WDCR examines three factors: Knowledge, the capacity to understand and learn the new technologies; technology, the competence to develop new digital innovations; and future readiness, the preparedness for the coming developments.

Key performers: India rose from 48th place in 2018 to 44th rank this year. US was ranked as the world’s most digitally competitive economy, followed by Singapore in the second place. Sweden was ranked third on the list, followed by Denmark and Switzerland in the 4th and 5th place, respectively.

Others in the list of top-10 most digitally competitive economy include Netherlands in the 6th place, Finland (7th), Hong Kong SAR (8th), Norway (9th) and Republic of Korea (10th). The largest jump in the overall ranking was registered by China, moving from 30th to 22nd, and Indonesia, from 62nd to 56th.

Key trends: Many Asian nations showed significant growth from last year in digital competitiveness, as Hong Kong and South Korea entered the top 10 for the first time, Taiwan moved up to the 13th place and China made a huge jump from the 30th position to the 22nd.

Indonesia also showed massive growth by rising to 56th rank from its 62nd rank in 2018. China showed significant improvement in the knowledge factor. India also showed significant improvement by jumping up four places. In knowledge factor, India fared best in graduates in sciences and R&D productivity by publication.

India fared best in the technology factor, especially in the telecommunications investment and IT& media stock market capitalization. India has to still, however, work on enforcing contracts, mobile broadband subscribers, wireless broadband and internet users.

In future-readiness, India fared best in world robots distribution and requires to work more on tablet possession.

Context: Winners of the 2019 UN Global Climate Action Awards Announced. The 15 award-winning projects fall within four focus areas: Planetary Health, Climate Neutral Now, Women for Results, and Financing for Climate Friendly Investment.

The Awards are spearheaded by the Momentum for Change initiative at UN Climate Change.

The projects are recognized as innovative solutions that not only address climate change, but also help drive forward progress on many other sustainable development goals, for example, innovation, gender equality and economic opportunity.

From India, IT major Infosys has won the United Nations Global Climate Action Award (UNGCAA) in the ‘Climate Neutral Now’ category for “Infosys’ Journey to Carbon Neutrality”.

The UN Climate Change’s Momentum for Change initiative is implemented with the support of The Rockefeller Foundation. It operates in partnership with World Economic Forum (WEF), donors supporting implementation of UN Climate Change’s Gender Action Plan and Climate Neutral Now.

It is a joint military exercise between India and Kazakhstan. The latest edition is scheduled to be held in Pithoragarh district, Uttarkhand from 3-15 October 2019.

Focus: counter terrorism operation. Conducted alternatively in Kazakhstan and India every year.

23rd edition of Malabar Exercise, the trilateral maritime exercise between navies of India, Japan and the US recently began off the coast of Japan.

Malabar 2019 exercise seeks to further strengthen India-Japan-US naval cooperation and enhance interoperability, based on shared values and principles.

The exercise involves complex maritime operations in surface, sub-surface and air domains.

What is it? The black hole’s extreme gravity skews light emitted by different regions of the disc, producing the misshapen appearance. This visualization simulates the appearance of a black hole where infalling matter has collected into a thin, hot structure called an accretion disc.

It is a new mineral that has been discovered recently inside a diamond unearthed from a mine in South Africa.

It has been found in Earth’s Mantle (A part of Interior of the Earth) which covers 80% of earth’s volume.

Composition: It has high concentrations of niobium, potassium and the rare earth elements lanthanum and cerium.

Features: The found single grain is dark green in colour and opaque. Nomenclature: The mineral has been named after the Norwegian scientist Victor Moritz Goldschmidt, who is considered as the founder of Modern Geochemistry.