Daily Prelims Notes 14 July 2022

Daily Prelims Notes

14 July 2022

Table Of Contents

1. Coffee Board launched blockchain based coffee e-marketplace
2. Oppo tax evasion case:
3. International laws to stop plastic pollution from fishing vessels
4. Sodium-ion battery tech
5. WHO bats for passing on genomics tech to developing world
6. I2U2 Summit
7. India ranks 135 out of 146 in Gender Gap Index
8. Union Minister inaugurates IS4OM to safeguard Indian space assets
9. Unfolding mysteries of the night sky
10. Foreign Currency Deposits
11. Off Budget Loans
12. Suspicious transaction reports
13. Special INR Vostro Accounts

1. Coffee Board launched blockchain based coffee e-marketplace

Subject : Polity

Section: National bodies

Coffee Board

• The Coffee Board is a statutory organization constituted under Section (4) of the Coffee Act, 1942 and functions under the administrative control of the Ministry of Commerce and Industry,Government of India.
• The Board comprises 33 Members including the Chairperson. The remaining 32 Members representing various interests are appointed as per provisions under Section 4(2) of the Coffee Act read with Rule 3 of the Coffee Rules, 1955.
• The Board is mainly focusing its activities in the areas of research, extension, development, market intelligence, external & internal promotion and welfare measures.
• The HQ of the Board is in Bangalore. The board has a Central Coffee Research Institute at Balehonnur (Karnataka) with a Sub-Station at Chettalli (Karnataka) and Regional Coffee Research Stations at Chundale (Kerala), Thandigudi (Tamil Nadu), Narasipatnam (Andhra Pradesh) and Diphu (Assam), apart from the extension units located in coffee growing regions of Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Orissa and North Eastern Region

Other commodity  board under Ministry of Commerce

Rubber Board

• The Rubber Board is a statutory organization constituted under Section (4) of the Rubber Act, 1947 and functions under the administrative control of Ministry of Commerce and Industry.
• The Board is headed by a Chairman appointed by the Central Government and has 28 members representing various interests of natural rubber industry. The Board’s headquarters is located at Kottayam in Kerala.
• The Board is responsible for the development of the rubber industry in the country by way of assisting and encouraging research, development, extension and training activities related to rubber. It also maintains statistical data of rubber, takes steps to promote marketing of rubber and undertake labour welfare activities.
• The activities of the Board are exercised through Five Departments viz. General Services, Extension & Advisory Services, Research Services (rubber Research Institute of India), Training (Rubber Training Institute) & Finance. There are 5 independent divisions viz., Internal audit, Planning, Market Promotion, Publicity & Public Relations, Vigilance.

Tea Board

• Tea Board was set up as a statutory body on 1st April, 1954 as per Section (4) of the Tea Act, 1953. As an apex body, it looks after the overall development of the tea industry. The Board consists of 32 Members, including Chairman and Deputy Chairman appointed by the Government of India representing different sections of the Tea industry.
• The Board’s Head Office is situated in Kolkata and there are two Zonal offices-one each in North Eastern Region at Jorhat in Assam and in Southern Region at Coonoor in Tamil Nadu. Besides, there are 18 regional offices spread over in all the major tea growing states and four metros.
• For the purpose of tea promotion, three overseas offices are located at London, Dubai and Moscow. In order to meet the developmental needs of the small sector which accounts for more than 1/3rd of national tea production, separate directorate has been set up during the year under report.
• The functions and responsibilities of Tea Board include increasing production and productivity, improving the quality of tea, market promotion, and welfare measures for plantation workers and supporting Research and Development. Collection, collation and dissemination of statistical information to all stake holders are yet another important function of the Board. Being the regulatory body, the Board exerts control over the producers, manufacturers, exporters, tea brokers, auction organizers and warehouse keepers through various control orders notified under Tea Act.

Tobacco Board

The Tobacco Board was constituted as a statutory body on 1st January, 1976 under Section (4) of the Tobacco Board Act, 1975. The Board is headed by a Chairman with its headquarters at Guntur, Andhra Pradesh and is responsible for the development of the tobacco industry. While the primary function of the Board is export promotion of all varieties of tobacco and its allied products, its functions extend to production, distribution (for domestic consumption and exports) and regulation of Flue Cured Virginia (FCV) tobacco.

Spices Board

• Spices Board is a statutory body constituted with effect from 26.02.1987 under the Spices Board Act, 1986 (10 of 1986) by merging the erstwhile Cardamom Board and the Spices Export Promotion Council under the administrative control of the Department of Commerce.
• Spices Board is responsible for the overall development of cardamom industry and export promotion of 52 spices listed in the schedule of the Spices Board Act, 1986. The primary function of the Board includes development of small and large cardamom, promotion, development, regulation of export of spices and control on quality of spices for export. The Spices Board also undertakes research activities on cardamom (small & large) under Indian Cardamom Research Institute.

2. Oppo tax evasion case

Subject: Polity

Section: National body

Investigation has also revealed that Oppo India remitted and made provisions for payment of ‘Royalty’ and ‘Licence Fee’ to various multinational companies, including those based in China, in lieu of use of proprietary technology, brand, IPR licence and so on. However, the said ‘Royalty’ and ‘Licence Fees’ paid by Oppo India were not being added in the transaction value of the goods imported by them. This was a violation of Section 14 of the Customs Act, 1962, and the alleged duty evasion by Oppo India on this account was ₹1,408 crore

DRI

• The Directorate of Revenue Intelligence (DRI) is the premier intelligence and enforcement agency of the Government of India on anti-smuggling matters.
• The Directorate is run by officers from the Central Board of Indirect Taxes and Customs (CBIC), Ministry of Finance, who are posted in its various Zonal Units as well as in Indian embassies abroad as part of the Customs Overseas Intelligence Network.
• It is headed by a Director General of the rank of Special Secretary to the Government of India.
• The Agency works to secure India’s national and economic security by preventing the outright smuggling of contraband such as firearms, gold, narcotics, Fake Indian Currency notes, antiques, wildlife and environmental products.
  • Moreover, it also works to prevent the proliferation of black money, trade based money laundering and commercial frauds.
• The DRI has also been designated as the lead agency for Anti-Smuggling National Coordination Centre (SCord).

3. International laws to stop plastic pollution from fishing vessels

Subject : Environment

Section: Pollution

Context:

• Ocean plastic pollution was a focus at the recent United Nations oceans conference, which issued a declaration in support of an earlier decision by the UN Environment Assembly to start negotiations for a global plastics treaty.
• An estimated half of ocean plastic pollution comes from some 4.5 million fishing vessels operating in national and international waters.
• Plastic waste from fishing vessels includes lost and deliberately abandoned fishing gear such as nets, pots, floats, crates and fish aggregation devices (FAD).
• Plastics have been found in the deepest part of the ocean in the Mariana Trench and in remote regions such as Henderson Island in the Pitcairn group.
• Lost or abandoned fishing gear can result in “ghost fishing” where nets, FADs and other gear continue to “fish” for decades.
• Other impacts of ocean plastic pollution include entanglement, ingestion, transfer of invasive species and toxins, navigational hazards and beach fouling.

Global rules on plastic pollution from fishing vessels

• Two principal regimes have been developed under the International Maritime Organisation (IMO).
• One is the London dumping regime, which regulates the deliberate dumping of plastic waste at sea from vessels and platforms.
  • Under this, plastic waste including fishing nets and FADs must not be dumped or discarded deliberately by any vessel in all maritime zones outside the internal waters of states.
  • Although there is an exception for the disposal of material incidental to the “normal” operation of vessels, it cannot be argued this includes deliberate disposal of plastic waste, given the harm it causes to marine ecosystems.
• The other is the International Convention for the Prevention of Pollution from Ships (MARPOL), which regulates both deliberate and accidental discharge of plastics from vessels.
  • While the London regime does not apply to accidental loss of fishing gear, MARPOL does by prohibiting the discharge into the sea of all plastics, including nets, FADs and other fishing gear, both deliberate and accidental.
  • There is, however, an important loophole: The prohibition does not apply to fishing vessels where “all reasonable precautions have been taken to prevent such loss” or where the discharge of fishing gear is necessary for the protection of the environment.
• Apart from these, the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR), which manages fisheries in the Southern Ocean, bans the use of plastic packaging bands on most vessels.

Problems with these rules

• The problem with these rules is lack of enforcement. It is hard to monitor and enforce the prohibition on plastic pollution from vessels on the high seas.
• Also, there are insufficient incentives to persuade vessels to retrieve abandoned gear they come across while fishing.

4. Sodium-ion battery tech

Subject :Science and Technology

Section: EV

Context:

• Sodium-based battery technology might soon be a viable alternative to lithium-based ones.
• A homogeneous oxysulfide glass electrolyte has been developed, which makes it significantly more viable to produce sodium ion-based batteries commercially and on a larger scale.
• It enables reversible sodium plating and stripping at a greater current density.
• The ambient temperature solid-state sodium-sulfur battery technology can be used for grid-level energy storage systems with the help of the new electrolyte.
• The positively charged metallic ion in sodium or lithium takes the charge from the anode to the cathode of a battery when the circuit is completed. This process is called stripping of the anode.
• When a battery is charged, the formation of sodium/lithium occurs around the anode of the battery in its metallic form. This is called plating or deposition.
• The positive ions must be free to move about because this movement is what produces electric energy.

Advantage over Lithium batteries

• Lithium carbonate prices are at an all-time high.
• Mining lithium also has high environmental costs.
• Sodium-ion batteries will be cheaper to produce than their lithium counterparts because of the abundance of the raw materials required to make them.
• The process of recycling lithium-ion batteries is even more expensive than the extraction of lithium and as a result, the market usually ends up disposing of it instead, much to the detriment of our planet and its resources.

5. WHO bats for passing on genomics tech to developing world

Subject: Science and Technology

Section:

Context:

• The field of genomics uses biochemistry, genetics and molecular biology methods to understand and use biological information in deoxyribonucleic acid (DNA) and ribonucleic acid (RNA).
• This information benefits medicine and public health — especially during the COVID-19 pandemic — as well as agriculture, biological research and more.
• Genomics can make enormous contributions to human health, from surveying populations for infectious agents — such as the virus that causes COVID-19 — to predicting and treating a wide variety of diseases, such as cancers and developmental disorders.
• Thus WHO said that shortfalls in financing, laboratory infrastructure, materials and highly trained personnel need to be addressed to expand access to genomic technologies.
• Tools, like tiered pricing, sharing of intellectual property rights for low-cost versions and cross-subsidisation can be used to make genomic technologies more affordable.
• However, there are concerns which need to be addressed first, these are- Advocacy, implementation, collaboration and associated ethical, legal and social issues. 
• The report also recommended WHO create a Genomics Committee to take forward the recommendations and monitor their applications.
• The report followed WHO’s 10-year strategy for genomic surveillance of pathogens. 
• Genomic surveillance has played a crucial role in the global COVID-19 response, with countries like South Africa able to make essential contributions in detecting variants due to their capacities in this area.

6. I2U2 Summit

Subject: International Relations

Section: International Organization

Context:

• I2U2 stands for India, Israel, the UAE, and the US, and was also referred to as the ‘West Asian Quad’ by Ahmed Albanna, Ambassador of the UAE to India.
• It was given the name International Forum for Economic Cooperation.

Aim of I2U2

• Its stated aim is to discuss “common areas of mutual interest, to strengthen the economic partnership in trade and investment in our respective regions and beyond”.
• Six areas of cooperation have been identified by the countries mutually, and the aim is to encourage joint investments in water, energy, transportation, space, health, and food security.
• The four-nation framework would foster support and cooperation in various domains like infrastructure, technology and maritime security.
• The grouping also points to India’s growing engagement with countries in West Asia including Israel, with whom India has developed closer ties.

Background

• The Abraham Accords of 2020 had led to Israel formally normalizing diplomatic ties with the UAE and Bahrain, marking an important shift in the stance of West Asian countries on Israel.
• I2U2 was initially formed in October, 2021 following the Abraham Accords, to deal with issues concerning maritime security, infrastructure and transport.

7. India ranks 135 out of 146 in Gender Gap Index

Subject : Governance

Section: Index and Report

Context:

What is Gender Gap Index?

• The Global Gender Gap Index benchmarks gender parity across four key dimensions or sub-indices:

1. Economic participation and opportunity
2. Educational attainment
3. Health and survival
4. Political empowerment

• It measures scores on a 0-to-100 scale, which can be interpreted as the distance covered towards parity or the percentage of the gender gap that has been closed.
• It was released by the World Economic Forum

Key takeaways from the Index:

• India ranks 135 among a total of 146 countries in the Global Gender Gap Index, 2022. In 2021, India ranked 140 out of 156 nations
• India ranks 146 in health and survival, 143 in economic participation and opportunity, 107 in educational attainment and 48 in political empowerment
• India ranks poorly among its neighbours and is behind Bangladesh (71), Nepal (96), Sri Lanka (110), Maldives (117) and Bhutan (126)
• Only the performance of Iran (143), Pakistan (145) and Afghanistan (146) was worse than India in South Asia
• The report says that India will now take 132 years to reach gender parity, with the gap reducing only by four years since 2021 and the gender gap closed by 68.1%.

World Economic Forum:

• It is an international non-governmental and lobbying organisation based in Geneva, Switzerland
• It was founded on 24 January 1971 by German engineer and economist Klaus Schwab
• The WEF is mostly known for its annual meeting at the end of January in Davos, a mountain resort in the eastern Alps region of Switzerland.

8. Union Minister inaugurates IS4OM to safeguard Indian space assets

Subject : Science and Technology

Section:Space

Context:

What is ISRO System for Safe & Sustainable Operations Management (IS4OM)?

• It is ISRO’s holistic approach to ensure the safety of our space assets and thus, sustains the utilization of outer space for national development
• The new facility based in Bengaluru will perform a host of functions – safeguarding India’s space assets, protecting them from space debris, predicting the orbital movement of debris, predicting likely collisions and coordinating with global agencies for all of the above.
• This is not about (space)traffic management alone, it is about keeping orbits available to everyone, operating in space without causing problems to one another, and ensuring sustainable use

Different functions of ‘IS40M’:

• Firstly it is about using radars and optical observation to watch and tag objects in space. In case an object poses a threat to our satellite, we must accordingly move our satellite out of harm’s way and also inform foreign agencies(whose satellites are in the vicinity) about our collision avoidance maneuver.
• In addition to this, the objects that are likely to fall back onto the earth, asteroids that are on collision course with earth will also have to be tracked.
• In response to ever-growing space object population and the risk of collisions in space, it undertakes observation and monitoring of space objects and space environment, processing the observations for orbit determination, object characterization and cataloging, analysis of space environment evolution, risk assessment and mitigation, and, data exchange and collaboration

Why we need space Traffic Management System?

• The number of satellites orbiting earth are increasing in number, this also naturally means an increase in space debris
• Debris includes everything from the spent upper stages of rockets, and defunct satellites, to even smaller objects that emerge after debris collisions
• Given that these objects orbit the earth at nearly 27,000 km per hour, any collision with space assets can prove catastrophic and could cause a massive outage of space-based services.

Hence, it becomes increasingly important to have a ‘Space Traffic Management System’

9. Unfolding mysteries of the night sky

Subject :Science and Technology

Section: Space

Context:

• With the release of its first five stunning images, the James Webb Space Telescope has demonstrated an acute observational capacity and revealed aspects of the cosmos hitherto hidden from other telescopes.
• The deep field image of the SMACS 0723 cluster of galaxies has images that date back to times when the first stars were born.
• In contrast, the Southern Ring Nebula image details a dying star. The Eight-Burst Nebula, also known as the Southern Ring Nebula or NGC 3132, is a well-known planetary nebula in the constellation Vela, located approximately 2,500 light-years from Earth.
• In Stephan’s quintet, the JWST has captured the cataclysmic cosmic collision of galaxies.
• By analyzing the spectrum of the radiation from WASP-96 b, an exoplanet (a planet orbiting a distant star), the telescope has shown conclusively the presence of water vapour in the atmosphere of this hot, puffy gas giant planet orbiting a distant Sun-like Star.

Peering back in time

• About 13.8 billion years ago, through the Big Bang, our Universe
• The first stars and galaxies were born around 300 million years after the Big Bang.
• As light travels with a velocity of about 3,00,000 km per second, light from a distant object will take time to reach us on Earth.
• Hence, when we see a distant stellar object, we see it as if it were far back in time.
• Further, light from distant objects is stretched out by the expansion of our Universe, driving the radiation from the visible range into the infrared.
• Therefore, to look deep back into the early phases of the Universe, we need a giant infrared telescope. JWST is the biggest infrared telescope ever built.
• To observe the massive SMACS 0723 cluster of galaxies, which, as Einstein’s general relativity theory predicts, distorts the fabric of spacetime.
• As a result of this ”gravitational lensing” effect, some galaxies appear distorted in an arc shape, some are split into multiple images, and some are magnified.
• The kaleidoscope of colours in the image captured by the JWST’s Mid-Infrared Instrument (MIRI) are false colours, corresponding to a radiation wavelength.

Where stars are born

• Stars and star clusters are formed inside giant gas clouds.
• The visible light is obscured by the thick dust that goes into the making of these stars and renders it opaque.
• Shrouded in thick dust clouds, these star forming regions remained hidden to even powerful telescopes, until now.
• Other phenomena that one sees include ionized gas and hot dust wafting away due to radiation from young stars, causing turbulence and eddies and dust swirling in the surrounding gas.

A star on its deathbed

• Planetary nebulae have nothing to do with planets. They are gas shells formed from the cast-off outer layers of a dying star.
• Intermediate mass stars with a mass of 0.8 to eight times the mass of the Sun end their lives with drama.
• They do not die in one big explosion but go through a cycle of fits and starts.
• The dying star will expel its outer layer and expand, while simultaneously, its core will contract.
• The contracting centre will once again start to emit energy, and the star will have a lease of life.
• The expelled shell is pushed by this radiation and expands in space like a ring around the central star.
• After some time, the central star again sheds its outer layer while the remaining core contracts.
• Over time successive waves of expelled outer shells surround the central star-like concentric rings.
• The remaining core of the star ultimately becomes a faint glowing white dwarf.
• After trillions of years, they cool down and no longer shine, ultimately becoming black dwarfs.

10. Foreign Currency Deposits

Subject : Economy

Section: External Sector

Context:

Banks revised their FCNR rates right after RBI relaxed the  norms and permitted them to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates with effect from July 7, 2022.

Concept:

Foreign Currency account:

• A Foreign Currency Account is an account held or maintained in currency other than the currency of India or Nepal or Bhutan.
• Major foreign currency accounts that can be opened in India by a resident individual:
  •  Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Category – I bank i.e. a bank authorized to deal in foreign exchange.
    •  It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.
  • Resident Foreign Currency (Domestic) [RFC(D)] Account-are bank accounts that can be maintained by resident Indians in foreign currency.
    • These accounts are especially useful for Non Resident Indians (NRI) who return to India and would like to bring back foreign currency from their overseas bank accounts.
  • Resident Foreign Currency (RFC) Account- It is a savings account maintained in foreign currencies – USD and GBP – for NRIs who have returned to India and hold funds in foreign currency.
• Major foreign currency account held by non resident Indians:
  • Foreign Currency Non-Resident (FCNR) scheme-
    • It is a scheme introduced by the Indian government to help NRIs transfer funds into Indian banks.
    • Before 2011, FCNR allowed deposits in six currencies. In 2011, the Reserve Bank of India announced that banks could accept deposits for FCNR accounts in any currency that can be freely converted. 
    • FCNR accounts are term deposit accounts which are maintained by NRIs and PIOs in the form of foreign currencies.
    • Since the account is denominated in a foreign currency,depositors are not exposed to the risk of exchange rate fluctuations. 
    • The main benefit of an FCNR (B) account is that the principal amount and interest amount are tax-free and fully repatriable.
    • The account can be opened jointly (with residents and/or with non-residents).
    • Tenor -of 1-5 years (closed before maturity before completion of the minimum period of deposit)
    • Loans against the deposits are available in India both to the depositor and third parties at the request of the depositors. Banks also provide Loan against FCNR(B) deposits in Foreign Currencies also to the depositors only.

What is the difference between FCNR and FCNR B?

• FCNR B was introduced with an aim to replace the already prevailing FCNR scheme known as FCNR A where the foreign exchange risk was borne by RBI and subsequently by the Govt. of India.
• In 1993, the apex bank introduced FCNR (B), without exchange rate guarantee, to replace FCNR (A)
• All FCNR accounts today are FCNR (B) accounts.
• Generally, interest rates on Foreign Currency Non-Resident Bank [FCNR(B)] deposits are subject to ceilings of Overnight Alternative Reference Rate (ARR) In the case of NRE deposits, as per extant instructions, interest rates shall not be higher than those offered by the banks on comparable domestic rupee term deposits.

11. Off Budget Loans

Subject :Economy

Section: Fiscal Policy

Context:

The Centre on Wednesday relaxed norms for adjusting states’ off-budget loans to fund their capital expenditure.

Details:

• Centre earlier  informed states that off-budget borrowings were to be equated with the states’ own debt and any such fund raised by the governments in 2020-21 and 2021-22 would need to be adjusted out of the borrowing ceiling this year.
• However, now  such liabilities of the last fiscal year can be adjusted against the state’s  borrowing ceilings of the next four years till March 2026.

Concept:

Off-budget borrowings:

• Off-budget borrowings are loans that are taken not by the Government directly, but by another public institution which borrows on the directions of the central government or state government. 
• Such borrowings are used to fulfil the government’s expenditure needs. These items constitute the “off-budget borrowings” because these loans and deferred payments are not part of the fiscal deficit calculation.
• This helps keep the country’s fiscal deficit within acceptable limits.
• The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds.
•  For example:
  • Loans by Food Corporation of India for food subsidy.
  • Public sector oil marketing companies were asked to pay for subsidised gas cylinders for Pradhan Mantri Ujjwala Yojana beneficiaries in the past.
  • Loans from PSU banks were used to make up for the shortfall in the release of fertilizer subsidy, the recapitalisation of banks and capital expenditures of the Ministries of Railways and Power.

In case of the state government -It refers to loans taken by state government entities, special purpose vehicles, etc, where principal and interest would be repaid from the state government’s own budget, instead of the cash flows or revenues generated by the borrowing entity.

• Such borrowings bypass the net borrowing ceiling fixed for states in a fiscal year by routing loans outside the state budget through government owned companies or statutory bodies.
• Since the responsibility for repayment lies with states, it adversely impacts their revenue and fiscal deficit .
• As per norms, state governments are required to take the Centre’s approval for fresh borrowing over the limit set for a particular financial year.
• But states don’t need prior central consent to guarantee the loans and advances, and bonds issued by its entities. Also, the ceiling on guarantees is self-determined and varies from state to state.

12. Suspicious transaction reports

Subject : Security

Section: Money laundering

Context:

The Enforcement Directorate (ED) has filed a First Information Report (FIR) against certain entities, including some employees of the bank, over alleged financial irregularities.

Details:

The IndusInd bank had suo moto filed Suspicious Transaction Reports (STRs) with the regulatory authorities regarding certain entities for alleged irregularities with regard to remittances for import transactions carried out from 2011 to 2014.

Prevention of Money Laundering Act, 2002  – Obligations of NBFCs:

• Section 12 of the PMLA, 2002 casts certain obligations on the NBFCs in regard to preservation and reporting of customer account information.
• NBFCs were advised to appoint a Principal Officer and put in place a system of internal reporting of suspicious transactions and cash transactions of Rs.10 lakh and above. 
•  Maintenance of records of transactions:
  • all cash transactions of more than rupees ten lakh or its equivalent in foreign currency.
  • all series of cash transactions below rupees ten lakh or its equivalent in foreign currency within a month and the aggregate value of such transactions exceeds rupees ten lakh;
  • all cash transactions where forged or counterfeit currency notes or bank notes have been used;
  • all suspicious transactions.
•  Information to be preserved
  • the nature of the transactions;
  • the amount of the transaction and the currency in which it was denominated;
  • the date on which the transaction was conducted; and
  • the parties to the transaction.
• Maintenance and Preservation of records-that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities at least for 10 years.
• The identification records and transaction data should be made available to the competent authorities upon request.
• NBFCs are advised to adopt the format prescribed for banks with suitable modifications. There are five reporting formats prescribed for a banking company:

1. Manual reporting of cash transactions
2. Manual reporting of suspicious transactions
3. Consolidated reporting of cash transactions by Principal Officer of the bank
4. Electronic data structure for cash transaction reporting and
5. Electronic data structure for suspicious transaction

• NBFCs are required to report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND).

13. Special INR Vostro Accounts

Subject : Economy

Section: External Sector

Context:

Government is getting a new avenue of borrowing with the Reserve Bank of India (RBI) enabled Special INR Vostro Accounts for investment in treasury bills (T­Bills) and G­Secs.

Details:

• The new mechanism for international trade settlement in the rupee facilitates returns on the surplus balances in such accounts.
• The balance in Special Vostro accounts can be used for :
  • Payments for projects and investments;
  • export/import advance flow management
  • investment in T­Bills and G­Secs in terms of guidelines and prescribed limits, subject to the Foreign Exchange Management Act (FEMA) and similar statutory provisions.
• This will  encourage countries to have  current account surplus with India to open Special Rupee Vostro Accounts and use the surplus to build rupee denominated assets.

Concept:

• The settlement of trade transactions under this arrangement shall take place in INR.
• In terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, Authorised Dealer banks in India have been permitted to open Rupee Vostro Accounts.
• For settlement of trade transactions with any country, AD banks in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.
• In order to allow settlement of international trade transactions through this arrangement, it has been decided that:
  • Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
  • Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.
• Use of Surplus Balance: The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for:
  • Payments for projects and investments.
  • Export/Import advance flow management
  • Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision.

Existing Mechanism:

• If a company exports or imports, transactions are always in a foreign currency (excluding with countries like Nepal and Bhutan).
• So, in case of imports, the Indian company has to pay in a foreign currency (mainly dollars and could also include currencies like pounds, Euro, yen etc.).
• The Indian company gets paid in foreign currency in case of exports and the company converts that foreign currency to rupee since it needs rupee for its needs, in most of the cases.