Righting a wrong, RBI way

• The recent Reserve Bank of India notification on vendor subvention loans, zero-cost credit card EMI (equated monthly instalment) loans, and so on will go a long way to create an environment for truth-in-lending regulations.
• Truth-in-lending laws, found in many countries ensure that lenders make a truthful disclosure of their rates of interest, and do not try to attract borrowers with misleading rates of interest.
• Truthful disclosure of rates of interest is as important as fair disclosures made by a vendor selling goods.
• There was a time when there was no truth in lending in India at all.
• A lender could get away with disclosure of what was called ‘flat rate of interest’, which was almost like half of the actual interest rates. Leading housing finance lenders would show what was called ‘annually declining rate of interest’, which was also deceptively lower than the actual interest rates.
• It was in 2009 that the RBI required disclosure of the actual rates of interest in case of loan transactions.

Supplier subventions

• Most comments from the financial press on the recent RBI notification focused on the credit card EMIs.
• Credit card issuing banks quite often promise an interest-free EMI loan if a particular card is used for a particular purpose, say, travel booking.
• There are no free lunches in life; neither is there any interest-free credit in the world of banking. It is just that the bankers are getting merchant commissions from the respective merchants offering the services — in this, the airline or the travel company from which the interest is being made up.
• The arrangement is, when a bank or a non-banking financial company (NBFC) gives asset-based financing to a client, the supplier may provide a credit, or commission or both.
• Thus, the lender charges a lower interest rate from the borrower, and makes up for the same by way of credit, or commission or both.

Impact of notification

• The intent of the RBI — in ensuring that truth prevails in business of lending — is surely laudable. However, it could not have come at a worse time.

• Asset-based financing is languishing. Defaults and delays are mounting. NBFCs are facing the toughest time over last decade or so. At this stage, anything which affects business will soon worsen into an existential question.

Avahan India project prevented over 6 lakh HIV infections: Lancet

• The Bill and Melinda Gates Foundation-funded Avahan programme may have prevented over 6 lakh HIV infections in India over 10 years, according to a report in Lancet Global Health .
• It may be recalled that a 2011 study, by other institutes, also showed that the project prevented one lakh fresh HIV cases in five years in the general population by launching intervention programmes among targeted groups.
• The Avahan India AIDS Initiative was launched in 2003, as a large scale, targeted intervention prevention programme and was implemented in Andhra Pradesh, Maharashtra, Tamil Nadu, Manipur and Nagaland. The study looked at 69 districts in Andhra Pradesh, Maharashtra, Karnataka and Tamil Nadu.
• Avahan worked with State government agencies and local non-governmental agencies to work with high-risk groups, including female sex workers and men who have sex with men.
• The results of the assessment indicated that over the first four years of the programme, 42 per cent of the HIV infections were averted, and over 10 years, it rose to 57 per cent.
• The study examined current HIV trends, observed with epidemiological studies; compared it to what the number of infections might have been if condom use had not been promoted by the programme.
• The difference was estimated to be the number of HIV infections prevented.

• The authors say they created a mathematical model of HIV transmission in high-risk groups and the general population using data from cross sectional surveys Receiving funding from the Bill and Melinda Gates Foundation, the latest study was done by the School of Public Health, Imperial College, London, in association with a number of organisations, including the London School of Hygiene and Tropical Medicine, National AIDS Research Institute, Pune, and St. John’s Medical College and Hospital, Bangalore.

• The researchers found that in 24 districts, 62,800 infections were prevented in the first four years of the programme.

• By extrapolating the results to all 69 districts they estimate that 2,02,000 infections were prevented in those four years, with 37 per cent of infections averted in Andhra Pradesh, 30 per cent Karnataka, 8 per cent in Maharashtra and 25 per cent in Tamil Nadu. Over 10 years, this number rose to 6,06,000 across all districts.

life on Mars

• As if the news on earth weren’t depressing enough, the latest dispatches from Mars are also gloomy.
• It turns out the red planet doesn’t have any atmospheric methane.
• Earthlings longing for inter-galactic companionship may have to set their sights elsewhere, for the gas is an important chemical signature of microbial activity.
• On earth, more than 90 per cent of methane is produced by living organisms. A series of tests conducted by Curiosity, NASA’s rover on Mars, indicates an insignificant amount of methane on the planet: 1.3 parts per billion by volume.
• This tiny amount — about six times lower than previous estimates — greatly “reduces the probability” of ongoing microbial activity and, possibly, of any microbial life in the past.
• The results, published in Science , come as a surprise as a series of observations made from satellites and earth-bound telescopes had found evidence of higher amounts of methane.
• But some of these studies were mired in controversy, and recent measurements had lowered the upper limit.
• Although most of the studies found seasonal abundance or sudden spikes, it has not been established that the spikes were associated with seasons on a repetitive basis.
• Also, given that the methane molecule has a lifetime of about 300-600 years in the atmosphere, its near absence is a setback for seekers of life on Mars.
• The consolation, however, is that its absence does not automatically rule out the existence of life. Even on earth, not all organisms necessarily produce methane.
• Unlike the evidence collected earlier, every find of Curiosity has strengthened the possibility that Mars had been a habitable environment in the past.
• Two definite, separate sources have confirmed the presence of liquid water, the most essential prerequisite for habitability.
• The presence of carbon, hydrogen, oxygen and nitrogen has further increased the habitability quotient. Going by this, more tests at several other locations need to be undertaken before methane’s absence can be fully confirmed.
• Aside from further tests by Curiosity, the 2016 launch of the ExoMars Trace Gas Orbiter by the European Space Agency and Curiosity’s successor in 2020 may possibly settle the matter.
• The search for life on Mars has been based on our understanding of life as seen on earth.

Sources: Various News Papers & PIB