Daily Prelims Notes 24 April 2023

April 24, 2023
Posted by: OptimizeIAS Team
Category: DPN

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Daily Prelims Notes

24 April 2023

Table Of Contents

1. RBI refuses exceptions on CRR, SLR; gives some leeway on PSL, investments for merger: HDFC Bank

Subject: Economy

Section Monetary Policy

Context:

HDFC Bank said the Reserve Bank has refused to make any exceptions on cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements as sought by it ahead of the merger of mortgage financier parent HDFC with itself. The central bank has, however, allowed some leeways on the priority sector lending front, the city-headquartered bank said in a letter to the exchanges.
HDFC Bank and HDFC announced a USD 40 billion merger, the largest in Indian corporate history, last April and are awaiting the final regulatory go-ahead for the same. In pursuit of the same scheme, HDFC Bank sought relaxations on certain regulatory requirements from the regulator.The bank informed the exchanges that it has received a letter from RBI with views on certain matters, while clarity on other requests is expected in due course.

CRR

It is a certain minimum amount of deposit that the commercial banks have to hold as reserves with the central bank.
The percentage of cash required to be kept in reserves, vis-a-vis a bank’s total deposits, is called the Cash Reserve Ratio.
The cash reserve is either stored in the bank’s vault or is sent to the RBI. Banks do not get any interest on the money that is with the RBI under the CRR requirements.

Primary purposes of the Cash Reserve Ratio

Since a part of the bank’s deposits is with the Reserve Bank of India, it ensures the security of the amount. It makes it readily available when customers want their deposits back.
Also, CRR helps in keeping inflation under control.
At the time of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves so that they have less money to lend further.

Basel-III created two liquidity ratios: LCR and NSFR.

The liquidity coverage ratio (LCR) will require banks to hold a buffer of high-quality liquid assets sufficient to deal with the cash outflows encountered in an acute short term stress scenario as specified by supervisors. The goal is to ensure that banks have enough liquidity for a 30-days stress scenario if it were to happen.
The Net Stable Funds Rate (NSFR) requires banks to maintain a stable funding profile in relation to their off-balance-sheet assets and activities. NSFR requires banks to fund their activities with stable sources of finance (reliable over the one-year horizon). The minimum NSFR requirement is 100%.

Statutory Liquidity Ratio:

Statutory Liquidity Ratio popularly called SLR is the minimum percentage of deposits that the commercial bank maintains through gold, cash and other securities.
These deposits are maintained by the banks themselves and not with the RBI or Reserve Bank of India unlike the Cash Reserve Ratio.
- Banks earn returns on money parked as SLR
Section 24 and Section 56 of the Banking Regulation Act 1949 mandates all scheduled commercial banks, local area banks, Primary (Urban) co-operative banks (UCBs), state co-operative banks and central co-operative banks in India to maintain the SLR.
It comprises of– cash, gold and SLR securities, comprising central and state government securities:
- Dated securities
- Treasury Bills of the Government of India;
- Dated securities of the Government of India issued from time to time under the market borrowing programme and the Market Stabilization Scheme;
- State Development Loans (SDLs) of the State Governments issued from time to time under the market borrowing programme; and
- Any other instrument as may be notified by the Reserve Bank of India

The liquidity coverage ratio (LCR)

It refers to the proportion of highly liquid assets held by financial institutions, to ensure their ongoing ability to meet short-term obligations.
The LCR was introduced as part of the Basel III reforms following the 2008 global financial crisis and was finalised by the Basel Committee on Banking Supervision in January 2013.
LCR = High-Quality Liquid Asset Amount (HQLA) / Total Net Cash Flow Amount

Priority sector lending

Priority sector lending refers to those sectors or areas of the economy which may not get timely and adequate credit.
The RBI requires Indian banks to allocate certain portion of their overall lending for sectors mentioned under PSL. These areas of focus for PSL include Agriculture, Micro, Small and Medium Enterprises (MSME), Export Credit, Education, Housing, Social Infrastructure, Renewable Energy.
Reserve Bank of India has, from time to time, issued a number of guidelines to banks on Priority Sector Lending. These were last reviewed in April 2015 and for urban and cooperative banks in May 2018.
PSL guidelines are applicable to all domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and foreign banks with 20 branches and above.

2. India’s cheetah plan recipe for conflict

Subject: Environment

Section: Species in news

Context: Project Cheetah overestimated the carrying capacity of Kuno National Park and did not factor in the unique spatial requirement of the species before flying in 20 spotted cats from Africa, according to a group of Namibian researchers.

Findings of Namibian Researchers:

In southern Africa, cheetahs live in a stable socio-spatial system with widely spread territories and densities of less than one individual per 100 km².
- Therefore, the carrying capacity is usually between 0.2 and 1 adult per 100 km² for cheetahs under natural conditions.
The plan for cheetahs in KNP assumes that the high prey density will sustain high cheetah densities, even though there is no evidence for that.
- It also ignores important aspects of the cheetah socio-spatial system.
- Spatial ecology addresses the fundamental effects of space on the movement of individual species and on the stability of multispecies communities.
As KNP is small, it is likely that the released animals will move far beyond the park’s boundaries and cause conflicts with neighboring village
- Kuno National Park is an unfenced wilderness area of approximately 17 by 44 kilometers (about 750 km²).
- Based on a calculation of the local prey density, it was calculated that 21 adult cheetahs could be sustained by the prey base in Kuno National Park—equivalent to a density of about three individuals per 100 km².
In Namibia, territories are larger and prey density lower, in East Africa territories are smaller and prey density higher—but the distance between territories is a constant and no new territories are established in between. For the reintroduction plan in Kuno National Park, these distances were ignored.
Already with the cheetahs transferred from Namibia in autumn 2022, including three males, the carrying capacity of Kuno National Park has been reached in terms of the cheetahs’ territorial system.

Name of Cheetah translocated from South Africa:

12 cheetahs (7 male and 5 female) translocated from South Africa in the second phase under the reintroduction of ‘Project Cheetahs’ have also been given Indian names. They have been renamed Daksha, Nirva, Vayu, Agni, Gamini, Tejas, Veera, Suraj, Dheera, Uday, Prabhas and Pavak.

Incidents so far:

Straying outside National Park: Forest officials rescued a male cheetah that strayed out of the conservation area of Kuno National Park in Madhya Pradesh last week. As per reports, this is the second time in a month when the Cheetah named Oban has been tranquilised and brought back to the national park after it strayed out of the park.
Sasha, died of a kidney ailment on March 27.
One of the cheetahs ‘Uday’ which was aged six years, translocated to Madhya Pradesh’s Kuno National Park (KNP) from South Africa died on April 23.
Another cheetah, named Siyaya, recently gave birth to four cubs.

Cheetah Reintroduction Plan: https://optimizeias.com/cheetah-reintroduction-in-india/

Cheetah: https://optimizeias.com/asiatic-cheetah/

3. EU’s new crypto-legislation

Subject : Economy

Section: Monetary Policy

Concept :

The European Parliament, the legislative body of the 27-country block European Union, has approved the world’s first set of comprehensive rules to bring largely unregulated cryptocurrency markets under the ambit of regulation by government authorities.

About the new legislation

The regulation is called the Markets in Crypto Assets (MiCA). Mica is the most comprehensive regulatory framework for digital assets to date.
The rules will impose a number of requirements on crypto platforms, token issuers and traders around transparency, disclosure, authorization, and supervision of transactions.
Platforms will be required to inform consumers about the risks associated with their operations, while sales of new tokens will also come under regulation.

Coverage:

The MiCA legislation will apply to ‘cryptoassets’ (Bitcoin, Ethereum and stablecoins)
Cryptoassets can be understood as a digital representation of a value or a right that uses cryptography for security and is in the form of a coin or a token or any other digital medium which may be transferred and stored electronically, using distributed ledger technology or similar technology
Stablecoins:
It will apply not only to traditional cryptocurrencies like Bitcoin and Ethereum but also to newer ones like stablecoins. MiCA will establish new rules for three types of stablecoins-
asset-referenced tokens, which are linked to multiple currencies, commodities or cryptocurrencies
e-money Tokens, which are linked to a single currency
utility tokens are intended to provide access to a good or service that will be supplied by the issuer of that token
Stablecoins are digital tokens that aim to stay pegged in value with a more stable asset — a fiat currency like the U.S. dollar or other stable cryptocurrencies.

Out of Coverage

MiCA’s scope will not regulate digital assets that would qualify as transferable securities and function like shares or their equivalent and other crypto assets that already qualify as financial instruments under existing regulation.
It will also, for the most part, exclude nonfungible tokens (NFTs).
MiCA will also not regulate central bank digital currencies issued by the European Central Bank and digital assets issued by national central banks of EU member countries when acting in their capacity as monetary authorities, along with crypto assets-related services offered by them.

Regulation of cryptocurrency in India

India is yet to have a comprehensive regulatory framework for crypto assets. Draft legislation on the same is reportedly in the works.
However, the Indian government has taken certain steps to bring cryptocurrencies under the ambit of specific authorities and taxation.
In Budget 2022, the Finance Ministry said that cryptocurrency trading in India has seen a “phenomenal increase” and imposed a 30% tax on income from the “transfer of any virtual digital asset.”
In March 2023, the government placed all transactions involving virtual digital assets under the purview of the Prevention of Money Laundering Act (PMLA).

4. How can a juvenile be tried as an adult in Court?

Subject : Polity

Section: Msc

Concept :

The National Commission for Protection of Children (NCPCR) has recently issued guidelines for conducting a preliminary assessment by the Juvenile Justice Board (JJB) under Section 15 of the Juvenile Justice Act, 2015 (JJ Act, 2015)

Key Details

This preliminary assessment is to ascertain whether a juvenile can be tried as an adult.
The 2015 Act, for the first time, provided for trying juveniles in the age group of 16-18 as adults in cases of heinous offences.
The sole objective of having such a preliminary assessment is to determine whether a child within the age group of 16-18 years should be tried as an adult in case of heinous offences.

How does a child get tried as adult?

The Act has categorised the offences committed by children into three categories:
petty offences,
serious offences, and
heinous offences.
The JJ Act provides that in case of a heinous offence alleged to have been committed by a child, who has completed or is above the age of sixteen years, the Board shall conduct a preliminary assessment regarding:
his mental and physical capacity to commit such offence,
ability to understand the consequences of the offence and
the circumstances in which he allegedly committed the offence.
If the Board, after preliminary assessment passes an order that there is a need for trial of the said child as an adult, then the Board may order the transfer of the case to the Children’s Court having jurisdiction to try such offences.

Responsibilities of the Board

The Juvenile Justice Board (JJB) shall be responsible for the preliminary assessment.
In case the JJB does not have at least one member who is a practising professional with a degree in child psychology or child psychiatry, the Board shall take the assistance of psychologists or experts who have the experience of working with children in difficult times.
The child should also be provided with a legal aid counsel through the District Legal Services Authority who shall be present during the preliminary assessment.
The Act mandates experts, who have the required qualification to assist the JJB, to undergo training.
During the preliminary assessment, the Board and experts shall also analyse and take into consideration the Social Investigation Report (SIR) or a Social Background Report (SBR) to be prepared after interaction with the child or child’s family.
It will be prepared by the Probation officer or Child Welfare Officer or any social worker.

The Juvenile Justice (Care and Protection of Children Act) 2015

The Juvenile Justice (Care and Protection of Children) Act was introduced and passed in Parliament in 2015 to replace the Juvenile Delinquency Law and the Juvenile Justice (Care and Protection of Children Act) 2000.
Main Provisions:
Allowing the trial of juveniles in conflict with law in the age group of 16-18 years as adults, in cases where the crimes were to be determined.
The nature of the crime, and whether the juvenile should be tried as a minor or a child, was to be determined by a Juvenile Justice Board.
Another major provision was with regards to adoption, bringing a more universally acceptable adoption law instead of the Hindu Adoptions and Maintenance Act (1956) and Guardians of the ward Act (1890) which was for Muslims, although the Act did not replace these laws.
The Act streamlined adoption procedures for orphans, abandoned and surrendered children and the existing Central Adoption Resource Authority (CARA) has been given the status of a statutory body to enable it to perform its function more effectively.

5. Nagorno-Karabakh Enclave

Subject : International Relations

Section: Places in news

Concept :

Azerbaijan said it set up a checkpoint on the Lachin corridor, the only land link between Armenia and the the disputed Nagorno-Karabakh enclave.

Nagorno-Karabakh Region

Nagorno-Karabakh is a mountainous and heavily forested region that under international law is recognised as part of Azerbaijan.
However, ethnic Armenians who constitute the vast majority of the population there reject Azeri rule (the legal system of Azerbaijan).
After Azerbaijan’s troops were pushed out of the region following a war in the 1990s, these ethnic Armenians have been in administrative control of Nagorno-Karabakh, with support from Armenia.
Strategic Significance:
The energy-rich Azerbaijan has built several gas and oil pipelines across the Caucasus (the region between the Black Sea and the Caspian Sea) to Turkey and Europe.
Some of these pipelines pass close to the conflict zone (within 16 km of the border).
In an open war between the two countries, the pipelines could be targeted, which would impact energy supplies and may even lead to higher oil prices globally.

6. ‘Foreign lawyers cannot work here, yet’

Subject : Polity

Section: Judiciary

Concept :

The Society of Indian Law Firms (SILF) has submitted a 20-page representation to the Bar Council of India (BCI), demanding the repeal of the rule allowing foreign law firms and lawyers to practise international arbitration in India.
SILF has expressed concern over the timing of the move and cautioned that it went against the Supreme Court’s 2018 judgement.
SILF wants the BCI to reject all the applications received from foreign lawyers or firms seeking registration in India.

Areas of Concern

The Indian legal profession is subject to the overall jurisdiction of the BCI. But if foreign lawyers commit any professional misconduct, the BCI cannot act against them, because they will be governed by the rules of their home jurisdiction.
Another area of concern is that Indian law firms can’t have more than 20 partners. But in other countries, particularly the UK, rest of Europe, and the US one can even have big corporations. Now, how can one face this sort of competition, which is creating an unequal playing field.
Moreover, the law must first be amended.
The SC says only Indian citizens can practise law in the country and the practice includes not just litigation but all corporate work, transactional work. The SC judgement has been totally ignored in the bar council’s regulations.

About the new rules

According to the Advocates Act, advocates enrolled with the Bar Council alone are entitled to practise law in India.
All others, such as a litigant, can appear only with the permission of the court, authority or person before whom the proceedings are pending.
Foreign lawyers and law firms can practice in India:
The notification essentially allows foreign lawyers and law firms to register with BCI to practise in India if they are entitled to practise law in their home countries.
However, the foreign lawyers or foreign Law Firms have not been permitted to appear before any courts, tribunals or other statutory or regulatory authorities.
They are allowed to practise transactional work /corporate work such as joint ventures, mergers and acquisitions, intellectual property matters, drafting of contracts and other related matters on a reciprocal basis.
Same restrictions for Indian lawyers working with foreign law firms :
Indian lawyers working with foreign law firms will also be subject to the same restriction of engaging only in non-litigious practice.

Significance

According to BCI the move would mutually benefit lawyers from India and abroad and the legal fraternity in India would not experience any disadvantage.
Further, the latest move is expected to address the concerns over the flow of Foreign Direct Investment (FDI) into the country and would help make India a hub for international commercial arbitration.

Bar Council of India

The Bar Council of India is a statutory body created by Parliament under the Advocates Act, 1961 to regulate and represent the Indian bar.
It performs the regulatory function by prescribing standards of professional conduct and etiquette and by exercising disciplinary jurisdiction over the bar.
It also sets standards for legal education and grants recognition to Universities whose degree in law will serve as qualification for enrolment as an advocate.
In addition, it performs certain representative functions by protecting the rights, privileges and interests of advocates and through the creation of funds for providing financial assistance to organise welfare schemes for them.
It consists of members elected from each state bar council, and the Attorney General of India and Solicitor General of India who are ex-officio members of the bar council.
The members from the state bar council are elected for a period of five years.
The Act provided for the constitution of Bar Council of India, State Bar Councils, their powers, enrolment, qualification, disqualification of Advocates etc.

State Bar Councils

The State Bar Councils are statutory bodies established under Section 3 of the Advocates Act, 1961.
These were set up as different councils for the states and union territories of India.
They act as regulatory bodies, making rules for the legal profession and education in their respective states and also act as the representatives of the advocates of that state, thereby acting in their interests.
The main functions of the State Bar Councils as specified under Section 6 of the Advocates Act are to act in the interest of the advocates, to bring in legal reform, to regulate the conduct of advocates, to establish funds and to oversee the Legal Education in the respective states among others.
They work in coordination with and under the supervision of the Bar Council of India, which is a national body established under Section 4 of the Advocates Act, 1961.

7. What is LockBit ransomware and why is it targeting macOS?

Subject : Science and technology

Section: Awareness in IT and computers

Context:

Cybercriminals have developed new ransomware encryptors designed to target macOS devices, making this the first major ransomware operation to specifically target Apple computers.

Details:

The new encryptors target both older Macs and newer ones running on Apple Silicon.
Earlier in January, the LockBit gang was reportedly behind a cyber-attack on U.K. postal services.

About LockBit ransomware:

First reported in September 2019 and also known as “abcd” virus. due to the file extension used when encrypting victim’s files.
The virus is categorised as a “crypto virus” due to its requests for payment in cryptocurrency to decrypt the files on the victim’s device.
The LockBit ransomware is designed to infiltrate victims’ systems and encrypt important files.
It targets the enterprises and organisations in the U.S., China, India, Ukraine, and Indonesia. Attacks have also been recorded throughout Europe, including in France, Germany, and the U.K.

How do it works?

It works as a self-spreading malware, not requiring additional instructions once it has successfully infiltrated a single device with access to an organisational intranet.
It also known to hide executable encryption files by disguising them in the .PNG format, thereby avoiding detection by system defences.
It disables security programs and places an encryption lock on all system files, which can only be unlocked via a custom key created by the LockBit gang.

About LockBit ransomware gang:

The group behind this is known as the LockBit gang.
It is considered the most prolific ransomware group ever.
It operates on the ransomware-as-a-service (Raas) model and comes from a line of extortion cyberattacks.

How to protect systems against the LockBit ransomware?

The use of strong passwords, with strong variations of special characters which are not easy to guess along with multi-factor authentication should be implemented.
This ensures the use of brute force will not be enough to compromise systems.
Organisations can also undertake training exercises to educate employees on the use of phishing attacks and their identification.
Old and unused user accounts should be deactivated and closed as they can become weak links in the security apparatus.