Daily Prelims Notes 20 June 2023

Daily Prelims Notes

20 June 2023

Table Of Contents

1. ‘Rescuing’ camels not a solution; Rajasthan needs sanctuaries for its state animal
2. Rohtang Pass
3. What made Cyclone Biparjoy unique, why its path was difficult to predict
4. 68 dead in Ballia amid heatwave: How high temperatures combined with high humidity can be fatal
5. RAWs Sinha who headed operations is now agency’s new chief
6. ADR seeks action against parties for contempt of SC order
7. UAE and Qatar reopen embassies as ties improve after years of rift
8. Surplus liquidity in banking drops 43% due to advance tax payments
9. SGX Nifty rebranded GIFT Nifty World
10. FM Sitharaman suggests special outreach camps in credit deficient districts
11. Gandhi Peace Prize
12. Indo-US ties: Economics & Strategy
13. Impact of Rs. 2000 note withdrawal
14. RBI conducts VRR Auction to boost liquidity in view tax outflows

1. ‘Rescuing’ camels not a solution; Rajasthan needs sanctuaries for its state animal

Subject: Environment

Section: Species in news

Context:

• Rajasthan’s camels are regularly being rescued from slaughter, but this only increases their suffering, as it involves no long-term solution.

Details:

• Camels need protected grazing areas where they can feed on native vegetation. Such camel sanctuaries would serve as biodiversity hotspots and conserve other native drought-adapted animal and plant species as well.
  • These would be areas where native trees that camels thrive on grow – such as khejri (Prosopis cineraria), bordi (Zizyphus nummularia), babool (Acacia nilotica) and other drought-adapted species.
• The International Year of Camelids in 2024 provides a window of opportunity for rekindling Rajasthan’s camel heritage by setting up a network of camel sanctuaries that could turn into a major tourist attraction and secure rural livelihoods.

Kharai camel:

• It is a unique breed of camel found only in Kachchh, Gujrat.
• They have the special ability to survive on both, dry land and in the sea.
• They swim in seawater and feed on saline plants and mangroves.
• The Kharai was recognised as a separate breed in 2015 by the Indian Council of Agricultural Research (ICAR).

Raika community of Rajasthan:

• They are Rajasthan’s hereditary camel herders who have bred and managed these animals for generations and who have a treasure trove of knowledge for keeping them hale and healthy.
• This community traditionally felt responsible for the welfare of the camel, believing their primaeval ancestor was created by God Shiva for just that purpose.
• The Raika and their camels talk to each other; this language/conversation is called akal-dhakaal.

Issues:

• As per the livestock census 2012, the camel population had shrunk from over a million in the 1980s to around 300,000.
• The Raikas are no longer able to make a living from camel herding with the availability of motorised vehicles.
• Their ancestral grazing areas disappeared due to development, irrigation agriculture and forest conservation areas.

Steps taken:

• Rajasthan declared the camel as its state animal in 2014 and enacted the Rajasthan Camel (Prohibition of Slaughter and Regulation of Temporary Migration or Export) Act, 2015.
• The act prohibited not only slaughter but also prevented the movement of camels across state borders.
  • The act further deteriorated the camel population. Between 2012 and 2019, India’s camel numbers declined by an additional 37.1% to 2.5 lakh.
• 2024 has been designated as the International Year of Camelids by the United Nations General Assembly catapulting this species into the limelight of international development.

2. Rohtang Pass

Subject: Geography

Section: Places in news

• The name Rohtang means ‘ground of corpses’ due to the number of people who lost their lives while crossing this difficult mountain range. It is located on the Pir Panjal Mountain Range of the Himalayas and serves as the gateway to Pangi and the valley of Leh. The Rohtang Pass is a natural divide between the humid Kullu Valley, which has a predominant Hindu culture and high altitude Lahaul and Spiti Calleys, which are predominantly Buddhist.
• It is a high mountain pass (elevation 3,980 m) on the eastern Pir Panjal Range of the Himalayas around 51 km from Manali.
• It connects the Kullu Valley with the Lahaul and Spiti Valleys of Himachal Pradesh, India.
• The pass lies on the watershed between the Chenab and Beas basins.
• On the southern side of this pass, the Beas River emerges from underground and flows southward and on its northern side, the Chandra River, a source stream of the river Chenab, flows westward.

3, What made Cyclone Biparjoy unique, why its path was difficult to predict

Subject: Geography

Section: Physical geography (Climatology)

Context:

• Biparjoy had some characteristics that not only made it difficult to predict its path, but also made the cyclone potentially more dangerous.

Details:

• Cyclones usually give adequate warning of their arrival.
• Cyclones take 4-5 days to reach the Indian landmass from both, the Arabian sea and the Bay of Bengal.
• If a sufficient number of weather instruments are monitoring them, from the oceans as well as from satellites, everything about the cyclones — speed, intensity, trajectory, associated wind speeds — can be predicted accurately.

Cyclone Biporjoy:

• It developed from very severe cyclonic storm into a extremely severe cyclonic storm in a 10-day period, which was longer than the average but not the longest.
• One of the reasons for its longer stay on the sea was its relatively slow speed.
• Cyclones in the Arabian Sea typically progress with a speed of about 12-14 km per hour.
• Biparjoy, through most of its life, moved at a speed of 5-7 km an hour while covering a distance of nearly 1200 km to Gujarat.
• Biparjoy was sandwiched between two anticyclonic systems. One of them had the effect of aiding its northwards movement, while the other was sort of pulling it back. The combined effect was that it moved relatively slowly.
• The influence of these anticyclonic systems also made its trajectory wobble.
  • It is called the recurving tracks cyclone. The trajectory of such cyclones tends to change directions frequently.
  • Predicting the trajectory of recurving cyclones is extremely challenging, with an extra element of uncertainty.

Unpredictable path:

• Cyclone Biparjoy was earlier predicted to proceed towards Karachi in Pakistan.
• Most cyclones of this intensity complete the landfall in about three to four hours. Biparjoy took about five hours. The slow speed meant that even after reaching land, the cyclone remained close enough to the sea to draw moisture and sustain itself.
• Longer landfalls have a greater potential to cause destruction. The most dramatic landfall was in the case of the Odisha super cyclone of 1998, the most devastating cyclone to have hit India in recent decades. That process had continued for nearly 30 hours.

4. 68 dead in Ballia amid heatwave: How high temperatures combined with high humidity can be fatal

Subject: Geography

Section: Physical geography (Climatology)

Context:

• Amidst the scorching heatwave conditions, the temperatures soar up to 43.5 degrees Celsius in the eastern Uttar Pradesh region.

Details:

• The IMD in its forecast mentioned that Ballia’s maximum temperature on Monday (June 19) is likely to touch 45 degrees Celsius but would come down by 2 degree Celsius the next day.
• The mercury in the city is expected to go below 40 degrees Celsius only after June 22.

What are heat waves?

• A Heat Wave is a period of abnormally high temperatures, more than the normal maximum temperature that occurs during the summer season in the North-Western parts of India. Heat Waves typically occur between March and June, and in some rare cases even extend till July. The extreme temperatures and resultant atmospheric conditions adversely affect people living in these regions as they cause physiological stress, sometimes resulting in death.
• The Indian Meteorological Department (IMD) has given the following criteria for Heat Waves :
  • Heat Wave need not be considered till maximum temperature of a station reaches atleast 40°C for Plains and atleast 30°C for Hilly regions
  • When normal maximum temperature of a station is less than or equal to 40°C Heat Wave Departure from normal is 5°C to 6°C Severe Heat Wave Departure from normal is 7°C or more
  • When normal maximum temperature of a station is more than 40°C Heat Wave Departure from normal is 4°C to 5°C Severe Heat Wave Departure from normal is 6°C or more
  • When actual maximum temperature remains 45°C or more irrespective of normal maximum temperature, heat waves should be declared. Higher daily peak temperatures and longer, more intense heat waves are becomingly increasingly frequent globally due to climate change. India too is feeling the impact of climate change in terms of increased instances of heat waves which are more intense in nature with each passing year, and have a devastating impact on human health thereby increasing the number of heat wave casualties.

About Heat Index:

Why do heat waves cause deaths?

• High temperatures alone aren’t fatal in nature. It’s when high temperatures are combined with high humidity, known as the wet bulb temperature, heatwaves become lethal.
• Humans lose heat generated within their bodies by producing sweat that evaporates on the skin. The cooling effect of this evaporation is essential in maintaining a stable body temperature.
• As humidity rises, sweat does not evaporate —just like clothes take a long time to dry in humid locations – and makes it difficult to regulate body temperature. And this could cause a heat stroke, which takes place only when the body temperature goes above 40 degrees Celsius.
• What happens is that excessive heat increases metabolic activity in the body, leading to a drop in blood pressure and oxygen levels with increased sweating — this is a condition called hypoxia.
• Metabolism goes haywire (in such conditions), creating a toxin overload which affects multiple organs. At that stage, things are extremely difficult to manage outside ICU care.
• Prolonged exposure to even moderate heat, with poor nutrition and hydration levels in these circumstances, can lead to hypoxia. Those with pre-existing metabolic disorders like diabetes, the obese or the elderly, are more vulnerable.

5. RAWs Sinha who headed operations is now agency’s new chief

Subject : Polity

Section: National body

Concept :

• Senior IPS officer Ravi Sinha has been appointed as the chief of the country’s external spy agency RAW. Sinha will succeed Samant Kumar Goel who will complete his four-year tenure.

About Research and Analysis Wing

• Established in 1968, to handle the nation’s international intelligence affairs, RAW came into force after the China-India War in 1962.
• At present, the intelligence arm operates under the aegis of the Prime Minister’s Office.
• RAW provides intelligence support to various significant operations on foreign soil.
• RAW works in cooperation with the Intelligence Bureau or other Indian intelligence agencies.

Genesis

• After the 1962 China-India war and Indo-Pakistani war in 1965, India established a separate and distinct external intelligence organization – the Research and Analysis Wing.
• In 1968, R. N. Kao was appointed as the first director of RAW. Under his leadership, RAW provided intelligence support, which resulted in India’s successful operations including
• creation of Bangladesh in 1971,
• the defeat of Pakistan during the Kargil conflict of 1971,
• the accession of Sikkim in 1975,
• and the increase of India’s support to Afghanistan.

Working mechanism of RAW 

• RAW collects military, economic, scientific, and political intelligence through covert and overt operations.
• It also monitors terrorist elements and smuggling rings that transport weapons and ammunition into India.
• It primarily focuses on India’s neighbours. The collected inputs by RAW also help Indian officials, which are further used in national security policy and revise the foreign policy.

Attached Bodies

• The Aerial Reconnaissance Centre (ARC) collects high-quality overhead imagery of activities and installations in neighbouring countries.
• Special Frontier Force:
• The inspector general of a paramilitary force of India, the Special Frontier Force reports to the director-general of security for RAW. While the force has functions independent of RAW, it is often fielded to support covert and overt RAW missions.

6. ADR seeks action against parties for contempt of SC order

Subject : Polity

Section: Judiciary

Concept :

• Flagging what it called was a “deliberate act of contempt” by political parties, the Association for Democratic Reforms (ADR) wrote to the Election Commission seeking action against parties that fail to publish details of criminal antecedents of candidates as per orders of the Supreme Court and the poll panel.

Details

• The apex court had on September 25, 2018 directed all political parties to publish the details of criminal antecedents of their candidates, including the reason for selecting them.
• Hearing a contempt petition on its order not being implemented, the Supreme Court on February 13, 2020 directed the parties to list out the reasons for nominating such candidates within 72 hours of their selection.
• The EC issued directions to the parties on October 10, 2018 and March 6, 2020 in compliance with the SC’s orders, making it mandatory for all parties to publish the details on their websites.

About ‘Contempt of Court’:

• Contempt of court is the power of the court to protect its own majesty and respect. The power is regulated but not restricted in the Contempt of Courts Act, 1971.
• The expression ‘contempt of court’ has not been defined by the Constitution.
• However, Article 129 of the Constitution conferred on the Supreme Court the power to punish contempt of itself.
• Article 215 conferred a corresponding power on the High Courts.

The Contempt of Courts Act, 1971 defines both civil and criminal contempt.

• Civil contempt refers to wilful disobedience to any judgment of the court.
• Criminal contempt can be invoked if an act:
• Tends to scandalise or lower the authority of the court.
• Tends to interfere with the due course of any judicial proceeding.
• Obstruct the administration of justice.

7. UAE and Qatar reopen embassies as ties improve after years of rift

Subject : International Relations

Section: International events

Concept :

• The United Arab Emirates and Qatar have announced the reopening of their embassies on Monday following a years long rift over Qatar’s support of Islamist groups.

Background

• The UAE joined Saudi Arabia, Bahrain and Egypt in imposing a boycott and blockade of Qatar in 2017 over its support for Islamist groups across the Middle East that gained power immediately after the Arab Spring protests.
• The other Arab countries in the Persian Gulf view such groups as terrorists – including Egypt’s Muslim Brotherhood, which won free and fair elections.
• The unprecedented diplomatic crisis among the normally friendly Gulf Arab countries initially sparked fears of armed conflict. But Qatar’s gas riches, and close ties to Turkey and Iran, largely insulated it from the economic sanctions, and relations slowly thawed.

Gulf Cooperation Council

• The Gulf Cooperation Council (GCC) is a political and economic alliance of six countries in the Arabian Peninsula: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
• Established in 1981, the GCC promotes economic, security, cultural and social cooperation between the six states and holds a summit every year to discuss cooperation and regional affairs.
• All current member states are monarchies, including three constitutional monarchies (Qatar, Kuwait, and Bahrain), two absolute monarchies(Saudi Arabia and Oman), and one federal monarchy (the United Arab Emirates).

Structure:

• The GCC comprises six main branches that carry out various tasks, from the preparation of meetings to the implementation of policies.
• They are- Supreme Council, Ministerial Council, Secretariat-General, Consultative Commission, Commission for the Settlement of Disputes and the Secretary-General.

Role of GCC today:

• Whether the GCC still has a relevant function and role in the region is questionable. Though it was created for the purpose of solidifying union ranks, the blockade imposed on Qatar by its neighbours has largely annulled these principles.
• The Gulf states have in the past differed in their views on several issues that have unfolded in the region over the past two decades. The role of the GCC has also been diminishing ever since the 2003 US-led invasion of Iraq, with the six states illustrating various approaches to the war and its consequences.
• This has been enhanced during the wave of protests that swept the Middle East in 2011, known as the Arab Spring. Saudi Arabia has gained a dominant role within the GCC today.

8. Surplus liquidity in banking drops 43% due to advance tax payments

Subject : Economy

Section: Fiscal policy

Concept :

• Surplus liquidity in the banking system declined 42.9 per cent to Rs 1.04 lakh crore on June 18 from Rs 1.82 lakh crore on June 11 due to advance tax payments.
• Liquidity in the banking system is the difference between incremental credit and deposits. The current fall in (surplus) liquidity is a case of deposits coming down because of advance tax payments.
• Companies have drawn their deposits to pay advance tax.

Advance Tax

• Advance tax is the amount of income tax that is paid much in advance rather than a lump-sum payment at the year-end. Also known as earn tax, advance tax is to be paid in installments as per the due dates decided by the income tax department.

Why is advance tax important?

• Advance tax is the income tax paid in advance for the income earned in a particular financial year.
• Usually, the tax is to be paid when the income is earned. Still, under the tax provisions of advance tax, the payer has to estimate the income for the entire year.
• And based on this estimate the tax is paid at specific time intervals. Here it is important that the tax payer estimates the income and then calculates the estimated tax on it to check whether he or she needs to pay the advance tax and how much.

Who should pay advance tax?

• As per section 208 of the Income Tax Act 1961, every person whose estimated tax liability for the year is more than or equal to `10,000 is liable to pay advance tax.
• Those who are excluded from paying advance tax are senior citizens who are above the age of 60, not having any income from business or profession.

9. SGX Nifty rebranded GIFT Nifty World

Subject : Economy

Section: Capital market

Concept :

• The popular SGX Nifty will cease operations at the Singapore Exchange later this month and will start trading as GIFT Nifty with trading time of almost 21 hours per day at GIFT IFSC in Gujarat from July 3.
• The NSE International Exchange (NSE IX) is rebranding the SGX-Nifty product as the GIFT-Nifty.
• The reason for this rebranding is that from June 30, the entire trading of SGX-Nifty will cease at SGX and the entire volume will shift to GIFT IFSC from July 3,said Injeti Srinivas, Chairman, International Financial Services Center Authority (IFSCA), the unified regulator at GIFT IFSC at Gandhinagar.

SGX Nifty

• SGX is one of the leading stock exchanges in Asia, movement on which somehow reflects in other stock indices in the continent.
• SGX Nifty is Singapore Stock Exchange Nifty, which implies the Indian CNX Nifty traded in Singapore exchange.
• It is a very popular derivative product of Singapore Exchange as it allows foreign investors to take a position in Indian Market.
• In Singapore Exchange, Indian stocks cannot be traded but it allows future products like SGX Nifty Futures.
• Thus, it is the derivative product of Singapore Exchange facilitating futures trading of underlying NSE Nifty index. It allows FII’s and other individuals to invest in Nifty Futures.

10. FM Sitharaman suggests special outreach camps in credit deficient districts

Subject : Economy

Section: Monetary Policy

Concept :

• Finance Minister Nirmala Sitharaman on Monday chaired a consultative committee meeting on financial inclusion and suggested special outreach camps in credit-deficient districts in each state.
• In the meeting of the committee attached to the Ministry of Finance on ‘Financial Inclusion: Progress and Prospects‘, deliberations were also held on progress under PM Jan Dhan Yojana, Jan Suraksha schemes, and Mudra Yojana.

District Level Review Committee

• During the meeting, Finance Minister Nirmala Sitharaman suggested holding a special District Level Review Committee (DLRC) meeting between July 15 to August 15 and inviting Member of Parliament from such district to further brainstorm ideas towards financial inclusion by opening Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts for those still outside bank reach.

11. Gandhi Peace Prize

Subject : Schemes

Concept :

• Gita Press, Gorakhpur, a 100-year-old institution that publishes Hindu religious texts and promotes Gandhian ideals of peace and social harmony, has been awarded the Gandhi Peace Prize for 2021 by the Government of India.
• The prize was announced by the Ministry of Culture.

Gandhi Peace Prize

• Gandhi Peace Prize Awards for Social, Economic and Political transformation through Non-violence was instituted in the year 1995, on the occasion of the 125th birth anniversary of Mahatma Gandhi, as a tribute to his ideals and contributions to humanity.
• Reward:
• The award carries an amount of Rs 1 crore, a citation, a plaque and a traditional handicraft or handloom item.
• The award is conferred by the President of India at a function in Rashtrapati Bhavan.
• Consideration:
• This award is given to individuals, associations, institutions or organizations who have worked selflessly for peace, non-violence and amelioration of human sufferings.
• The award is open to all persons regardless of nationality, race, language, caste, creed or gender.
• The Award may be divided between two persons / institutions who are considered by the Jury to be equally deserving of recognition in a given year.
• Work by a person since deceased cannot be the subject of an Award. If, however, his death occurred subsequent to a proposal having been submitted to the Jury(headed by the Prime Minister) in the manner stipulated in the Code of Procedure, then a Posthumous Award may be made.

Previous Awardees:

• Organizations: Indian Space Research Organisation (ISRO), Ramakrishna Mission, Grameen Bank of Bangladesh, Vivekananda Kendra, Akshaya Patra, Ekal Abhiyan Trust, Sulabh International
• Luminaries: Nelson Mandela, Sultan Qaboos bin Said Al Said, Oman (2019) and Bangabandhu Sheikh Mujibur Rahman, Bangladesh (2020).

Gita Press

• Established in 1923 by Jaya Dayal Goyandka and Hanuman Prasad Poddar, Gita Press is one of the world’s largest publishers of Hindu religious texts, having published 41.7 crore books in 14 languages, including 16.21 crore copies of Shrimad Bhagvad Gita.
• Gita Press also runs a monthly magazine called Kalyan, which covers topics such as spirituality, culture, history, ethics and morality.
• It also runs a charitable hospital called Kalyan Chikitsalaya in Gorakhpur, which provides free medical services to the poor and needy.

12. Indo-US ties: Economics & Strategy

Subject: International Relations

Section: Major power

Concept:

• Indian Prime Minister heads to the United States for an official state visit on the invitation of American President.

Economic engagement

• The value of trade between the two countries has touched a record $191 billion, making the US India’s largest trading partner.
• For the US, India is the ninth largest trading partner.
• American companies have invested around $60 billion in India in sectors ranging from manufacturing to telecommunications and consumer goods to aerospace.
• Indian companies have put in more than $40 billion in sectors such as IT, pharmaceuticals, and green energy.
• Air India announced the purchase of more than 200 Boeing aircraft

Strategic underpinnings

• Quadrilateral Security Dialogue:
  • The flagbearer of the strategic engagement is the Quadrilateral Security Dialogue.
  • The Quad began as a broad partnership after the 2004 Indian Ocean tsunami.
  • It gained strategic heft after the four-country grouping, which has Australia and Japan alongside India and the US, was repurposed in 2017, primarily as a counter to China’s growing influence in the Indian Ocean rim, and as a forum for redoubling focus on the Indo-Pacific region.

The I2U2:

• The I2U2, a grouping of India, Israel, the US and the United Arab Emirates, is focused on joint investments and new initiatives in water, energy, transportation, space, health, and food security.

Critical and Emerging Technologies:

• India and US launched a new US-India initiative on Critical and Emerging Technologies.
• The two countries established a partnership to make the semiconductor supply chain more resilient through private sector cooperation.
• Defence sector:
• Cooperation in areas such as armoured vehicles, ammunition, and air combat could include a deal for India, the world’s largest arms importer, to manufacture under licence GE’s F414 turbofan jet engine to power the indigenous Tejas Mk2 light combat aircraft that is under development.

13. Impact of Rs. 2000 note withdrawal

Subject :Economy

Section: Monetary Policy

Context: Withdrawal of the Rs. 2,000 denomination may improve certain economic parameters, says SBI report.

According to the SBI report, the withdrawal of ₹2,000 currency notes can have a positive impact on the economy through various channels:

1. Enhanced Bank Deposits: Banks were struggling for deposits as the Credit/Deposit (C/D) Ratio was nearing pre-pandemic levels of around 75%. The withdrawal move has effectively helped Banks with this problem. This will help in supporting the Bank’s lending activities. Corporates, from sectors such as Oil, Chemical and Power who have been beneficiaries of consumer expenditure using Rs. 2,000 notes have also made deposits with banks to park the excess cash received.
2. Loan Repayment: As per RBI around 30% of the deposits have gone towards repayment of loans. With fresh credit growing at a healthy pace, this is welcome for banks as it improves the overall C/D Ratio.
3. Consumption Boost: Consumers have resorted to buying discretionary and expensive items to dispose off the Rs. 2,000 notes apart from fuel purchases. This has helped boost the sectors likes, gold, jewellry, real estate and electronic white goods.The consumption inturn boosts performance of companies in these sectors.
4. Reducing need for interest rate hike: RBI is still focused on keeping policy rates elevated to manage to bring inflation to its anchor level of 4%. With the withdrawal of Rs. 2,000 being pulled from the economy, there will be less urgency to increase rates as liquidity stands reduced.
5. Boost to UPI and CBDC E-Rupee:The absence of high denomination note will push people more towards using UPI and CBDC. RBI’s retail Central Bank Digital Currency (CBDC) project (E-RUPI) should benefit as it transitions from a beta-testing phase to broader roll-out.
6. Economic growth rate: The report expects Q1 FY24 GDP growth at around 8.1% due to the impact of ₹2,000 note withdrawal event, and supporting the projection that FY24 GDP could be higher than 6.5% (as per the RBI estimates). This has been attributed to the sudden boost in consumption expenditure as well as improved deposit position of the Banks.

Quick facts on ₹2,000 note withdrawal:

• Before RBI’s currency management move, the share of 2,000 denomination notes valued at ₹3.62 lakh crore was at 10.8% as on March 2023.
• As of June 8, around ₹1.8 lakh crore of ₹2000-rupee notes have come back to the system. Of this, around 85% or ₹1.5 lakh crore have come as deposits and the rest are exchanged for other smaller denomination

14. RBI conducts VRR Auction to boost liquidity in view tax outflows

Subject :Economy

Section: Monetary Policy

Key Points:

• Banks were facing reduced liquidity owing to advance tax and indirect tax payments.
• The overnight call money rates were above the repo rate of 6.5%.
• RBI conducted a Variable rate repo (VRR) auction for Rs. 75,000 crore and received a good response owing to the liquidity needs of Banks. The final cut-off rate was 6.51%.
• It may be noted that at several of the recent VRR auctions the final off-take is less than that earmarked by RBI.
• RBI conducts VRR auctions periodically for short term liquidity management. The present VRR auction was done in anticipation of tax outflows and tight liquidity.
  • RBI aims that call money rate does not deviate much from the repo rate, presently which is 6.50 per cent.
  • If call money rate falls below repo rate (say 6.25 per cent) the RBI will conduct a Variable Rate Reverse Repo/VRRR auction.
  • If call money rate is above the repo rate (say 6.75 per cent) it will conduct VRR.

• Tri-party repos (TREPs) is a risk-free borrowing and lending of funds against government-issued securities by financial institutions, banks, mutual funds, etc.
• TREPS facilitates borrowing and lending of funds in Triparty Repo arrangement.
• A repo or re-purchase agreement is a liquidity mechanism between two banks. Generally, banks are required to maintain their statutory liquidity ratio (SLR) and cash liquidity ratio (CLR) above certain limits. If there are mismatches, banks can use the repo market to ensure corrections.
• Only G-Secs are dealt with in this system, there is no risk premium. Most of the transactions take place at the repo rate only.
• TREPs require adding a broker between the two parties. The broker (CCIL as the third party) will ensure both legs of the repo go through smoothly, and fix the rates as well.
• TREPs are undertaken through the Clearing Corporation of India Ltd (CCIL), which acts as a counterparty to all trades.
• It is interesting to note that SEBI has mandatorily directed mutual funds to invest at least 5% of their assets in liquid assets, including TREPS.
• The earlier system of CBLO (Collateralised borrowing and lending obligation) was replaced by TREPS in 2018.