Current Affairs (6th May 2021)

Maratha Reservation

Context:

• A five-judge Constitution Bench of the Supreme Court struck down the Maharashtra law granting reservation to the Maratha community in admissions and government jobs in the state.
• The court had framed six questions of law on the issue; it unanimously agreed on three of those issues, while the verdict was split 3:2 on the other three.

Gaikwad Commission

• Chief minister set up a 11-member commission headed by Retired Justice Gaikwad in June 2017.
• After detail study and depositions from various groups and individuals, the commission submitted a report stating Marathas should be given reservation under Socially and Educationally Backward Class (SEBC).
• Although the commission recommended reservation, it did not specify the quota percentage and left it to state government.

Legislation

• In November 2018, the Maratha community was given the reservation under the Maharashtra State Socially and Educational Backward Act (SEBC).
• The special act was sanctioned by Maharashtra State Backward Class Commission and approved in both the assembly and council.
• The emphasis on legislation was to give reservation under SEBC, a legal and constitutional validity.
• However, the reservation under SEBC was challenged by a PIL in Bombay High Court. The Bombay High Court while upholding the reservation pointed that instead of 16 per cent it should be reduced to 12 per cent in education and 13 per cent in jobs. Accordingly, the Act was implemented with Maratha students availing the quota in educational institutions and jobs.
• OnSeptember 9, 2020, the Maratha reservation confronted another hurdle as Supreme Court stayed its implementation and refer the case to Chief Justice of India for larger bench.
• It meant Marathas could not avail quota benefits either in education or jobs till the final verdict came out. But those who had availed the quota benefit till date remained unaffected.

Stand of Supreme Court

Issue 1: On revisiting the Indra Sawhney v Union of India (1992)

• The ruling by a nine-judge Bench, in which the Mandal Commission report was upheld, laid down two important precedents.
  • First, it said that the criteria for a group to qualify for reservation is “social and educational backwardness”.
  • Second, it reiterated the 50% limit to vertical quotas reasoning that it was needed to ensure “efficiency” in administration. However, the court said that this 50% limit will apply unless in “exceptional circumstances.”
• The Maratha quota exceeded the 50% ceiling. The arguments by state governments before the court was that the Indra Sawhney verdict must be referred to a 11-judge Bench for reconsideration since it laid down an arbitrary ceiling which the Constitution does not envisage.
  • Additionally, in some judgements after Indra Sawhney, the Supreme Court itself had made exceptions to this rule.
• In a recently unanimous opinion, the court held that there is no need to revisit the case. The court said that the 50% ceiling, although an arbitrary determination by the court in 1992, is now constitutionally recognised.

Issues 2&3: On whether the Maratha law can be saved under the exception

• The court looked into whether the Maratha quota law falls under the exceptional circumstances contemplated by Constitution Bench in Indra Sawhney’s case.
• The court also looked into the Maharashtra State Backward Commission report that the Maharashtra government had relied on to see if a case can be made out for exceptional circumstances.
• The state government’s argument was that since the population of backward class is 85% and reservation limit is only 50%, an increase in reservation limit would qualify as an extraordinary circumstance.
• All five judges disagreed with this argument. The Marathas are dominant forward class and are in the mainstream of National life. The above situation is not an extra-ordinary.

Issues 4, 5 & 6: On state’s power to identify SEBCs, and 102nd Amendment

• The Constitution (One Hundred and Second Amendment) Act, 2018 gives constitutional status to the National Backward Classes Commission. The Amendment also gives the President powers to notify backward classes.
  • Several states raised questions on the interpretation of the Amendment and argued that it curtails their powers.
• The Bench unanimously upheld the constitutional validity of the 102nd Amendment but differed on the question whether it affected the power of states to identify socially and economically backward classes (SEBCs).
• However, the Supreme Court held that “the final say in regard to inclusion or exclusion (or modification of lists) of SEBCs is firstly with the President, and thereafter, in case of modification or exclusion from the lists initially published, with the Parliament”.
• In the task of identification of SEBCs, the President shall be guided by the Commission set up under Article 338B; its advice shall also be sought by the state regarding policies that might be framed by it.
• If the commission prepares a report concerning matters of identification, such a report must be shared with the state government, which is bound to deal with it, in accordance with provisions of Article 338B. However, the final determination culminates in the exercise undertaken by the President.
• The Commission set up under Article 338B shall conclude its task expeditiously, and make its recommendations after considering which, the President shall expeditiously publish the notification containing the list of SEBCs in relation to states and union territories, for the purpose of the Constitution.
  • Till the publication of the notification, the existing lists operating in all states and union territories, and for the purposes of the Central Government and central institutions, continue to operate. This direction is issued under Article 142.

Impact

• Marathas, who constitute 32 per cent of state population, are a major political force to reckon with in Maharashtra. The discontent amongst the community is likely to manifest once again.
• The divide between rich and poor Marathas could manifest in new form of politics and protests.
• The complex reservation politics had set the process of polarisation between Marathas versus OBCs. With SC’s order, it is likely to sharpen the divide on reservation.

Current reservation break up

• The Maratha reservation of 12 and 13 per cent (in education and jobs) had increased the overall reservation ceiling to 64 per cent and 65 per cent, respectively.
• Minus Maratha quota now, the total reservation in the state caste wise is restored to 52 per cent.

Liquidity push

Context:

• With the raging Covid pandemic putting severe stress on the economy, the Reserve Bank of India (RBI) unveiled a host of measures to boost fund flow to the healthcare sector and ease the pain of small borrowers and units.

Healthcare sector

• The RBI has opened an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate – four per cent — till March 31, 2022.
  • It aims to boost provision of immediate liquidity for ramping up Covid-related healthcare infrastructure and services in the countr
• Banks can provide fresh lending support to a wide range of entities including vaccine manufacturers, importers and suppliers of vaccines and priority medical devices, hospitals and dispensaries, pathology labs, manufactures and suppliers of oxygen and ventilators, importers of vaccines and Covid-related drugs, logistics firms and patients for treatment.
• Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to March 31, 2022.
  • These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier.
• Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI.
• Banks are expected to create a Covid loan book under the scheme. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the Covid loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate.

Other measures:

• Small finance banks: The RBI has decided to conduct special three-year long-term repo operations (SLTRO) of Rs 10,000 crore at repo rate for small finance banks, to be deployed for fresh lending of up to Rs.10 lakh per borrower.
  • This is to provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic.
• Resolution framework: Borrowers — individuals and small businesses and MSMEs — having aggregate exposure of up to Rs 25 crore and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘Standard’ as on March 31, 2021 will be eligible to be considered under Resolution Framework 2.0.
• Credit to MSME entrepreneurs: In February 2021, banks could deduct credit disbursed to new MSME borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).
  • To further incentivise inclusion of unbanked MSMEs into the banking system, this exemption currently available for exposures up to Rs 25 lakh and for credit disbursed up to the fortnight ending October 1, 2021 is being extended till December 31, 2021.
• Overdraft (OD) facility for states: The RBI also announced certain relaxations in Overdraft (OD) facilities of State Governments so that they can better manage their fiscal situation in terms of their cash-flows and market borrowings.
• KYC rationalization: The RBI has decided to rationalise certain components of the extant KYC norms.