Describe the several steps the RBI has taken to regulate credit in the economy.
The Indian subcontinent is one of the most earthquake prone regions of the world. In the last few decades, India has witnessed many devastating earthquakes e.g. Kashmir 2005, Gujarat 2001 and Uttarkashi 1991, which caused significant loss of human life as well as physical infrastructure. India's vulRead more
The Indian subcontinent is one of the most earthquake prone regions of the world. In the last few decades, India has witnessed many devastating earthquakes e.g. Kashmir 2005, Gujarat 2001 and Uttarkashi 1991, which caused significant loss of human life as well as physical infrastructure.
India’s vulnerability to earthquakes
- Huge area prone to Earthquake: An Earthquake Disaster Risk Index (EDRI), prepared by the National Disaster Management Authority (NDMA), showed that about 56% area of India is vulnerable to moderate to major earthquakes where about 82% of the population live. About 12% of the land is liable to severe earthquake shaking.
- Geographical location: The reasons for high magnitude earthquakes in India are hidden in the tectonic setting of India. The Indian plate is pushing against the Eurasian plate at a rate of approximately 45 mm/year and rotating slowly anticlockwise. The entire Himalayan Region is considered to be vulnerable to high intensity earthquakes as it lies at the boundary of two converging plates.
- Human-induced seismicity: Vulnerability to earthquakes increases due to several human actions such as
- Construction of unscientific dams, mining, water reservoir impoundment and power projects in areas prone to earthquakes.
- Inadequate attention to earthquake resistant construction standards in vulnerable areas. For instance, the proposed Pancheshwar dam project on the India-Nepal border is a large-scale project in the geologically sensitive Himalayan area.
- Indirect vulnerabilities: The earthquakes also have some serious and far-reaching consequences. For example, earthquakes are also responsible for landslides, soil liquefaction and other calamities in the affected areas.
Measures for better resilience to earthquakes
- Earthquake zone blueprint: There is a need to prepare a vulnerability map of the country based on different intensities of earthquakes. The vulnerability risk information should be disseminated among the people and they should be educated about the ways and means of minimising the adverse impacts of disasters.
- Monitoring and identifying the gaps in the existing seismic risk assessment methods: Establishing earthquake monitoring centres (seismological centres) for regular monitoring in the vulnerable areas. Use of Geographical Positioning System (GPS) can be of great help in monitoring the movement of tectonic plates.
- Prioritizing Action Plan: Prioritize the cities and regions based on the severity of risk for implementing mitigation programs using the EDRI model. There is a need for formal training among professionals in earthquake-resistant construction practices.
- Earthquake-proof planning and design of buildings: Make it mandatory to adopt earthquake-resistant designs in the vulnerable areas. There should be proper monitoring and enforcement of earthquake-resistant building codes and town planning by-laws.
- Technological solution: The new technological solution must be adopted to make houses earthquakes resilient as well as predicting patterns of earthquake occurrences.
- Periodical drills & awareness: Disaster like earthquakes cannot be preempted and hence people should be ready to handle any kind of situation. This is possible if periodic drills and mock exercises are conducted. People’s participation, cooperation and awareness are the key to success.
Unlike other disasters, it is not possible to prevent the occurrence of earthquakes; hence, the only Olution to minimise loss of lives and properties is effective disaster preparedness and mitigation gainst them. It is thus necessary to empower communities to ensure the seismic safety of the built mvironment by encouraging the use of simple, easy and affordable technical solutions and stitutional arrangements.
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Credit Control means the regulation of the creation and contraction of credit in the economy. It is an important function of the central bank of any country. In India, the Reserve Bank of India (RBI) controls credit in the economy using various quantitative and qualitative measures. Quantitative meaRead more
Credit Control means the regulation of the creation and contraction of credit in the economy. It is an important function of the central bank of any country. In India, the Reserve Bank of India (RBI) controls credit in the economy using various quantitative and qualitative measures.
Quantitative measures: These are deployed to regulate the volume of credit created by the banking system.
Qualitative measures: These are deployed to regulate the flow of credit in specific uses
- Marginal requirements: It is the difference between the market value of the security and its maximum loan value. The RBI can increase or decrease the marginal requirement to affect the credit flow.
- Consumer Credit Regulation: The RBI can control the consumer credit by changing the amount that can be borrowed for the purchase of the consumer durables or by changing the maximum period over which the installments can be extended.
- Rationing of credit: In this, the RBI seeks to limit the maximum amount of loans and advances and, also in certain cases, fix ceilings for specific categories of loans and advances.
- Moral Suasion: Here, the RBI tries to morally persuade the banks to cooperate in implementing its policies.
- Direct Action: This step is taken by the RBI against banks that don’t fulfil conditions and requirements. It may involve refusal to rediscount their papers, charging a penal rate of interest over and above the Bank rate etc. It must be noted the effectiveness of credit control measures in an economy depends upon a number of factors and one or more of these measures are adopted by RBI based on the situation.
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