Daily Prelims Notes 2 December 2022

Daily Prelims Notes

2 December 2022

Table Of Contents

1. Financially Sound and Well Managed (FSWM) banking entities
2. How e-rupi will work
3. Artificial intelligence (AI)-based chatbots
4. The battle to bring freshwater turtles back from the brink
5. India assume monthly presidency of UNSC
6. G20 presidency of India begins

1. Financially Sound and Well Managed (FSWM) banking entities

Subject: Economy

Context:

Reserve Bank of India prescribed revised norms to categorise UCBs as Financially Sound and Well Managed (FSWM) banking entities and announced a four-tiered regulatory framework

Details:

• The four-tiered regulatory framework is based on the size of deposits of the UCBs.
  • The extant regulatory framework classifies UCBs into two tiers — Tier I and Tier II.
• Four- tier Categorization:
  • Tier 1-UCBs deposits up to Rs 100 crore.
  • Tier 2–UCBs with deposits more than Rs 100 crore and up to Rs 1,000 crore.
  • Tier 3 -UCBs with deposits more than Rs 1,000 crore and up to Rs 10,000 crore.
  • Tier 4-UCBs with deposits more than Rs 10,000 crore.

• If a UCB transits to a higher Tier it may be provided a glide path of up to a maximum of three years to comply with higher regulatory requirements.
• Net worth and capital adequacy requirements of the UCBs:
  • Tier 1 UCBs operating in a single district-minimum net worth of Rs 2 crore.
  • For all other UCBs– the minimum net worth should be Rs 5 crore.
  • Tier 1 UCBs– minimum capital to risk weighted assets ratio of 9 percent of Risk Weighted Assets (RWAs).
  • Tier 2 to 4 UCBs -a minimum capital to risk weighted assets of 12 percent of RWAs on an ongoing basis.
• For categorising UCBs  as FSWM category banks:
  • The capital adequacy ratio- at least one percent above the minimum CRAR applicable to an UCB.
  • Net non-performing Assets (NPAs) -not be more than three per cent.
  • Reported Net profit for at least three out of the preceding four years.
  • Not have incurred a net loss in the immediate preceding year.
  • Not have defaulted on maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) during the preceding year.
  • It should have a sound internal control system with at least two professional directors on the board and fully implemented core Banking Solution (CBS).
  • No monetary penalty should have been imposed on the bank for violation of RBI’s directives and guidelines during the last two financial years.
• Process of categorizing UCBs as Financially Sound and Well Managed (FSWM) banking entities
  • UCBs can decide the eligibility based on the assessed financials and findings of RBI inspection report or audited financial statements, whichever is latest.
  • The boards of the banks have to examine the compliance with the FWSM criteria and pass necessary resolutions and inform RBI immediately.
  • UCBs may review the compliance with FSWM criteria every year at Board level immediately after the audit of the financial statements and RBI inspection report as and when received.
  • This process will be subject to supervisory review of RBI.

Concept:

• A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank.
• Co-operative banks in India are registered under the States Cooperative Societies Act.
• The Co-operative banks are also regulated by the Reserve Bank of India (RBI) and governed by the Banking Regulations Act 1949,Banking Laws (Co-operative Societies) Act, 1955.
• The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector.
  • It comprises short-term and long-term co-operative credit structures.
    • The short-term co-operative credit structure operates with a three-tier system –
      • Primary Agricultural Credit Societies (PACS) at the village level and the are outside the purview of the Banking Regulation Act, 1949 and hence not regulated by the Reserve Bank of India. ,
      • Central Cooperative Banks (CCBs) at the district level and
      • State Cooperative Banks (StCBs) at the State level. StCBs/DCCBs are registered under the provisions of State Cooperative Societies Act of the State concerned and are regulated by the Reserve Bank. Powers have been delegated to National Bank for Agricultural and Rural Development (NABARD) to conduct inspection of State and Central Cooperative Banks.
  • Primary Cooperative Banks (PCBs), also referred to as Urban Cooperative Banks (UCBs), cater to the financial needs of customers in urban and semi-urban areas.
  • UCBs are primarily registered as cooperative societies under the provisions of either the State Cooperative Societies Act of the State concerned or the Multi State Cooperative Societies Act, 2002 if the area of operation of the bank extends beyond the boundaries of one state.
  • There is duality of control over these banks with  banking related functions being regulated by the Reserve Bank of India and management related functions regulated by respective State Governments/ Central Government.

2. How e-rupi will work

Subject :Economy

Context:

The Reserve Bank of India (RBI)   launched the Central Bank Digital Currency (CBDC) — digital rupee or e-rupee (e₹).

• CBDC is a legal tender issued by the RBI in digital form.
• It is the same as the fiat currency- is exchangeable one-to-one with the fiat currency except it is not paper (or polymer) like physical cash.
• It is a fungible legal tender, for which holders need not have a bank account.
• CBDC will appear as ‘liability’ (currency in circulation) on the RBI’s balance sheet.
• The e-rupee is in the form of a digital token representing a claim on the central bank, and will effectively function as the digital equivalent of a banknote that can be transferred electronically from one holder to another.
• A token CBDC is a “bearer-instrument” like a banknote, meaning whoever ‘holds’ the tokens at a given point in time will be presumed to own them.
• E-rupees will be issued in the same denominations as paper currency and coins, and will be distributed through the intermediaries, that is banks.

How is RBI introducing the CBDC?

• The pilot launched  will initially cover four cities — Mumbai, New Delhi, Bengaluru and Bhubaneswar. It will later be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
  • RBI issued ₹2 crore to four banks.
• Select customers from the selected cities will get CBDC wallets with notes printed digitally with the RBI Governor’s signature.
  • The banks selected a closed user group of 50,000 customers and merchants for these transactions who had to download a digital rupee QR for doing transactions.
• Transactions will be through a digital wallet offered by the participating banks, and stored on mobile phones and devices.
  • Banks sent SMSes to select customers with Android Play Store links to download separate bank-specific CBDC apps for transactions.
  • Customers using debit card details created an e-wallet through the app.
  • Customers then  loaded the wallet with money, which was transferred in the form of tokens from their bank accounts.
  • This money was used to transact with merchants or persons with a similar wallet.
    • Transactions can be both person to person (P2P) and person to merchant (P2M). For P2M transactions (such as shopping), there will be QR codes at the merchant location.
  • At the end of the day, this money can be redeemed back to the bank account
• Eight banks will participate in the pilot — the State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in the first phase in the first four cities, and subsequently, Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank.

How is this different from other wallets?

• UPI-based apps like Google Pay and Paytm have a daily and per-transaction spending limit while the RBI has not fixed any limit on holding digital rupees in wallets.
• Digital rupee transactions above Rs 2 lakh are likely to be reported for tax matters.

What are the types of e-rupee?

• Retail e-rupee -is an electronic version of cash primarily meant for retail transactions, which can potentially be used by almost everyone, and can provide access to safe money for payment and settlements.
• Wholesale CBDC– is designed for restricted access to select financial institutions.
  • It aims to transform the settlement systems for financial transactions undertaken by banks in the government securities (G-Sec) segment and inter-bank market, and make the capital market more efficient and secure in terms of operational costs, use of collateral, and liquidity management.

How is CBDC different from cryptocurrency?

• It is backed by the RBI while private virtual currencies like Bitcoin are not backed by any commodities or Central Banks and have no intrinsic value.
• Private currencies do not represent any person’s debt or liabilities and have no issuer. 
• The inherent design of cryptocurrencies is more geared to bypass the established and regulated intermediation and control arrangements that can lead to instability of the monetary and financial ecosystem.

What are the benefits of e-rupee?

• Reduced dependency on cash
• Higher seigniorage due to lower transaction costs
• Reduced settlement risk-When CBDC is transacted instead of bank balances, the need for interbank settlement disappears.
• Cost of printing, transporting, storing and distributing currency can be reduced
• Real-time and cost-effective globalization of payment systems.

Will CBDC work in offline mode?

• There is no indication yet from the RBI that the e-rupee will function in the offline mode.
• While offline functionality will allow CBDC transactions in regions with poor or no Internet connectivity and create digital footprints of the unbanked population in the financial system.
• The risk of ‘double-spending’ exists in offline mode — because it will be technically possible to use a CBDC unit more than once without updating the common ledger of CBDC.

Is it vulnerable to cyber-attacks?

CBDC ecosystems may be at similar risk for cyber-attacks as existing payment systems.

3. Artificial intelligence (AI)-based chatbots

Subject :Science and technology

Context:

Public sector organizations and government agencies are leading the adoption of artificial intelligence (AI)-based chatbots in India

Details:

The National Payments Corp. of India (NPCI), Indian Railways, Bangalore Metro Rail Corp. Ltd (BMRCL) and Bharat Petroleum Corp. Ltd (BPCL)  are increasingly using these platforms to answer user queries and  accept bookings.

Concept:

• A chatbot is a conversational application that aids in customer service, engagement, and support by replacing or augmenting human support agents with artificial intelligence (AI) and other automation technologies that can communicate with end-users via chat.
• This tool helps add convenience for customers—they are automated programs that interact with customers like a human would and cost little to nothing to engage with.
• Key examples are chatbots used by businesses in Facebook Messenger, or as virtual assistants, such as Amazon’s Alexa.

Rule-based chatbots vs AI chatbots

• Rule based chatbots are also referred to as decision-tree bots which use a series of defined rules.
  • These rules are the basis for the types of problems the chatbot is familiar with and can deliver solutions for.
  • Rule-based chatbots can use very simple or complicated rules. They can’t, however, answer any questions outside of the defined rules.
• AI chatbots that use machine learning understand the context and intent of a question before formulating a response.
  • These chatbots generate their own answers to more complicated questions using natural-language responses.
  • The more one uses and trains these bots, the more they learn and the better they operate with the user.

Example-

• DigiSaathi-is a chatbot service for customers to find information on resolution of issues with digital payments on WhatsApp.
  • The Reserve Bank of India (RBI), along with the National Payments Corporation of India (NPCI), launched it
  • It is a 24-hour helpline that would offer information on various products and services offered across payment cards of all kinds-including debit, credit and prepaid cards, UPI, QR-based payments, mobile or net banking, ATMs etc.
  • Besides this, it will also provide contact details of various payment system participants, both banks and non-banks.
  • There are two ways to get information from DigiSaathi- 
    • a toll-free number 14431 or 1800 891 3333
    • official website-digisaathi.info

• Conversations on the move– Central Railways’ chatbot designed for user entertainment on select train routes. It offers passengers infotainment on journey locations.

4. The battle to bring freshwater turtles back from the brink

Subject: Environment

What is Turtle Survival Alliance:

• The Turtle Survival Alliance (TSA) was formed in 2001 as an International Union for Conservation of Nature (IUCN) partnership for sustainable captive management of freshwater turtles and tortoises.
• The TSA arose in response to the rampant and unsustainable harvest of Asian turtle populations to supply Chinese markets, a situation known as the Asian Turtle Crisis.
• Mission: ‘Zero Turtle Extinctions in the 21st Century’.

Status of Turtle in India:

• India has 29 species of freshwater turtles (24) and tortoises (5).
• More than half of the turtle species are threatened and 11 are protected under Schedule I of The Wildlife Protection Act, enjoying the same protection as tigers.
• The three critically endangered turtles are being conserved as a part of TSA India’s research, conservation breeding and education programme in different parts of the country.
  • The Northern River Terrapin (Batagurbaska) is being conserved at the Sunderbans;
  • The Red-crowned Roofed Turtle (Batagurkachuga) at Chambal;
  • The Black Softshell Turtle (Nilssonia nigricans) at different temples in

What is the difference between Turtle and Tortoise:

• The main difference between the two is that turtles are primarily aquatic whereas tortoises are terrestrial and spend more time on land.

What is Wildlife Crime Control Bureau

• The Wildlife Crime Control Bureau  is a statutory multi-disciplinary body under the MoEFCCcreated in 2007 under the provisions of the Wildlife Protection Act 1972.
• Wildlife Crime Control Bureau is designated nodal agency for CITES related enforcement.
• The Bureau has its five regional offices at Delhi (headquarters), Kolkata, Mumbai, Chennai and Jabalpur; and five border units at Ramanathapuram, Gorakhpur, Motihari, Nathula and Moreh.
• It has received the Asia Environmental Enforcement Award-2020 awarded by the United Nations Environment Programme (UNEP).
• Under the Wild Life (Protection) Act, 1972, WCCB is mandated to:
  • Collect and collate intelligence related to organized wildlife crime;
  • Disseminate the same to State and other enforcement agencies so as to apprehend the criminals;
  • To establish a centralized wildlife crime data bank;
  • Coordinate actions by various agencies in connection with the enforcement of the provisions of the Act;
  • Assist international organizations& foreign authorities to facilitate wildlife crime control;
  • Capacity building of the wildlife crime enforcement agencies;
  • Assist State Governments to ensure success in prosecutions related to wildlife crimes; and
  • Advise the Government of India on issues relating to wildlife crimes.
  • It also assists and advises the Customs authorities in inspection of the consignments of flora & fauna as per the provisions of Wild Life Protection Act, CITES and EXIM Policy governing such an item.

Various Wildlife Crime Control Bureau (WCCB) led operations:

• Operation “Save Kurma” to focus on the poaching, transportation and illegal trade of live turtles and tortoises.
• “Operation Turtshield- I” and “Operation Turtshield-II” were taken up to tackle the illegal trade of live turtles.
• Operation “Lesknow”, “Lesknow-II” and Operation “Lesknow-III” to gain attention of enforcement agencies towards the illegal wildlife trade in lesser-known species of wildlife.
• Operation Clean Art to drag attention of enforcement agencies towards illegal wildlife trade in Mongoose hair brushes.
• Operation Softgold to tackle Shahtoosh Shawl made from Chiru wool illegal trade and to spread awareness among the weavers and traders engaged in this trade.
• Operation Birbil to curb illegal trade in wild cat and wild bird species.
• Operation Wildnet, Operation Wildnet-II, Operation Wildnet-III and Operation Wildnet-IV to draw the attention of the enforcement agencies within the country to focus their attention on the ever increasing illegal wildlife trade over internet using social media platforms.
• Operation Freefly on illegal trade of live birds
• Operation Wetmark to ensure prohibition of sale of meat of wild animals in wet markets across the country

5. India assume monthly presidency of UNSC

Subject: International relations

Context:

• India assumed the monthly rotating presidency of the UN Security Council (UNSC) on December 1, the second time in its two-year tenure as an elected member of the Council in 2021-22.
• India had earlier assumed UNSC presidency in August 2021.

What are the signature events under Indian Presidentship:

• Under India’s December presidency of UNSC, there are two signature events at the ministerial level, scheduled for December 14 on Reformed Multilateralism and on 15 December on Counter-Terrorism.
•  India will hold a “high-level open debate” on “Maintenance of International Peace and Security: New Orientation for Reformed Multilateralism” at the Security Council.
• New Orientation for Reformed Multilateralism (NORMS) envisages reforms in the current multilateral architecture, with the UN at its centre, to make it more representative and fit for purpose.
• The other signature event planned is the high-level briefing on the theme “Threats to International Peace and Security Caused by Terrorist Acts: Global Approach to Counter Terrorism — Challenges and Way Forward”, scheduled for December 15.

More about UNSC

• UNSC is considered the nucleus of the UN system.
• It is the only body of UN which has teeth to bite.It has a major say in all critical appointment in UN
• Chapter VI of the UN charter gives a mandate to UNSC to settle disputes peacefully through mediation and secure a ceasefire through peacekeeping force.
• Chapter VII of UN charter give power to UNSC to impose military and economic sanctions

What is Counter terrorism Committee of UNSC:

• The Counter-Terrorism Committee was established by Security Council resolution 1373 adopted unanimously on 28 September 2001 in the wake of the 9/11 terror attacks in the US.
•  It is a subsidiary body of the United Nations Security Council (UNSC).
• It is 15-member committee set up to implement the UN resolution obligating member states to criminalize support for terrorist activities and stop financial aid and harbouring of terrorists.
• In 2004, the Counter-Terrorism Committee Executive Directorate(CTED) was established to provide expert advice for Counter-Terrorism Committee.
• The CTED also provides technical aid for the member countries and promotes their collaboration at various international forums.

6. G20 presidency of India begins

Subject: International relations

Context:

• India assumed the G20 presidency on 1st of December.

More about India Presidency:

• India assumes the presidency of G20 from 1st of December.
• The G20 Presidency also marks the beginning of “Amritkaal”, the 25-year period beginning from the 75th anniversary of its independence on 15 August 2022, leading up to the centenary of its independence, towards a futuristic, prosperous, inclusive and developed society, distinguished by a human-centric approach at its core.
• Guest countries during India’s presidency will include Bangladesh, Egypt, Mauritius, Netherlands, Nigeria, Oman, Singapore, Spain and the UAE

About the G20 logo:

• The G20 logo created with the four colors of India’s national flag, comprises earth sitting atop a lotus.
• The seven petals in the logo signify the seven seas and the coming together of seven continents at G20 India 2023.
• The theme-‘VasudhaivaKutumbakam: One Earth, One Family, and One Future’ reflects India’s pro-planet approach to life and from this and derives the theme of G20 India 2023

G20 logo illuminates 100 monuments

• 100 monuments across the country will be illuminated with the G20 logo and its colours for seven days as India takes over the presidency of the grouping.
• The list of monuments drawn up by the Archaeological Survey of India (ASI) to mark the occasion includes:
  • The Shankaracharya Temple in Srinagar,
  • The Nalanda ruins in Bihar,
  • The Purana Qila complex and Humayun’s Tomb in Delhi,
  • The Modhera Sun temple and the ancient Dholavira site in Gujarat,
  • The Tipu Sultan Palace in Bengaluru,
  • The Hemis Monastery in Ladakh,
  • The Chola temple of Thanjavur and
  • The Konark Sun temple in Puri.
• The Taj Mahal in Agra, despite being a UNESCO World Heritage Site, will not be illuminated with the G20 logo. 

The objectives of the G20 are:

a) Policy coordination between its members in order to achieve global economic stability, sustainable growth;

b) To promote financial regulations that reduce risks and prevent future financial crises;

c) To create a new international financial architecture.

Origin of G20

The G20 was created in response to both to the financial crises that arose in a number of emerging economies in the 1990s and to a growing recognition that some of these countries were not adequately represented in global economic discussion and governance.

In December 1999, the Finance Ministers and Central Bank Governors of advanced and emerging countries of systemic importance met for the first time in Berlin, Germany, for an informal dialogue on key issues for global economic stability. Since then, Finance Ministers and Central Bank Governors have met annually. India hosted a meeting of G20 finance ministers and central bank governors in 2002. G20 was raised to the Summit level in 2008 to address the global financial and economic crisis of 2008.

• G-20 is a forum, not a legislative body and its agreements and decisions have no legal impact, but they do influence countries’ policies and global cooperation.

Structure:

G20 does not have any permanent secretariat or headquarters.

• The G20 Summit is formally known as the “Summit on Financial Markets and the World Economy”.

How G20 works:

• Since the G20 has no permanent secretariat. The agenda and work are coordinated by representatives of the G20 countries, known as ‘Sherpas’.
• The presidency of the G20 rotates every year among members, and the country holding the presidency, together with the previous and next presidency-holder, forms the ‘Troika’.
• Troika ensures continuity of the G20 agenda.
• During India’s presidency, India, Indonesia and Brazil will form the troika.
• The preparatory process for the G20 Summit is conducted through the established Sherpa and Finance tracks that prepare and follow up on the issues and commitments adopted at the Summits.
• The Sherpas’ Track focuses on non-economic and financial issues, such as development, anti-corruption and food security, while addressing internal aspects such as procedural rules of the G20 process. The Sherpas carry out important planning, negotiation and implementation tasks continuously.
•  The Finance Track focuses on economic and financial issues. The Sherpa and Finance tracks both rely on the technical and substantive work of a series of expert working groups. Additionally, the thematic agenda is developed through the organization of several Ministerial Meetings, such as the Joint Meeting of Finance and Development Ministers, and the Labour, Agriculture and Tourism Ministerial meetings.