With the spread of COVID-19, along with the central government, state governments have also announced several policy decisions to contain and prevent the spread of the virus. In this blog post, we summarise some of the key measures taken by the government of West Bengal in this regard as of April 18, 2020.
As of April 18, 2020, there have been 287 confirmed cases of COVID-19 in West Bengal. Of these, 55 have been discharged and 10 have died. To manage patients, there are 66 COVID hospitals, eight testing laboratories, and 582 institutional quarantine centres in the state.
Early response: Leading up to lockdown
Between January and February, the state government's efforts were aimed at raising awareness among citizens on COVID-19. These include advisories on observing precautionary measures, and informing citizens on travel restrictions, home isolation, and screening protocols for foreign returnees.
On March 2, the state government responded to the growing number of suspected cases by issuing guidelines for preparedness by government medical colleges and hospitals. These covered admission, isolation and management of suspected COVID-19 cases. These instructions were extended to private medical colleges and hospitals on March 7. A week later, the government issued protocols for monitoring travellers at various state checkposts by joint teams of state police and paramedical staff, and for reference of symptomatic patients to isolation facilities in the district. All cases had to be reported on a daily basis to district surveillance teams. The government also announced the closure of all educational institutions in the state (government and private) till March 31.
On March 16, the government notified the West Bengal Epidemic Disease COVID-19 Regulations, 2020. These regulations specify screening and treatment protocol for COVID-19 patients, and empower the district administration to take containment measures to curb the spread of COVID-19.
The next day, the state reported its first confirmed case of COVID-19. The government proceeded to issue orders: (i) for segregating isolation wards for suspected and confirmed COVID-19 cases, (ii) specifying treatment protocols for confirmed cases, (iii) establishing medical boards in all COVID-19 hospitals with representation from different medical disciplines, and (iv) establishing fever clinics for suspected patients. Anganwadi centres and creches were also closed, with provisions to ensure supply of two kilograms of rice and potatoes to each beneficiary.
On March 21, the government ordered the closure of certain establishments to restrict non-essential social gatherings till March 31, 2020. This included closure of restaurants, clubs, amusement parks, and museums. Further, all trains entering the state and inter-state buses were banned till March 31, 2020.
Subsequently, the government announced a lockdown. In addition to steps for physical containment, the government also undertook various health and welfare measures. These are detailed below.
Measures taken post-lockdown
On March 22, a lockdown was announced in 23 areas of the state until March 27. Restrictions during the lockdown included: (i) prohibition on public gatherings of over seven people, (ii) suspension of public transport, and (iii) closure of shops, commercial establishments, offices and factories. Establishments providing essential goods and services such as health services, print media, banks, groceries, and e-commerce delivery of food and groceries, were excluded from the restrictions. Over the next few weeks, steps were taken to expand these exemptions, and to regulate the movement of goods and services.
List of essential goods and services: On March 24, the lockdown was extended till March 31 in the entire state, and the exemptions were expanded to include industries producing coal, power, steel, or fertilisers. After the centre notified a 21-day lockdown, the list of exemptions in the state was gradually expanded to include agricultural operations, fish production, tea garden operations, and operations in krishak bazars for marketing agricultural produce. At the same time, restrictions were placed on hoarding of masks and hand sanitisers.
Last week, after the central government extended the lockdown till May 3, orders were passed for resumption of government offices from April 20 onwards at a strength of 25% of workforce. Similar permission was also granted for restricted operations in jute mills, and IT/IT enabled services.
Regulating movement of goods and services: A pass system was introduced on March 25 to regulate the movement of persons supplying essential goods and services. Transportation of non-essential cargo was prohibited till March 31, 2020. However, as a one-time measure, permission was granted on March 26 to such vehicles to reach their destination. Two days later, the government ordered for the seamless movement of commodities in all district borders and interstate areas.
Health Measures
On March 26, a Committee of Experts was constituted to advise on strategies for isolation, quarantine, testing, health infrastructure, and disease prevention. The Committee has been issuing protocols on clinical management of COVID-19 cases. The government also established various monitoring committees on setting up isolation hospitals, managing critical care, and to audit the cause of deaths related to COVID-19 patients.
To respond to the increasing number of patients, the government acquired private healthcare facilities in April. Further, to expand its testing capacity, the government recommended sample pooling for COVID-19 testing yesterday.
In addition to these measures, the government also issued several guidelines, advisories and orders on containment of the virus, patient handling and protecting healthcare workers. Some of these are detailed below:
For healthcare facilities: Advisory for setting up of isolation facilities, orders for establishment of fever clinics to segregate patients with severe symptoms, separation zones for suspected cases to protect healthcare personnel, and use of hydroxychloroquine for asymptomatic healthcare workers.
For government: Guidelines for cluster containment and treatment strategies to contain COVID-19 in hi-risk spots, directions for awareness generation among rural population for containment, and arranging for counselling sessions for quarantined patients.
Welfare/Austerity Measures
Creation of relief fund: The “West Bengal State Emergency Relief Fund” was created on March 23 to mobilise additional resources to cope with the emergency. On April 2, austerity measures were announced by the government. These include prohibition on announcement of new schemes, unless required in urgent public interest.
Distribution of food: Free entitlement of wheat and rice was announced on March 26 to beneficiaries under some food subsidy schemes (including the Antyodaya Anna Yojana) until September, 2020.
Measures for workers: Directions were notified in March for provisions on shelter, food, quarantine, wage payment, and continued tenancy for workers.
Free insurance cover was announced on April 1 for treatment of certain categories of persons, including heathcare workers, and police.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
The issue of Non-Performing Assets (NPAs) in the Indian banking sector has become the subject of much discussion and scrutiny. The Standing Committee on Finance recently released a report on the banking sector in India, where it observed that banks’ capacity to lend has been severely affected because of mounting NPAs. The Estimates Committee of Lok Sabha is also currently examining the performance of public sector banks with respect to their burgeoning problem of NPAs, and loan recovery mechanisms available.
Additionally, guidelines for banks released by the Reserve Bank of India (RBI) in February 2018 regarding timely resolution of stressed assets have come under scrutiny, with multiple cases being filed in courts against the same. In this context, we examine the recent rise of NPAs in the country, some of their underlying causes, and steps taken so far to address the issue.
What is the extent and effect of the NPA problem in India?
Banks give loans and advances to borrowers. Based on the performance of the loan, it may be categorized as: (i) a standard asset (a loan where the borrower is making regular repayments), or (ii) a non-performing asset. NPAs are loans and advances where the borrower has stopped making interest or principal repayments for over 90 days.
As of March 31, 2018, provisional estimates suggest that the total volume of gross NPAs in the economy stands at Rs 10.35 lakh crore. About 85% of these NPAs are from loans and advances of public sector banks. For instance, NPAs in the State Bank of India are worth Rs 2.23 lakh crore.
In the last few years, gross NPAs of banks (as a percentage of total loans) have increased from 2.3% of total loans in 2008 to 9.3% in 2017 (Figure 1). This indicates that an increasing proportion of a bank’s assets have ceased to generate income for the bank, lowering the bank’s profitability and its ability to grant further credit.
Escalating NPAs require a bank to make higher provisions for losses in their books. The banks set aside more funds to pay for anticipated future losses; and this, along with several structural issues, leads to low profitability. Profitability of a bank is measured by its Return on Assets (RoA), which is the ratio of the bank’s net profits to its net assets. Banks have witnessed a decline in their profitability in the last few years (Figure 2), making them vulnerable to adverse economic shocks and consequently putting consumer deposits at risk.
What led to the rise in NPAs?
Some of the factors leading to the increased occurrence of NPAs are external, such as decreases in global commodity prices leading to slower exports. Some are more intrinsic to the Indian banking sector.
A lot of the loans currently classified as NPAs originated in the mid-2000s, at a time when the economy was booming and business outlook was very positive. Large corporations were granted loans for projects based on extrapolation of their recent growth and performance. With loans being available more easily than before, corporations grew highly leveraged, implying that most financing was through external borrowings rather than internal promoter equity. But as economic growth stagnated following the global financial crisis of 2008, the repayment capability of these corporations decreased. This contributed to what is now known as India’s Twin Balance Sheet problem, where both the banking sector (that gives loans) and the corporate sector (that takes and has to repay these loans) have come under financial stress.
When the project for which the loan was taken started underperforming, borrowers lost their capability of paying back the bank. The banks at this time took to the practice of ‘evergreening’, where fresh loans were given to some promoters to enable them to pay off their interest. This effectively pushed the recognition of these loans as non-performing to a later date, but did not address the root causes of their unprofitability.
Further, recently there have also been frauds of high magnitude that have contributed to rising NPAs. Although the size of frauds relative to the total volume of NPAs is relatively small, these frauds have been increasing, and there have been no instances of high profile fraudsters being penalised.
What is being done to address the problem of growing NPAs?
The measures taken to resolve and prevent NPAs can broadly be classified into two kinds – first, regulatory means of resolving NPAs per various laws (like the Insolvency and Bankruptcy Code), and second, remedial measures for banks prescribed and regulated by the RBI for internal restructuring of stressed assets.
The Insolvency and Bankruptcy Code (IBC) was enacted in May 2016 to provide a time-bound 180-day recovery process for insolvent accounts (where the borrowers are unable to pay their dues). Under the IBC, the creditors of these insolvent accounts, presided over by an insolvency professional, decide whether to restructure the loan, or to sell the defaulter’s assets to recover the outstanding amount. If a timely decision is not arrived at, the defaulter’s assets are liquidated. Proceedings under the IBC are adjudicated by the Debt Recovery Tribunal for personal insolvencies, and the National Company Law Tribunal (NCLT) for corporate insolvencies. 701 cases have been registered and 176 cases have been resolved as of March 2018 under the IBC.
What changed recently in the RBI’s guidelines to banks?
Over the years, the RBI has issued various guidelines aimed at the resolution of stressed assets of banks. These included introduction of certain schemes such as: (i) Strategic Debt Restructuring (which allowed banks to change the management of the defaulting company), and (ii) Joint Lenders’ Forum (where lenders evolved a resolution plan and voted on its implementation). In line with the enactment of the IBC, the RBI, through a circular in February 2018, substituted all the specific pre-existing guidelines with a simplified, generic, time-bound framework for the resolution of stressed assets.
In the revised framework which replaced the earlier schemes, the RBI put in place a strict deadline of 180 days during which a resolution plan must be implemented, failing which stressed assets must be referred to the NCLT under IBC within 15 days. The framework also introduced a provision for monitoring of one-day defaults, where incipient stress is identified and flagged immediately when repayments are overdue by a day.
Borrowers whose loans were tagged as NPAs before the release of the circular recently crossed the 180-day deadline for internal resolution by banks. Some of these borrowers, including various power producers and sugar mills, had appealed against the RBI guidelines in various High Courts. A two-judge bench of the Allahabad High Court had recently ruled in favour of the RBI’s powers to issue these guidelines, and refused to grant interim relief to power producers from being taken to the NCLT for bankruptcy. All lawsuits against the circular have currently been transferred to the Supreme Court, which has now issued an order to maintain status quo on the same. This means that these cases cannot be referred to the NCLT until the Supreme Court’s decision on the circular, although the RBI’s 180-day deadline has passed. This effectively provides interim relief to the errant borrowers who had moved to court till the next hearing of the apex court on this matter, which is scheduled for November 2018.
