Daily Prelims Notes 14 October 2023

October 14, 2023
Posted by: OptimizeIAS Team
Category: DPN

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Daily Prelims Notes

14 October 2023

Table Of Contents

1. Israel used White Phosphorus bomb in Israel

Subject :IR

Section: International conventions

Context: Israel used White Phosphorus bomb in Israel

More about the news:

The Human Rights Watch accused Israel of using white phosphorus bombs in the densely populated Gaza Strip in response to a recent Hamas attack.
Israel’s Defense Forces denied using these munitions, but past instances indicate otherwise.
White phosphorus use in civilian areas violates international law, although Israel contends it’s necessary for troop protection from rocket attacks.

What is White Phosphorus:

White phosphorus munitions are weapons that use one of the common allotropes of the chemical element phosphorus.
White phosphorus is pyrophoric i.e it is ignited by contact with air, burns fiercely, and can ignite cloth, fuel, ammunition, and other combustibles. Apart from this, it is also used in smoke, illumination, and burning elements of tracer ammunition.
In addition to its offensive capabilities, white phosphorus is a highly efficient smoke-producing agent, reacting with air to produce an immediate blanket of phosphorus pentoxide vapour.
In addition to direct injuries caused by fragments of their casings, white phosphorus munitions can cause injuries in two main ways: burn injuries and vapour inhalation.

Is White Phosphorus an incendiary or chemical weapon:

The Organisation for the Prohibition of Chemical Weapons, which is an intergovernmental organization and the implementing body for the Chemical Weapons Convention, has not listed White Phosphorous in any of the three Schedules of Chemical Weapons.
However, the United Nations considers it as an incendiary chemical.
In 1972, United Nations labeled incendiary weapons, including white phosphorus, as instruments causing horrific and indiscriminate harm, leading to resolutions condemning their use.
The 1980 international agreement established Protocol III, restricting the use of incendiary weapons that cause excessive harm to civilians and their property.

What is the general regulations of Protocol III on Prohibitions or Restrictions on the Use of Incendiary Weapons:

Protocol III specifically mentions it is not applicable on munitions that are illuminants, tracers, smoke or signalling systems thus making it confusing for many if the use of White Phosphorus can be considered a war crime or not.
Protocol III specifically does not ban the use of White Phosphorous in military action. It only restricts its use near the civilian population.

What is Organisation for the Prohibition of Chemical Weapons (OPCW):

It is an international organization established by the Chemical Weapons Convention, 1997 to implement and enforce the terms of the non-proliferation treaty, which prohibits the use, stockpiling or transfer of chemical weapons by signatory states.
The headquarter of OPCW is in the Hague, Netherlands
By the 2001 Relationship Agreement between the OPCW and the United Nations, the OPCW reports on its inspections and other activities to the UN through the office of the Secretary-General.
The OPCW is authorized to perform inspections to verify that signatory states are complying with the convention.
The organization was awarded the 2013 Nobel Peace Prize “for its extensive efforts to eliminate chemical weapons”.

2. Questions of foetal viability and rights of unborn child

Subject: IR

Section: International conventions

Context: Legal dispute spanned two Supreme Court benches, raising abortion autonomy and legislative concerns.

What is the case about;

A 27-year-old woman, with two children, seeks an abortion due to unplanned pregnancy and financial constraints.
A two-judge bench approved the termination, citing contraceptive failure.
However, AIIMS raised concerns about foeticide, prompting a three-judge bench, led by the Chief Justice of India, to request a new medical report regarding the woman’s health and foetal condition.

What are the abortion law in India:

Abortion was initially illegal in India, resulting in imprisonment or fines under Section 312 of the Indian Penal Code.
To address this, the Shantilal Shah Committee was formed in 1964. to assess the necessity of abortion regulations.
This led to the introduction of the Medical Termination of Pregnancy (MTP) Act in 1971, legalizing and regulating abortions.
Now abortions in India are regulated by the Medical Termination of Pregnancy (MTP) Act, 1971.
Under the law section 3 of the MTP Act 1971, the doctor can perform an abortion in the following conditions:
- If the pregnancy would be harmful to the life of the patient or affects her physical or mental health. The doctor will need to consider the circumstances of the patient to figure out if the pregnancy will harm her mental health, on a case to case basis.
- If there is a good chance that the child would suffer from physical or mental abnormalities which would leave him or her seriously handicapped.
- If pregnancy occurred as a result of a failure of contraception only applicable to married women.
- If pregnancy is a result of sexual assault or rape.

Condition for termination of pregnancy:

If the pregnancy has not exceeded 12 weeks, only one doctor is needed to sign-off.
If the pregnancy has exceeded 12 weeks and is below 24 weeks, two doctors are needed.
The gestation period does not matter if a doctor feels that an immediate abortion must be conducted to save the life of the patient.
The doctor who determines if it is necessary to perform an abortion and performs it needs to be a ‘registered medical practitioner’ under the law.
In January 2020, the Union Cabinet approved amendments to the MTP Act, allowing women to seek abortions as part of reproductive rights and gender justice.
The amendment raised the upper limit of MTP from 20 weeks to 24 weeks for women including rape survivors, victims of incest, differently-abled women and minors

Has the court allowed termination beyond 26 weeks:

Yes, in several cases. For example, the SC on August 21 allowed termination of pregnancy of a rape survivor whose pregnancy was at 27 weeks and three days.
However, the difference in this case seems to be the marital status of the woman, which indicates that the conception is consensual and not a forced pregnancy in that sense.
In September 2022, the SC allowed abortion for an unmarried woman who was 24 weeks pregnant, and was in a consensual relationship. The Bench cited “transformative constitutionalism” that promotes and engenders societal change.
There are also instances in which courts have overruled the decision of the medical board to allow termination.

What About the Rights of an Unborn Child:

The Chief Justice of India (CJI) led Bench debated the balance between a woman’s abortion rights and the rights of the unborn child.
The CJI acknowledged India’s liberal and pro-choice abortion laws, distinguishing them from the US’s Roe v. Wade case.
In India, the concept of “foetal viability” is a new benchmark for abortion decisions, a departure from the US model where it’s linked to a foetus’s ability to survive outside the womb.
Critics argue that Indian law shifts the decision to terminate after 20 weeks to doctors, not the woman, highlighting a legislative gap.
India’s legal framework favors a woman’s autonomy in reproductive rights over the rights of the unborn child.
Past legal cases have challenged the MTP Act’s constitutional validity regarding the rights of the unborn child.
However, the right of an unborn child has been the basis of legislation dealing with succession or the law prohibiting sex-determination of foetuses.
Section 416 of CrPC also provides for postponement of the death sentence awarded to a pregnant woman.

3. The United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA)

Subject :IR

Section: International organisation

Context: The recent attack of Israel in Gaza

More about UNRWA:

It is a United Nations agency established by the General Assembly in 1949 when nearly three-quarters of a million Palestinians became refugees in the aftermath of the 1948 Arab- Israeli war.
It was mandated to support Palestinian refugees and their patrilineal descendants who fled or were expelled from their homes during the 1948 Palestine War and 1967 Six-Day War.
UNRWA was originally designed as a temporary agency, though its mandate has been continuously renewed every three years by the General Assembly.
It provides services in its five fields of operations i.e Jordan, Lebanon, Syria, Gaza Strip and West Bank, including East of Jerusalem.
UNRWA is unique in that it delivers services directly to its beneficiaries.
It is funded almost entirely by voluntary contributions from UN Member States. It also receives some funding from the Regular Budget of the United Nations.
It reports only to the UN General Assembly.
It was originally headquartered in Beirut, Lebanon, but was moved to Vienna, Austria, in 1978. In 1996 the General Assembly moved the agency to the Gaza Strip to demonstrate the Assembly’s commitment to the Arab-Israeli peace process.
Its chief officer, the commissioner-general—the only leader of a UN agency to report directly to the General Assembly and is appointed by the UN secretary-general with the approval of an Advisory Commission.
It supports the relief and human development of Palestinian refugees across its five fields of operation. Its services encompass education, health care, relief and social services, camp infrastructure and improvement, protection and microfinance.

4. Australia’s Indigenous Voice referendum

Subject: IR

Section: Places in news

Context: Australians will vote in a referendum on October 14 to decide whether the country’s indigenous peoples should be formally consulted in making laws

More about the news:

On October 14, Australians will participate in a historic referendum that seeks to determine whether the nation should formally engage its indigenous communities in the legislative process.
This upcoming referendum marks the first time in nearly a quarter-century that a national constitutional amendment is being considered.
The central issue at the heart of this referendum is the recognition of Indigenous people and the establishment of a representative body empowered to offer advisory opinions to the parliament.

Who are the ‘First Peoples of Australia’:

The native inhabitants of Australia and its neighbouring islands are collectively referred to as the ‘First Peoples of Australia’ or ‘aboriginals.’
These individuals have lived on these lands for countless millennia prior to the arrival of Europeans in the early 17th century.

What is the need of this referendum:

The Aboriginals find no mention in Australia’s 122-year-old Constitution.
Aboriginal people make up about 3.2% of Australia’s population and track below national averages on most socio-economic measures.
According to a government booklet containing information that would help people make the choice on whether to support or reject the vote, indigenous Australians have:
- A life expectancy 8 years shorter than non-Indigenous Australians;
- Worse rates of disease and infant mortality;
- A suicide rate twice as high as non-Indigenous Australians.

How did the Australian government’s policies impact indigenous people

Historical laws and policies, enacted by colonial settlers, marginalised indigenous communities, leading to disparities in education and life expectancy.
The infamous “Stolen Generation” involved the forced removal of indigenous children from their families, causing lasting trauma.
Recent legislative changes have aimed to address these injustices, including voting rights in 1962 and acknowledgment of native title in 1992.
In 1997, the “Bringing Them Home” report shed light on the Stolen Generation, prompting official apologies and recognition from the Australian government.

Why then does the referendum appear likely to fail:

For the referendum to be passed, more than 50 per cent of voters must vote in favour nationally, plus the majority of voters in the majority of Australian states.
Any constitutional alterations in Australia require a national referendum in which voting is compulsory for all adults.
Opposition parties like the Liberal Party and the Nationals have expressed reservations about the referendum.
The ‘No’ campaign argues that the proposed body’s specifics, including member composition and powers, remain unclear.
Critics claim that a ‘Yes’ vote might deepen racial divisions within Australian society.
Some Indigenous groups reject the proposed consultative body, viewing it as toothless, and instead advocate for a formal treaty to transfer substantial power from the government to Indigenous people.

5. Government mulls partnerships to make semiconductor chips

Subject: Science and Tech

Section: Awareness in IT

Context:

Six working groups, which had been formed to mull the Indian government’s artificial intelligence (AI) roadmap, have submitted the first edition of their report adding that the report’s recommendations included public-private partnerships to make semiconductors for AI applications.

Details:

The PPP model would be leveraged to build “GPU clusters”, masses of resource-intensive graphics processors that are used by AI applications.
These clusters would be made available to Indian start-ups and researchers.
Use cases for AI: agriculture, healthcare, education, fintech, security, and governance.
India Dataset Platform:
- A planned collection which will be among the largest and most diverse collections of anonymised datasets for Indian researchers and startups to train their multi-parameter models.

Significance of semiconductor for AI development:

Semiconductors Are Essential For AI In Providing the Required Processing Power.
Advanced semiconductor materials provide the performance and power efficiency needed for AI applications.
Semiconductor design is critical to AI chips’ performance and efficiency. As AI algorithms become more complex, semiconductor designers will need to develop new ways to optimize the performance of AI chips.

INDIAai portal- National AI portal of India:

INDIAai is the National AI Portal of India – a central hub for everything AI in India and beyond.
A joint initiative of MeitY, NeGD and NASSCOM, the website aims to be the trusted content powerhouse in the backdrop of India’s journey to global prominence in Artificial Intelligence.

US-India AI Initiative:

In 2023, US-India Artificial Intelligence was launched by IUSSTF to build a strong platform for promoting the growth of AI through idea exchange, exploring R&D opportunities, and strengthening the collaboration prospects between the two countries.

MCA 3.0 portal:

The Ministry of Corporate Affairs introduced a modern and agile version of its portal- version 3.0, MCA 21.
It is designed to take the complexity out of regulatory filing for companies with the help of AI/ML and advanced data analytics capabilities for automating and streamlining the processes.
Along with improving ease of doing business this initiative will also strengthen compliance monitoring and help create a well-organized ecosystem for businesses.
It will provide a robust tracking mechanism for monitoring historical law changes while also providing quick access to most current legislations. Overall it will help in bringing transformative changes to incorporate regulatory and governance systems.

AI portal:

A joint venture of MeitY and NASSCOM, the AI portal is a dedicated central ecosystem encompassing information, resources, and the latest updates about different initiatives and developments in the field of AI in India.
It has been thoughtfully designed to invite people of different backgrounds and educational qualifications to be a part of the AI community.

Draft National Strategy on Robotics:

Released by: Union Minister of State for Skill Development & Entrepreneurship and Electronics & IT Shri Rajeev Chandrasekhar.
It represents the significant opportunities for the manufacturing sector, Industry 4.0 and cyber-physical systems among others, it has the potential to create a lot of impact.
It aims to capitalize this potential and nurture the development of robotic technology, helping India emerge as a “Robotics Hub” for the world. To drive India’s global leadership in Robotics, four sectors of strategic importance have also been identified, namely – manufacturing, agriculture, healthcare and national security.
The draft strategy recommends fiscal interventions to facilitate local manufacturing of robotics hardware, building of ‘demonstration facilities’ to test and show off technologies, and building capacity in the robotics sector.

Source: TH

6. The afterglow of an explosive collision between giant planets may have been detected in a far-off star system

Subject: Science and Tech

Section: Space technology

Context:

The afterglow of a massive collision between two giant planets may have been detected for the first time.

Details:

The wreckage of the collision could eventually cool and form an entirely new planet.
If the observation is confirmed, it provides an amazing opportunity to watch the birth of a new world in real time and open a window into how planets form.
Observations:
- To emit the amount of energy observed, the post-impact body must have been many hundreds of times the size of Earth as large as the “ice giant” planets Uranus and Neptune.
- The temperature of the post-impact body is around 700°C. For the temperature to be that low, the colliding bodies could not have been entirely made of rock and metal.

About the star- Aaan-21qj:

In December 2021, astronomers observed a star and at times it would almost disappear, before returning to its previous brightness.
The star, which sits roughly 1,800 light years from Earth, was given the identifier ASASSN-21qj, after the ASASN-SN astronomy survey that first observed the star’s dimming.
- The dimming of stars is generally attributed to material passing between the star and Earth.
Infrared light is most strongly emitted by objects at relatively high temperatures of a few hundred degrees Celsius.
- The infrared brightening of ASASSN-21qj was observed by NASA’s WISE space telescope. WISE only looks at the star every 300 days or so and probably missed the initial flash of light from the impact.

Planetary cataclysm:

Both sets of observations could be explained by a cataclysmic collision between two planets.
Giant impacts and collisions are common in the final stages of the formation of planets. They dictate the final sizes, compositions and thermal states of planets and mould the orbits of objects in those planetary systems.
In our solar system, giant impacts are responsible for the odd tilt of Uranus, the high density of Mercury and the existence of Earth’s Moon.
But, until now, we had little direct evidence of giant impacts ongoing in the galaxy.
A collision would have needed to release more energy in the first few hours after impact than would be emitted from the star. Material from the colliding bodies would have been superheated and melted, vaporized or both.

New planet or the post-impact body:

The impact would have formed a hot, glowing mass of material hundreds of times larger than the original planets.
However, the expanded planetary body produced by the impact will take a long time, perhaps millions of years, to cool and shrink to something we might recognise as a new planet.
Initially, when this “post-impact body” was at its greatest extent, it could have produced the infrared brightening.
The impact would also have ejected great plumes of debris into a range of different orbits around the star. A fraction of this debris would have been vaporized by the shock of the impact, later condensing to form clouds of tiny ice and rock crystals.
Over time, some of this clumpy cloud of material passed between ASASSN-21qj and Earth, blocking out a fraction of the visible light from the star and producing the erratic dimming.

Ice giants:

The outer regions of at least one of the planets must have contained elements with low boiling temperatures, such as in water. It is like a collision between two Neptune-like worlds that are rich in ice.
The delay between the emission of infrared light and the observation of debris crossing the star suggests that the collision took place quite far away from the star.

WISE telescope:

Wide-field Infrared Survey Explorer (WISE) is a NASA infrared astronomy space telescope in the Explorers Program. It was launched in December 2009 and placed in hibernation mode in February 2011, before being re-activated in 2013 and renamed the Near-Earth Object Wide-field Infrared Survey Explorer (NEOWISE).
WISE discovered thousands of minor planets and numerous star clusters. Its observations also supported the discovery of the first Y-type brown dwarf and Earth trojan asteroid.
After its solid hydrogen coolant depleted, a four-month mission extension called NEOWISE was conducted to search for near-Earth objects (NEO) such as comets and asteroids using its remaining capability.

Source: DownToEarth

7. ImmunoACT’s cell therapy to treat blood cancer gets CDSCO nod

Subject :Science and Tech

Section: Biotechnology

Context:

IIT Bombay-incubated Immunoadoptive Cell Therapy (ImmunoACT), in which drugmaker Laurus Labs holds about 34% stake, has received Central Drugs Standard Control Organisation’s (CDSCO) marketing authorisation approval of the ‘first’ humanised CD19-targeted Chimeric Antigen Receptor T cell (CAR-T cell) therapy product for relapsed/refractory B-cell lymphomas and leukaemia (blood cancer) in India.

India’s homegrown CAR-T cell therapy, a form of immunotherapy, gets market authorisation

DEATAILS:

For treating relapsed-refractory B-cell lymphoma and leukemia, Mumbai-based Immunoadoptive Cell Therapy Private Limited (ImmunoACT) announced the approval of India’s first chimeric antigen receptor (CAR) T-cell therapy by the Central Drugs Standard Control Organization (CDSCO) on October 13, 2023.
Called NexCAR19, it is an indigenously developed CD19-targeted CAR-T cell therapy.
CD-19 is biomarker for B lymphocytes and can be utilised as a target for leukemia immunotherapies.
ImmunoACT is an IIT Bombay-incubated company founded in 2018 and works on converting research into pharmaceutical products
It is a major breakthrough as the therapy is not available in India outside of clinical trials.
The multi-centre Phase I and II clinical trials were conducted with 60 patients with r / r B-cell lymphomas and leukemia. The clinical data indicated a 70 per cent overall response rate.
ImmunoACT received market authorisation for our CAR-T cell therapy from the Drugs Controller General of India .
CAR T-cell therapy is generally accompanied by some side effects. One of them, according to the American Cancer Society, is cytokine release syndrome (CRS). It is when CAR T-cells multiply, they can release large amounts of chemicals called cytokines into the blood, which can ramp up the immune system.
In comparison to other CAR T-cell therapies, the safety profile of CRS and the absence of neurotoxicity indicates a significant improvement.
Priorly, CAR-T cell therapy cost around $400,000 or over Rs 3.3 crore and patients could avail of it in the United States. With this development, the therapy will be accessible at 20 Indian government and private hospitals treating cancer across major cities at around Rs 30-35 lakh per patient.

About CAR-T Cell Therapy

CAR-T cell therapy stands for chimeric antigen receptor T cell therapy.
It is a type of cancer immunotherapy that uses the patient’s own T cells, genetically modified in a laboratory to enhance their ability to locate and destroy cancer cells.

Working Process

T cells are white blood cells responsible for identifying and fighting illness and infection.
Each T cell has a receptor that can recognize antigens (proteins or molecules recognized by the immune system).
Cancer cells may have antigens that the immune system does not recognize as abnormal, allowing cancer to evade the immune response.
CAR-T cells are genetically engineered in the lab to express a new receptor that can bind to cancer cells and effectively kill them.
The process involves several steps, including:

Collecting T Cells: Blood is drawn from the patient’s arm, and T cells are separated from the blood using an apheresis machine.
Engineering T Cells: In a laboratory, the T cells are modified by adding a manufactured CAR, and they are allowed to multiply and grow.
Infusing CAR-T Cells: Once enough CAR-T cells are prepared, they are injected back into the patient’s arm.

Chemotherapy may be recommended before CAR-T cell infusion to enhance treatment effectiveness.
The process can take place in an outpatient infusion center or a hospital setting.

Cancers Treated:

CAR-T cell therapy is effective against certain types of cancer, especially when other treatments are ineffective.
It is currently FDA-approved for treating haematological malignancies, including leukemia, lymphoma, and multiple myeloma.

8. G20’s roadmap for crypto regulation

Subject: Economy

Section: Monetary Policy

Why in the News?

Adoption of the G20 Roadmap on Crypto Assets: Under India’s Presidency, the Finance Ministers and Central Bank Governors of the G20 nations have adopted a comprehensive roadmap for the regulation of crypto-assets, as proposed by the IMF and FSB.
Preferential Regulatory Oversight: Rather than supporting a blanket ban, the roadmap emphasizes the necessity of comprehensive regulatory and supervisory oversight to ensure macroeconomic and financial stability.
Implementation of FATF Standards: The roadmap advocates the implementation of Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing (AML/CFT) standards to mitigate potential risks associated with the misuse of crypto-assets for criminal or terrorist activities.
Special Considerations for Emerging Economies: The synthesis paper recommends that emerging economies, in particular, take additional targeted measures to address specific risks that they may face. These measures should be adapted based on the unique circumstances and capacity constraints of each jurisdiction.
Volatility and Market Trends: Crypto assets have exhibited significant volatility, with several episodes of sharp appreciation and subsequent steep price reversions. For instance, in 2021, the total market value of crypto-assets experienced substantial growth but subsequently faced a significant downturn in 2022.

The G20’s emphasis on regulatory oversight and compliance with AML/CFT standards signifies a concerted effort to address potential risks associated with crypto-assets and ensure financial stability on a global scale.

IMF and FSB Paper Recommendations:

The IMF and FSB highlight the challenges associated with banning cryptocurrencies, emphasizing the importance of regulatory oversight and compliance with anti-money laundering standards. They advocate for monitoring licensed crypto-asset issuers and service providers to bridge information gaps and ensure effective oversight of cross-border crypto activities.

What is Cryptocurrency?

Cryptocurrency is a digital or virtual form of currency that operates on decentralized blockchain technology, utilizing cryptography for security. It is not regulated by any central authority and often exhibits high price volatility.

What are the difference from Central Bank Currencies:

Unlike central bank currencies, cryptocurrencies are not issued or governed by a central authority such as a government or central bank. They are decentralized, globally accessible, and typically have a limited supply, making them immune to government manipulation.

Regulatory Framework in India:

The regulatory environment in India has experienced various shifts, including a ban on cryptocurrency transactions by the Reserve Bank of India (RBI) in 2018, subsequently overturned by the Supreme Court in 2020. In the 2022-23 Union budget, India proposed a 30% tax framework for cryptocurrency-related income and transactions.

G20’s Endorsement:

The G20 Leaders Declaration has endorsed the FSB’s recommendations and welcomed the paper’s roadmap for a comprehensive policy and regulatory framework concerning cryptocurrencies.

About FSB

The Financial Stability Board (FSB) is an international organization established in 2009 that monitors and provides recommendations on global financial systems, succeeding the Financial Stability Forum. Its headquarters are in Basel, Switzerland.

About Central Bank Digital Currency (CBDC)

A Central Bank Digital Currency (CBDC) is a digital form of a country’s fiat currency that is issued and regulated by the country’s central bank.

It operates as a legal tender and is designed to provide a secure and efficient medium of exchange, aiming to offer an alternative to physical cash and other forms of digital payments.

The CBDC is managed and supervised by the central bank, ensuring its stability and reliability.

The introduction of CBDCs by central banks is often seen as a response to the growing demand for digital currencies and the increasing adoption of digital payment systems in the modern financial landscape.

By offering a digital alternative to physical cash, central banks aim to provide a secure and convenient means of digital transactions while maintaining the stability and credibility of the national currency.

OECD’s Crypto-Assets Reporting Framework (CARF)

Establishment of a framework for cross-border reporting and exchange of information on crypto assets.
Aims to address the borderless nature of crypto assets, emphasizing the need for international collaboration in regulation and prevention of misuse.

Anticipated Benefits of CARF Implementation:

Enforcement of reporting obligations for entities and individuals involved in crypto asset services.

Promotion of a standardized regulatory environment for crypto asset usage and investments globally.

Impact on India:

CARF introduction could facilitate the development of a comprehensive taxation and regulatory structure for crypto assets in India.
Enables India to establish a robust and standardized approach to managing crypto assets within its financial ecosystem.

About OECD:

Formed as the Organisation for European Economic Co-operation (OEEC) in 1948.
Renamed the OECD in 1961 with the inclusion of the USA and Canada.
Focuses on promoting economic stability and combating poverty through economic development and cooperation.
India, although not an OECD member, has been engaged in a cooperation program with the organization since 1997.

9. Rising risk of unsecured retail loans in India

Subject: Economy

Section: Monetary Policy

Increasing Risk: UBS highlights the growing risk of unsecured retail loans turning bad in Indian banks as lending to borrowers with overdue debt has risen.
Pandemic Impact: The stress on household finances due to the pandemic has eased, leading to a boost in unsecured lending portfolios by lenders in the country.
Regulatory Scrutiny: The Reserve Bank of India (RBI) has indicated its close monitoring of the segment for early signs of stress, reflecting the significance of the issue.
UBS’s Observations: UBS has conducted a study, which indicates a rise in the share of loans to borrowers with weaker risk profiles and increased leverage among retail borrowers.
Data Insights: Central bank data shows a significant increase in outstanding receipts from credit cards and personal loans, further emphasizing the rapid growth in unsecured lending.
Changing Metrics: The share of lending to borrowers with overdue loans and the number of borrowers with multiple retail loans has notably increased over the past few fiscal years, signaling potential risks.
Impact on Bank Ratings: UBS has downgraded its rating on State Bank of India and Axis Bank, citing rising credit costs as the reason for the change.
Unsecured Loan Proportions: Unsecured loans as a percentage of total loans have risen for banks like SBI and Axis Bank, further underscoring the potential vulnerability in their lending portfolios.

Status of Unsecured Loans:

Unsecured loans reached from 5 lakh crore in April 2019 to 11.1 lakh crore in April 2023.
Banks turned to retail loans due to defaults on project loans, leading to rapid growth in unsecured credit card debt and personal loans.
Unsecured loans are growing at a rate of 30-31% annually, outpacing overall system credit growth of 8-9%.
Despite constituting less than 8% of outstanding bank credit, unsecured retail loans are growing faster, warranting attention from risk managers and regulators.

Concerns and Significance:

Past experiences highlight challenges in recovering loans in case of defaults.
Unsecured loans are crucial for sustaining India’s consumption momentum and showcasing robust credit growth for banks.
Improved data quality and technical interventions have facilitated better monitoring of retail borrowers and loan extension to prime candidates.
Intense competition among lenders catering to the same segment may dilute credit standards, resulting in poor risk pricing and potential negative outcomes.

Recommended Actions:

Public sector banks should prioritize technology adoption and strengthen alternative credit scoring and data analytics.
Indirect acquisition of retail exposures through securitization or assignment deals with NBFCs or small finance banks can help manage risks effectively.
Niche lenders should exercise caution due to their vulnerability to liquidity risks and external shocks, necessitating conservative exposure limits for unsecured retail loans.