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The Hindu Editorial Analysis | PDF Download

Date: 22 April 2019



  1. do not form part of the payment and settlement system
  2. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, like in case of banks.
  3. All NBFCs are regulated by RBI

(A) 1 & 2

(B) 2 & 3

(C) 3 only


  •  Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions.
  •  Housing Finance Companies are regulated by National Housing Bank,
  •  Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and
  •  Insurance companies are regulated by Insurance Regulatory and Development Authority.
  •  Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India.
  •  Companies that do financial business but are regulated by other regulators are given specific exemption by the Reserve Bank from its regulatory requirements for avoiding duality of regulation.
  • NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
  1. NBFC cannot accept demand deposits;
  2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
  • deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

What is a Non-Banking Financial Company (NBFC)?

  • A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
  • What does conducting financial activity as “principal business” mean?
  • Financial activity as principal business is when a company’s financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income. A company which fulfils both these criteria will be registered as NBFC by RBI.
  • The term 'principal business' is not defined by the Reserve Bank of India Act. The Reserve Bank has defined it so as to ensure that only companies predominantly engaged in financial activity get registered with it and are regulated and supervised by it. Hence if there are companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial business in a small way, they will not be regulated by the Reserve Bank. Interestingly, this test is popularly known as 50-50 test and is applied to determine whether or not a company is into financial business.
  • The Office of the United Nations High Commissioner for Refugees(UNHCR also known as the UN Refugee Agency) is a United Nations programme with the mandate to protect refugees, forcibly displaced communities and stateless people, and assist in their voluntary repatriation, local integration or resettlement to a third country.
  • UNHCR was created in 1950, during the aftermaths of World War II. Its headquarters are in Geneva, Switzerland and it is a member of the United Nations Development Group.
  • The UNHCR has won two Nobel Peace Prizes, once in 1954 and again in 1981 and a Prince of Asturias Awards for International Cooperation in 1991.
  • The International Organization for Migration (IOM) is an intergovernmental organization that provides services and advice concerning migration to governments and migrants, including internally displaced persons, refugees, and migrant workers. In September 2016, it became a related organization of the United Nations. It was initially established in 1951 as the Intergovernmental Committee for European Migration (ICEM) to help resettle people displaced by World War II. As of March 2019, the International Organization for Migration had 173 member states and eight observer states
  • IOM, or as it was first known, the Provisional Intergovernmental Committee for the Movement of Migrants from Europe (PICMME), was born in 1951 out of the chaos and displacement of Western Europe following the Second World War.
  • Mandated to help European governments to identify resettlement countries for the estimated 11 million people uprooted by the war, it arranged transport for nearly a million migrants during the 1950s.
  • A succession of name changes from PICMME to the Intergovernmental Committee for European Migration (ICEM) in 1952, to the Intergovernmental Committee for Migration (ICM) in 1980 to the International Organization for Migration (IOM) in 1989, reflects the organization's transition over half a century from logistics agency to migration agency.
  • While IOM's history tracks the man-made and natural disasters of the past half century - Hungary 1956, Czechoslovakia 1968, Chile 1973, the Vietnamese Boat People 1975, Kuwait 1990, Kosovo and Timor 1999, and the Asian tsunami and Pakistan earthquake of 2004/2005 - its credo that humane and orderly migration benefits migrants and society has steadily gained international acceptance.
  • TheGlobal Migration Group (GMG) is a group consisting of fourteen UN agencies, the World Bank and the International Organisation for Migration that work in cooperation to address global migration issues. It was created in 2006 by then UN Secretary-General Kofi Annan, in order to better coordinate multilateral migration governance initiatives.
  • The Group's primary aim is to improve the management of cross-border migration, to promote further research and to develop international norms relating to migration.
  • The GMG is chaired on a rotating basis of six months by a member agency, during which a thematic topic is adopted to guide the Group's activities. UNICEF chaired the Group during the first half of 2011 with a focus on youth. UNESCO Chairs the Group in the second half of 2011 on the theme of climate change and its impact on migration.
  • The GMG also feeds its activities into that of the Global Forum on Migration and Development, although the two are not formally affiliated.
  • The Global Forum on Migration and Development (GFMD) is a state-led, informal and non-binding process, which helps shape the global debate on migration and development.
  • It provides a flexible, multi-stakeholder space where governments can discuss the multi-dimensional aspects, opportunities and challenges related to migration, development, and the link between these two areas.
  • The GFMD process allows governments - in partnership with civil society, the private sector, the UN system, and other relevant stakeholders – to analyze and discuss sensitive issues, create consensus, pose innovative solutions, and share policy and practices
  • The objectives of the GFMD are:
  • To provide a venue for policy-makers and high-level policy practitioners to informally discuss relevant policies and practical challenges and opportunities of the migration-development nexus, and engage with other stakeholders, including non-governmental organizations, experts and migrant organizations to foster practical and action-oriented outcomes at national, bilateral and international level;
  • To exchange good practices and experiences, which can be duplicated or adapted in other circumstances, in order to maximize the development benefits of migration and migration flows;
  • To identify information, policy and institutional gaps necessary to foster synergies and greater policy coherence at national, regional and international levels between the migration and development policy areas;
  • To establish partnerships and cooperation between countries, and between countries and other stakeholders, such as international organizations, diaspora, migrants, academia etc., on migration and development;
  • To structure the international priorities and agenda on migration and development.


  • The Global Knowledge Partnership on Migration and Development (KNOMAD) is an initiative of the World Bank that describes itself as "envisaged to be a global hub of knowledge and policy expertise on migration and development issues."
  • The goal is to have it work in close collaboration with the Global Forum on Migration and Development and the Global Migration Group
  • KNOMAD was announced by the World Bank on April 19, 2013. It entered a fiveyear implementation phase in May 2013.
  • KNOMAD has collaborated with diverse organizations such as the Organisation for Economic Co-operation and Development (Paris workshop, December 2013) and the United Nations Development Programme (specifically, the United Nations Institute for Training and Research).
  • A number of seminars, conferences, and workshops have been held by KNOMAD in collaboration with other agencies and institutions to further its agenda
  • The KNOMAD is funded by a multi-donor trust fund set up by the World Bank. The largest contributors are the Swiss Agency for Development and Cooperation and the Federal Ministry of Economic Cooperation and Development (Germany)

Expropriation in the name of conservation

  • It is shocking that a democratic government is seeking to strengthen the colonial-era Indian Forest Act
  • The Indian Forest Act, 1927 was a remarkable piece of expropriation in the name of conservation. The British government carried out one of the largest land expropriations in history, where the rights to occupy and use forests were transferred from communities with customary and historical property rights to the colonial Central government. The act offered a fig leaf that those who could establish their rights were excepted from this expropriation (of course, few could establish their rights, given that their rights were not property rights as per the British government’s conception of property). These expropriations were ameliorated in some small measure in the Forest Rights Act of 2006, but they have remained the edifice of the relationship between the government and the Adivasis. It is the forest department that Adivasis must deal with as their primary government agency. That a democratic government almost a century later seeks to expand and strengthen the tools of the Indian Forest Act is remarkable and shocking at the same time.
  • The ostensible inspiration for the amendments proposed by the Central government is the same as that of the colonial regime: the protection of forests. However, the government goes a step further than the colonial government and seeks to criminalise the communities, primarily the Adivasis, who dwell in these forests. Forest rights activists have expressed concern that forests could turn into a ‘police state’. A better description would be that they would become a more draconian police state.
  • Proposed amendments
  • According to the draft amendments, the forest department will now be able to enforce the property rights of the government to forests at the exclusion of Adivasis dwelling there, through preventive arrest provisions. Certain offences will be made non-bailable. The presumption of innocence is reversed. Alleged encroachers can be arrested without warrant. Forest officials will be given the authority to use arms against tribals for “violation of laws”.
  • The draft says the ‘forest’ will not be limited to land owned by the government; it will include any flora considered forest, as a 1996 Supreme Court order had expanded the definition of forest. The Central government will be able to change the classification from ‘unprotected’ to ‘reserved’ or ‘protected’, and the erstwhile land owners will be subjected to penal provisions for customary use of their land.
  • The fears of a draconian police state are not alarmist. The criminal justice system in States such as Chhattisgarh is inundated with cases against Adivasis who exercise their forest rights. Yet, the amendments proposed seek to limit the discretion of officers to withdraw any offences, ensuring a protracted legal process, with prolonged incarceration.
  • It is an old adage that those who forget history are bound to repeat it. As a young editor in Germany, Karl Marx was radicalised by the use of penal provisions to prosecute people collecting firewood in the forests, an old custom. With increasing industrialisation, feudal property owners could monetise the firewood, and the customary rights of people to collect firewood was curtailed. Marx was incensed at the plight of those jailed for this infraction, which accounted for the majority of penal cases in the prosperous Rhineland.
  • The Forest Rights Act, a legislation mitigating the Indian Forest Act, already weakened by poor implementation, will be further limited by excluding ‘village forests’, ironically named, from its purview. In addition, the community’s voice will also be excluded from a new category of ‘production forest’ . ‘Production forest’ may be handed over to private operators. This will corporatize forest resources. The problems with these provisions are self-evident.
  • A Section 26 has been proposed, which will allow forest department officers to suspend the right to pasture or collect forest produce from the primarily Adivasi communities residing in the forest. This will take away not only the livelihood of the forest dwellers, but also strike at the very root of their deep relationship with their environment, customs and traditions. The proposed Section 22(A)(2) is another example of gross injustice. It proposes that the government can acquire any right of a person which is “inconsistent with the conservation of the proposed reserved forest”. No parameters have been given to decide what is “inconsistent”, and the decision to declare the “inconsistent” use rests with the government.
  • States with large forest tracts with big tribal populations have tried in the past to settle forest land “encroached” by the tribal people and grant them pattas. The Forest Rights Act allows tribals present at the cut-off date, and non-tribals who can show 75 years of possession, a quasi-property right, or patta, to be administered by the Tribal Affairs Ministry rather than the forest department. Activists expected that this proposed amendment would bring in legal provisions for such settlement. This so-called forest land has no trees on the ground, and has been cultivated by the tribals for a long time, but is still designated as forest. People are subjected to harassment year after year because they are treated as encroachers. The Chhattisgarh government had granted pattas to these “encroachers” to give them legal status, but recently the courts have cancelled these pattas, calling them illegal. It was expected that the proposed amendments would legalise these pattas, but the amendments proposed suggest the opposite.
  • Managing forests
  • It is not only activists who are voicing their concerns; the Chhattisgarh government has expressed its concern at the taking away of the powers given to gram sabhas through the Provisions of the Panchayats (Extension to Scheduled Areas) Act, 1996.
  • The amendments will also further centralise the management of forest, as the legislation takes away the State governments’ discretion to manage forests even further.
  • Given the correlation between Adivasi forest areas and the ‘Red Corridor’, the law is not only undemocratic, but also has implications for internal security. Adivasis are at the front line of the battle against Maoists, and the principal victims of war-waging in their communities. This Act, in seeking to criminalise their very economic existence, will be a boon for Maoist propaganda.
  • The proposed legislation seeks to turn communities into the problem. To paraphrase Justice Ruth Bader Ginsburg of the U.S. Supreme Court, the Adivasis, at the very least, need the Indian state to take its foot off their neck. In these elections, Adivasis and other communities would do well to ask those seeking their blessings their stance on the proposed amendments