What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1: Foreign Capital and Indian Banks

Context:

Foreign capital has long been a critical driver of growth in emerging economies. For India, which has been steadily liberalizing its financial sector, foreign investment in banks is a vital component of strengthening capital adequacy, fostering competition, and deepening financial inclusion.

Evolution of Foreign Investment in Indian Banking:

• Pre-1991 era: Banking was tightly regulated, with little or no foreign presence. The sector was dominated by public sector banksafter the nationalizations of 1969 and 1980.
• Post-1991 liberalization: With economic reforms, India opened up to foreign direct investment (FDI)in financial services. The Reserve Bank of India (RBI) allowed foreign banks to operate through branches and subsidiaries, subject to licensing norms.
• Recent trends: Over the last two decades, foreign investors have increasingly infused capital into private sector banks, either through strategic stakes, portfolio investments, or partnerships. This reflects global confidence in India’s banking growth story.

Advantages of Foreign Capital:

• Strengthening Capital Base: Indian banks, particularly private ones, need robust capital to meet Basel III normsand expand credit. Foreign capital supplements domestic resources and reduces fiscal pressure on the government.
• Technology & Expertise Transfer: International banks and investors bring advanced technology, risk management practices, and global banking expertise, thereby modernizing India’s financial ecosystem.
• Financial Inclusion & Growth: With India’s push for financial inclusionthrough schemes like Jan Dhan Yojana, foreign capital enables banks to expand outreach, digital banking, and innovative products.
• Global Integration: Foreign investment links Indian banking to global capital markets, improving competitiveness and creating cross-border financial synergies

Rising investments in India:

• Recent years have seen significant interest from global financial giants:
• Singapore’s GIC, Temasek, and Fullerton have invested billions into Indian private banks like HDFC, Kotak Mahindra, and Axis Bank.
• Canadian pension funds (CPPIB, CDPQ) and sovereign wealth funds from Abu Dhabi and Qatar have acquired long-term stakes.
• US-based funds like Warburg Pincus, Carlyle, and Blackstone have infused capital into Indian NBFCs and banks.
• European players such as Zurich Insurance and HSBC have also strengthened their presence.
• This trend highlights India’s appeal as one of the fastest-growing banking markets globally.

Challenges of Foreign investments:

• Regulatory Concerns:RBI imposes caps on foreign ownership (74% in private banks, 20% in PSU banks) to safeguard national interests. Large inflows must balance openness with control.
• Dependence on Global Markets: Excessive foreign capital may expose Indian banking to global shockssuch as interest rate volatility, currency fluctuations, or geopolitical tensions.
• Profit Repatriation: A large foreign share in profits may mean reduced domestic reinvestment, creating tensions between development priorities and investor interests.
• Concentration of Ownership: Heavy dependence on a few sovereign wealth or pension funds could reduce diversity of stakeholders, making banks vulnerable to sudden exits.
• Level Playing Field: Public sector banks, burdened with NPAs and lower autonomy, may find it difficult to compete with foreign-capital-backed private banks.

Policy reforms needed to increase foreign investments:

• Balanced Liberalization: While foreign capital is essential, India must maintain cautious regulatory frameworks to prevent destabilizing ownership patterns.
• Strengthening Domestic Savings: Encouraging greater domestic capital infusion into banks will reduce overdependence on foreign funds.
• Focus on Digital & Green Banking: Channelizing foreign investments into fintech, AI-driven banking, and sustainable finance can accelerate modernization.
• Level Support for PSBs: Recapitalization and governance reforms in public sector banks are vital to ensure healthy competition.

Way Forward:

Foreign capital in Indian banks is both an opportunity and a responsibility. It has enabled Indian banking to become globally competitive, capital-strong, and technologically advanced. However, regulators must remain vigilant to protect financial sovereignty and ensure inclusive growth.

 

Editorial 2: How SC reiterated century-old principle regarding minors’ property rights

Context:

The Supreme Court of India recently delivered an important ruling on the property rights of minors, reaffirming a principle that has stood for over a century: a natural guardian of a minor cannot bind the minor’s estate in a contract without prior permission of the court. This judgment not only reinforces the sanctity of minors’ property rights but also highlights the judiciary’s role in protecting vulnerable sections of society.

Recent case:

• The dispute arose when a father, acting as the natural guardian of his minor child, entered into an agreement for the sale of the child’s immovable property.
• Later, the transaction was challenged on the grounds that the sale was void as it had not received prior approval from a competent court under the Hindu Minority and Guardianship Act, 1956.
• This raises a question on whether a natural guardian can dispose of or bind the minor’s immovable property without court permission.

Indian Contract Act, 1872:

• Section 11 of the Indian Contract Act, 1872 declares that a minor is not competent to contract. Any agreement involving a minor is therefore void ab initio.
• Hindu Minority and Guardianship Act, 1956 (HMGA)provides that while natural guardians (father, then mother) have the right to manage a minor’s property, they cannot transfer or dispose of immovable property without prior approval of the court.
• Transfer of Property Act, 1882also restricts transfer of property by persons incompetent to contract.
• Thus, the statutory framework places strict safeguards on transactions involving minors’ property.

Recent SC judgment:

• Any agreement to sell a minor’s property without court sanction is void and unenforceable.
• A guardian cannot, by private contract, bind the minor’s estate unless prior judicial approval is obtained.
• The principle has been consistently upheld since the Privy Council ruling in Mohori Bibee v. Dharmodas Ghose (1903), where it was declared that minors are incompetent to contract.
• Protection of minors’ property rights is paramount, even if such restrictions create inconveniences in commercial transactions.

Significance of the Judgment:

• Protection of Vulnerable Sections: Minors, being legally incompetent to safeguard their own interests, require judicial safeguards against exploitation or misuse by guardians.
• Continuity of Legal Principle: By reaffirming a century-old precedent, the Court has ensured legal certainty and consistency in property law.
• Deterrence against Misuse: Guardians are reminded of their fiduciary duty and legal limitations, discouraging unauthorized sales.
• Balance between Autonomy and Oversight: While guardians retain the right to manage property, judicial oversight ensures that transactions are in the best interests of the minor.
• Legal Certainty: Strengthens confidence in India’s property law regime, essential for rule of law.
• Family Property Disputes: Provides clear guidance in cases where minors’ shares are involved in ancestral or inherited property.
• Policy Reinforcement: Highlights the importance of protecting minors’ rights in broader reforms related to property, inheritance, and guardianship.

Way Forward:

The Supreme Court’s reaffirmation of the principle that minors’ property cannot be alienated without judicial permission underscores the enduring relevance of protective laws. In a rapidly changing economic environment, this judgment strikes a balance between safeguarding minors’ rights and ensuring legal certainty.