By Vijay Marke
Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.
In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.
Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.
While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.
Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.
Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.
Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.
Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.
“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.
Wednesday, December 17, 2008
Loan sops: Has Govt put PSBs to Risk?
By Vijay Marke
Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.
In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.
Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.
While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.
Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.
Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.
Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.
Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.
“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.
Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.
In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.
Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.
While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.
Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.
Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.
Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.
Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.
“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.
Loan sops: Has Govt put PSBs to Risk?
By Vijay Marke
Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.
In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.
Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.
While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.
Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.
Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.
Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.
Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.
“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.
Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.
In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.
Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.
While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.
Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.
Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.
Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.
Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.
“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.
The Worst is yet to come for India, say US Economist
By M H Ahssan
The recession in the US is likely to remain till the fourth quarter of 2009 or the first quarter of 2010, and India too will be affected by it as the two countries are ‘joined at the hip’, said a leading US economist.
James R Barth, Senior Finance Fellow at Santa Monica-based Milken Institute, was in Hyderabad to talk about the current financial crisis and possible solutions. Taking part in a press roundtable, Barth traced the genesis of the crisis in the US and its impact on India.
Stating that the crisis was triggered by the housing price bubble, the economist said, “low interest rates in adjustable (variable) loans led to a boom in the housing sector. By the end of 2006, 69 per cent of the US population had homes. Housing prices shot upto levels seen only once before, after the Second World War.”
But soon, the bubble burst. “Of the 80 million houses that were bought during the period, 53 million houses were bought on mortgage. And only 10 per cent of these were behind payment or defaulters. Very soon, housing prices crashed and fell by 20 per cent across the US and even by 30 per cent and 40 per cent in some cities,” Barth said.
According to the expert, uncertainty is the biggest enemy of a well-founded democracy. “You know it is going to happen but are not exactly sure as to who will go down next,” he said. Barth maintained that the mortgage funds in the US were highly regulated, though the same could not be said of the hedge funds.
Referring to India, Barth said the worst is yet to come. “China opened up its market in 1977, but was done very selectively. As a result, China’s share of GDP grew. India, on the other hand, has not yet opened up fully, and as a result, its GDP has been flat. The point is openness per se is not bad, but one does it is what makes the difference,” he said.
According to Barth, since India and the US are joined at the hip, the financial crisis will hit it soon. “Exports are down, stock prices have fallen and so has home prices. All this means that consumption will go down and there will be a decline in general economic activity,” he said.
Referring to the impact of the financial crisis on India’s outsourcing boom, the economist said ‘offshore outsourcing’ may get hit. Many companies having their offices in India but headquartered in the US may cut back on costs. But in the long run, the future is in the hands of the global players,” he said and concluded that terrorism will only act as a temporary setback to foreign investment in India and not cause any permanent damage.
The recession in the US is likely to remain till the fourth quarter of 2009 or the first quarter of 2010, and India too will be affected by it as the two countries are ‘joined at the hip’, said a leading US economist.
James R Barth, Senior Finance Fellow at Santa Monica-based Milken Institute, was in Hyderabad to talk about the current financial crisis and possible solutions. Taking part in a press roundtable, Barth traced the genesis of the crisis in the US and its impact on India.
Stating that the crisis was triggered by the housing price bubble, the economist said, “low interest rates in adjustable (variable) loans led to a boom in the housing sector. By the end of 2006, 69 per cent of the US population had homes. Housing prices shot upto levels seen only once before, after the Second World War.”
But soon, the bubble burst. “Of the 80 million houses that were bought during the period, 53 million houses were bought on mortgage. And only 10 per cent of these were behind payment or defaulters. Very soon, housing prices crashed and fell by 20 per cent across the US and even by 30 per cent and 40 per cent in some cities,” Barth said.
According to the expert, uncertainty is the biggest enemy of a well-founded democracy. “You know it is going to happen but are not exactly sure as to who will go down next,” he said. Barth maintained that the mortgage funds in the US were highly regulated, though the same could not be said of the hedge funds.
Referring to India, Barth said the worst is yet to come. “China opened up its market in 1977, but was done very selectively. As a result, China’s share of GDP grew. India, on the other hand, has not yet opened up fully, and as a result, its GDP has been flat. The point is openness per se is not bad, but one does it is what makes the difference,” he said.
According to Barth, since India and the US are joined at the hip, the financial crisis will hit it soon. “Exports are down, stock prices have fallen and so has home prices. All this means that consumption will go down and there will be a decline in general economic activity,” he said.
Referring to the impact of the financial crisis on India’s outsourcing boom, the economist said ‘offshore outsourcing’ may get hit. Many companies having their offices in India but headquartered in the US may cut back on costs. But in the long run, the future is in the hands of the global players,” he said and concluded that terrorism will only act as a temporary setback to foreign investment in India and not cause any permanent damage.
The Worst is yet to come for India, say US Economist
By M H Ahssan
The recession in the US is likely to remain till the fourth quarter of 2009 or the first quarter of 2010, and India too will be affected by it as the two countries are ‘joined at the hip’, said a leading US economist.
James R Barth, Senior Finance Fellow at Santa Monica-based Milken Institute, was in Hyderabad to talk about the current financial crisis and possible solutions. Taking part in a press roundtable, Barth traced the genesis of the crisis in the US and its impact on India.
Stating that the crisis was triggered by the housing price bubble, the economist said, “low interest rates in adjustable (variable) loans led to a boom in the housing sector. By the end of 2006, 69 per cent of the US population had homes. Housing prices shot upto levels seen only once before, after the Second World War.”
But soon, the bubble burst. “Of the 80 million houses that were bought during the period, 53 million houses were bought on mortgage. And only 10 per cent of these were behind payment or defaulters. Very soon, housing prices crashed and fell by 20 per cent across the US and even by 30 per cent and 40 per cent in some cities,” Barth said.
According to the expert, uncertainty is the biggest enemy of a well-founded democracy. “You know it is going to happen but are not exactly sure as to who will go down next,” he said. Barth maintained that the mortgage funds in the US were highly regulated, though the same could not be said of the hedge funds.
Referring to India, Barth said the worst is yet to come. “China opened up its market in 1977, but was done very selectively. As a result, China’s share of GDP grew. India, on the other hand, has not yet opened up fully, and as a result, its GDP has been flat. The point is openness per se is not bad, but one does it is what makes the difference,” he said.
According to Barth, since India and the US are joined at the hip, the financial crisis will hit it soon. “Exports are down, stock prices have fallen and so has home prices. All this means that consumption will go down and there will be a decline in general economic activity,” he said.
Referring to the impact of the financial crisis on India’s outsourcing boom, the economist said ‘offshore outsourcing’ may get hit. Many companies having their offices in India but headquartered in the US may cut back on costs. But in the long run, the future is in the hands of the global players,” he said and concluded that terrorism will only act as a temporary setback to foreign investment in India and not cause any permanent damage.
The recession in the US is likely to remain till the fourth quarter of 2009 or the first quarter of 2010, and India too will be affected by it as the two countries are ‘joined at the hip’, said a leading US economist.
James R Barth, Senior Finance Fellow at Santa Monica-based Milken Institute, was in Hyderabad to talk about the current financial crisis and possible solutions. Taking part in a press roundtable, Barth traced the genesis of the crisis in the US and its impact on India.
Stating that the crisis was triggered by the housing price bubble, the economist said, “low interest rates in adjustable (variable) loans led to a boom in the housing sector. By the end of 2006, 69 per cent of the US population had homes. Housing prices shot upto levels seen only once before, after the Second World War.”
But soon, the bubble burst. “Of the 80 million houses that were bought during the period, 53 million houses were bought on mortgage. And only 10 per cent of these were behind payment or defaulters. Very soon, housing prices crashed and fell by 20 per cent across the US and even by 30 per cent and 40 per cent in some cities,” Barth said.
According to the expert, uncertainty is the biggest enemy of a well-founded democracy. “You know it is going to happen but are not exactly sure as to who will go down next,” he said. Barth maintained that the mortgage funds in the US were highly regulated, though the same could not be said of the hedge funds.
Referring to India, Barth said the worst is yet to come. “China opened up its market in 1977, but was done very selectively. As a result, China’s share of GDP grew. India, on the other hand, has not yet opened up fully, and as a result, its GDP has been flat. The point is openness per se is not bad, but one does it is what makes the difference,” he said.
According to Barth, since India and the US are joined at the hip, the financial crisis will hit it soon. “Exports are down, stock prices have fallen and so has home prices. All this means that consumption will go down and there will be a decline in general economic activity,” he said.
Referring to the impact of the financial crisis on India’s outsourcing boom, the economist said ‘offshore outsourcing’ may get hit. Many companies having their offices in India but headquartered in the US may cut back on costs. But in the long run, the future is in the hands of the global players,” he said and concluded that terrorism will only act as a temporary setback to foreign investment in India and not cause any permanent damage.
Plug The Security Holes
By Radha Kumar
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
Plug The Security Holes
By Radha Kumar
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
Plug The Security Holes
By Radha Kumar
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
For the federal investigating agency, look at US example
The government has finally put security reforms on a fast track. They have announced a Bill to set up a National Investigating Agency, a new coastal command, amending the CISF Act to protect private facilities and a slew of other measures. How far will these help to prevent the security lapses Mumbai made so painfully clear?
The three key areas for reform are: intelligence gathering and communication, specialist training and equipment and coordination between the federal and state ministries concerned. The first of these areas has received the greatest attention. In September, the Moily commission on administrative reforms suggested the creation of a federal investigative authority which could be set up by ordinance or through a constitutional amendment to the National Security Act of 1980. A similar proposal was made by the Subrahmanyam committee on security reforms set up by the NDA government. Neither proposal was acted upon, in part, according to Moily, because the states are concerned that this might infringe upon their rights in the federation. While this is an important concern, it ought to be possible to accommodate it, for example, through state consultation in an advisory capacity, so that national security, which is a federal responsibility, is not jeopardised as it has so often been.
According to the Moily and Subrahmanyam committees’ recommendations, the authority would be responsible for coordinating tasks that are divided amongst different intelligence agencies, such as RAW, IB and CBI. Additionally, it has been suggested that the authority coordinate between state police forces through the appointment of special police commissioners. Though the coordination of intelligence inputs is under the purview of the national security adviser and the coordination of police forces is under the home ministry,having a dedicated authority will at least make a sole agency responsible. To this extent it may succeed in plugging some of the existing gaps, especially in information communication to prevent or minimise terrorist attacks.
But an authority whose mandate is restricted to intelligence would not be able to deal with the national security challenge of how to effectively protect us from terrorism. While some of the other measures announced, such as setting up a coastal command, are intended to remedy glaring problems such as the navy lapses, coast guard breaches and police inadequacies that the Mumbai attacks pinpointed, it is not clear that a slew of complementary measures will work unless they are integrated with each other. As the failure to implement the Dharma Vira and Soli Sorabjee committees’ recommendations for police reforms shows, leaving this job to the respective ministries or service branches is chancing our luck.
In the past 15 years of terrorist attacks, our security forces have progressively weakened rather than strengthened in their capacity to protect us, and successive ministers and chiefs of services appear to bicker amongst themselves rather than attempt to reverse the trend. Who will tackle this problem? The federal authority would have been ideally positioned to build consensus on reforms and their implementation in the security forces, but many fear that such a comprehensive mandate might concentrate too much power in the hands of a very few.
In the US, the Department of Homeland Security faced similar problems. It was given too many and far too wide-ranging executive powers to counter terrorism, and it ran into stiff resistance in implementing recommendations that required reform in powerful departments and agencies. Nevertheless, it did have important success in coordinating between the border forces, coast guard, customs, transport, immigration and citizenship officials, and in acting as a conduit between them and the intelligence agencies. This success was generated only after the department won the right to choose its personnel rather than have them nominated.
While in actual practice the Department of Homeland Security infringed human rights, especially at immigration points, these violations diminished over time as it appointed special advisory and monitoring bodies. Its activities include training in emergency response and disaster preparedness. And it comprises not one but a series of coordinating councils, between services, departments and states. Most of its advisory bodies constitute a public-private partnership: they include members of industry, academia and think tanks, and their job is to propose innovative and practical measures for improving national security as well as to monitor performance for efficiency and human rights protection. In our case, for example, a first aim should be to regulate our financial and cellular services.
Most of the lessons to be learned from the US are those that we know. Our intelligence agencies and security services have to work together if they are to be effective; we need to combine training, materials and fair working conditions if we want our forces to be alert; and we have to develop a publicprivate partnership, with a focus on human rights protection and community outreach, if we are to give our security the deep roots that it needs.
A federal investigative authority alone may not be sufficient to reform our security. We need an authority which can, at the least, oversee the reforms that are required in our armed forces, coast guard, police and intelligence agencies as well as in our financial and cellular services. If those reforms are to be separately undertaken by the concerned ministries, then we need to hear what they will be and on what time frame. Logically, they should be simultaneous and the reforms should be integrated in order to facilitate interoperability in times of crisis. Otherwise it will be impossible to coordinate between intelligence and action, a scenario that we are all too familiar with.
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