Daily Prelims Notes 28 May 2022

May 28, 2022
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Daily Prelims Notes

28 May 2022

Table Of Contents

1. RBI Risk Provisioning

Subject: Economy

Section: Monetary Policy

Context:

The six-fold increase in RBI’s transfer to the Contingency Fund reduced the central bank’s surplus transfer to the government.

Central bank’s risk provision:

The central bank’s main risk provision accounts are –

Contingency Fund–
- This is a specific provision meant for meeting unexpected and unforeseen contingencies
- It includes among other things-depreciation in the value of securities, risks arising out of monetary/exchange rate policy operations, systemic risks and any risk arising on account of the special responsibilities enjoined upon the Reserve Bank.
- Section 47 of the RBI Act states-Profits or surplus of the RBI are to be transferred to the government, after making various contingency provisions.
Currency and Gold Revaluation Account (CGRA)–
- It is maintained by the Reserve Bank to take care of currency risk, interest rate risk and movement in gold prices.
- Unrealised gains or losses on valuation of foreign currency assets (FCA) and gold are not taken to the income account but instead accounted for in the CGRA.
- Net balance in CGRA, varies with the size of the asset base, its valuation and movement in the exchange rate and price of gold.
- CGRA provides a buffer against exchange rate/ gold price fluctuations. It can come under pressure if there is an appreciation of the rupee vis-à-vis major currencies or a fall in the price of gold.
- When CGRA is not sufficient to fully meet exchange losses, it is replenished from the CF.
Investment Revaluation Account Foreign Securities (IRA-FS)–
- The unrealised gains or losses on revaluation in foreign dated securities are recorded in the Investment Revaluation Account Foreign Securities (IRA-FS)
Investment Revaluation Account-Rupee Securities (IRA-RS)-
- The unrealised gains or losses on revaluation is accounted for in Investment Revaluation Account-Rupee Securities (IRA-RS).

2. Restructuring of loan

Subject: Economy

Section: Monetary Policy

Context:

With the unwinding of support measures, some of the restructured accounts might face solvency concerns, with the impact on banks’ balance sheets becoming clearer in the upcoming quarters, said the Reserve Bank of India’s latest annual report.

The RBI noted that the setting up of the National Asset Reconstruction Company Ltd.

(NARCL) is a step forward for resolution of large value legacy stressed assets,

Concept:

Restructuring of loans:

When a borrower is facing financial stress, the banks can modify the terms of the loan by a practice called restructuring/ recasting. This is done to prevent the borrower being declared a defaulter and the loan being classified as an NPA (non-performing asset).

Loans can be restructured by changing various parameters like:

Repayment period
Repayable amount
Number of instalments
Interest rate
Additional loans

Schemes:

Corporate Debt Restructuring (CDR)-The CDR system is the RBI’s first loan recast mechanism.
- It was framed in the early 2000s to recast corporate debts outside the purview of the Board for Industrial and Financial Reconstruction (BIFR) and the Debt Recovery Tribunals (DRT).
- It has a 3 tiered structure consisting of:
  - CDR Standing Forum– which is responsible for establishing policies and guidelines related to debt restructuring.
  - CDR Cell– for scrutinizing the recasting proposals from borrowers and banks. This was overseen by the erstwhile IDBI.
  - CDR Empowered Group– which takes the final decision on whether or not to approve the restructuring proposal.
Strategic Debt Restructuring Scheme (SDR):
- This is an improved version of the CDR introduced by the RBI.
- Under this scheme, the banks could convert the loan amount into 51% of equity. Once the firm becomes viable, this equity could then be sold to the highest bidder.
Sustainable Structuring of Stressed Assets (S4A) scheme-This is a restructuring scheme introduced, in 2015, for projects that are already up and running and has an exposure of 500 crore INR or more.

In 2018, the RBI scrapped numerous loan recasting schemes like CDR, S4A, SDR, Flexible Structuring of Existing Long Term Project Loans scheme and the Joint Lenders Forums scheme. It made Insolvency and Bankruptcy Code the main tool to deal with defaulters.

National Asset Reconstruction Company Limited (NARCL)

NARCL has been incorporated under the Companies Act and has applied to Reserve Bank of India for license as an Asset Reconstruction Company (ARC).

NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. PSBs will maintain 51% ownership in NARCL.

NARCL will acquire fully provisioned stressed assets by making an offer to the lead bank in a consortium of lenders; once the offer is accepted, NARCL will engage with India Debt Resolution Company Ltd. (IDRCL) for management and resolution of the stressed assets.

IDRCL is a service company/operational entity which will manage the asset and engage market professionals and turnaround experts. Public Sector Banks (PSBs) and Public FIs will hold a maximum of 49% stake and the rest will be with private sector lenders.

NARCL will acquire stressed assets worth about Rs 2 lakh crore from various commercial banks in different phases.

The NARCL will first purchase bad loans from banks.
It will pay 15% of the agreed price in cash and the remaining 85% will be in the form of “Security Receipts”.
When the assets are sold, with the help of IDRCL, the commercial banks will be paid back the rest.
If the bad bank is unable to sell the bad loan, or has to sell it at a loss, then the government guarantee will be invoked.

Security receipts are defined under section 2(1) (zg) of SARFAESI Act.

It means a receipt or other security, issued by an asset reconstruction company to any qualified buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder, thereof, of an undivided right, title or interest in the financial asset involved in securitization.

3. National Bank for Financing Infrastructure and Development (NABFID)

Subject: Economy

Section: Monetary Policy

Context:

The central bank also observed that the setting up of the National Bank for Financing Infrastructure and Development (NABFID) is expected to shift the burden of long-term financing away from banks.

Concept:

National Bank for Financing Infrastructure and Development (NABFID)

NBFID will be set up as a corporate body with authorised share capital of one lakh crore rupees.

Objectives:

To directly or indirectly lend, invest, or attract investments for infrastructure projects located entirely or partly in India.
It intends facilitating the development of the market for bonds, loans, and derivatives for infrastructure financing.

Functions of NBFID:

Extending loans and advances for infrastructure projects.
Taking over or refinancing such existing loans.
Attracting investment from private sector investors and institutional investors for infrastructure projects.
Organising and facilitating foreign participation in infrastructure projects.
Facilitating negotiations with various government authorities for dispute resolution in the field of infrastructure financing.
Providing consultancy services in infrastructure financing.

Source of Funds:

It may raise money in the form of loans or otherwise both in Indian rupees and foreign currencies, or secure money by the issue and sale of various financial instruments including bonds and debentures.
It may borrow money from the central government, Reserve Bank of India (RBI), scheduled commercial banks, mutual funds, and multilateral institutions such as the World Bank and Asian Development Bank.

Initially, the central government will own 100% shares of the institution which may subsequently be reduced up to 26%.

Management of NBFID:

NBFID will be governed by a Board of Directors.
The Chairperson will be appointed by the central government in consultation with RBI.
A body constituted by the central government will recommend candidates for the post of the Managing Director and Deputy Managing Directors.
The Board will appoint independent directors based on the recommendation of an internal committee.

Support from the Central Government:

The central government will provide grants worth Rs. 5,000 crore to NBFID by the end of the first financial year.
The government will also provide guarantee at a concessional rate of up to 0.1% for borrowing from multilateral institutions, sovereign wealth funds, and other foreign funds.
Costs towards insulation from fluctuations in foreign exchange (in connection with borrowing in foreign currency) may be reimbursed by the government in part or full.
Upon request by NBFID, the government may guarantee the bonds, debentures, and loans issued by NBFID.

Prior Sanction For Investigation And Prosecution:

No investigation can be initiated against employees of NBFID without the prior sanction of the central government in case of the chairperson or other directors, and the managing director in case of other employees.
Courts will also require prior sanction for taking cognisance of offences in matters involving employees of NBFID.

4. Sela Pass

Subject: Geography

Section: Mapping

Context:

Sela Pass

The Sela Pass is a high-altitude mountain pass located on the border between the Tawang and West Kameng districts in the Indian state of Arunachal Pradesh.
It has an elevation of 4170 m (13,700 ft) and connects the Indian Buddhist town of Tawang to Dirang and Guwahati.
The pass supports scarce amounts of vegetation and is usually snow-covered to some extent throughout the year.
Sela Lake, near the summit of the pass, is one of approximately 101 lakes in the area that are sacred in Tibetan Buddhism.
While Sela Pass does get heavy snowfall in winters, it is usually open throughout the year unless landslides or snow require the pass to be shut down temporarily.
Recently, a species of a new monkey found in Arunachal is named after Sela mountain passe. Sela macaque.

5. Centre to hand over 10 stolen antiquities, idols to Tamil Nadu govt

Subject: History

Section: Art and Culture

Context:

Centre to hand over 10 stolen antiquities, idols to Tamil Nadu govt

Among the 10 stolen antiquities are four objects retrieved from Australia in 2020-2022, and six from the US last year.
Once the state receives the idols, they will be installed at their original locations.
Significant among these idols is the Dvārapāla, a stone sculpture retrieved in 2020 from Australia, which belongs to the Vijayanagar dynasty dating to 15th-16th century, burgled from Moondreeswaramudayar Temple, Tirunelveli, in 1994.
There is also a sculpture of the Natarāja retrieved in 2021 from the US, stolen from the strong room of Punnainallur Arulmigu Mariamman Temple in Thanjavur.
There is a sculpture of Kankālamurti, also retrieved in 2021 from the US, which was stolen from Narasinganadhar Swamy Temple, Tirunelveli, in 1985.
Other notable works include sculptures of Nandikeshvara (13th century), the four-armed Vishnu (11th-12th century), Goddess Pārvati (11th-12th century), Siva and Pārvati (12th century) and Sambandar (11th century).
The Archaeological Survey of India (ASI) has been effectively pursuing the process of retrieval of antiquities from foreign lands, in conjunction with various missions abroad.
Between 2014 and 2021, more than 200 stolen antiquities have been returned, or are in the process of being returned, to India, as per ASI, which is the custodian of these objects once they return to India.

6. National Facility for Gene Function in Health & Disease

Subject: Science and Technology

Section: Biotechnology

Context: Recently, the National Facility for Gene Function in Health and Disease was inaugurated

National Facility for Gene Function in Health & Disease

Recently, the National Facility for Gene Function in Health and Disease was inaugurated in Pune by Dharmendra Pradhan, Union Minister of Education.
The NFGFHD has been set up at the Indian Institute of Science Education and Research (IISER), Pune and is supported by the Department of Biotechnology (DBT).
This will be one-of-its-kind large facilities providing a timely supply of animal models to researchers studying a range of diseases from cancer to diabetes.
Rats, mice and rabbits will be housed here, doing away with the need to import them.

Why the need?

To study diseases in a time-bound manner.
Dependence on small animals such as rats, mice and rabbits to study human diseases.
CRISPR / Cas9 systems can be used to generate mouse models, in which scientists will knock out existing genes and replace them with external or artificial genes that are linked to the disease.
It also has facilities for making embryonic stem cell-based models and traditional transgenic mice models, embryo and sperm cryopreservation, and in-vitro fertilization.
Thus, will also develop trained and skilled manpower.

7. Kosi River course change

Subject: Geography

Section: Maping

Context: Kosi River course change

Content

In India, a large flood forced the Kosi River to abandon its established channel for an older one in 2008, displacing 3 million people and claiming more than 250 human lives; such events are called avulsions.
Based on satellite data on 113 such avulsions, in 33 instances, rivers changed routes in the bases of mountains while descending onto unconfined valleys or open oceans.
Kosi river belongs to this category.
In the other two categories, the change occurs in the delta regions.
One is along the backwater zones, part of the river that flows differently because of the effects of the downstream sea.
The last category occurs in rivers with extreme sediment load.

Kosi River

The Kosi is a trans-boundary river which flows through China, Nepal and India.
It drains the northern slopes of the Himalayas in Tibet and the southern slopes in Nepal.
From a major confluence of tributaries north of the Chatra Gorge onwards, the Kosi River is also known as Saptakoshi for its seven upper tributaries.
These include the Tamor River originating from the Kanchenjunga area in the east and Arun River and Sun Kosi from Tibet.
The Sun Koshi’s tributaries from east to west are Dudh Koshi, Bhote Koshi, Tamakoshi River, Likhu Khola and Indravati.
The Saptakoshi crosses into northern Bihar, India where it branches into distributaries before joining the Ganges near Kursela in Katihar
Its unstable nature has been attributed to the heavy silt it carries during the monsoon season, and flooding in India has extreme effects.
Peaks located in the basin include Mount Everest, Kangchenjunga, Lhotse, Makalu, Cho Oyu and
The Kosi alluvial fan is one of the largest in the world. It shows evidence of lateral channel shifting exceeding 120 km (75 mi) during the past 250 years, via at least twelve major channels.
The river, which flowed near Purnea in the 18th century, now flows west of Saharsa.

8. Draft National Data Governance Framework Policy

Subject: Governance

Section: Schemes

Context: Draft National Data Governance Framework Policy

Draft National Data Governance Framework Policy

Aim – To enhance access, quality, and use of data, in line with the current and emerging technology needs of the decade.

The development comes after a strong criticism of the previous ‘Draft India Data Accessibility and Use Policy, 2022’ which It proposed to permit the licensing and sale of public data by the government to the private sector.

About NDGFP

The NDGFP standards and rules will ensure data security and informational privacy.
This policy shall be applicable to all government departments and entities and rules and standards prescribed will cover all data collected and being managed by any government entity.
It also said this policy would be applicable to all non-personal datasets and data and platform, rules, standards governing its access and use by researchers and start-ups.
State governments would also be encouraged to adopt the provisions of the Policy and rules, standards, and protocols as applicable.
An ‘India Data Management Office (IDMO)’ shall be set up under the Digital India Corporation (DIC) under MeitY and shall be responsible for framing, managing and periodically reviewing and revising the Policy.
For data anonymization, the IDMO will set and publish data anonymization standards and rules to ensure informational privacy is maintained.

9. Flex Fuel Vehicles

Subject: Environment

Section:

Context:

Flex Fuel Vehicles

Flexible fuel vehicles (FFVs) have an internal combustion engine and are capable of operating on gasoline and any blend of gasoline and ethanol up to 83%.
Other than an ethanol-compatible fuel system and a different powertrain calibration, FFVs are similar to their conventional gasoline-only counterparts.
While fuel economy (miles per gallon) is generally lower with increased levels of ethanol (engines are optimized for gasoline), many FFVs have improved acceleration performance when operating on higher ethanol blends.

FFVs in India

In India, Carmakers will most likely miss the advisory deadline issued by the Centre over start of production of FFVs by June as availability of ethanol as a fuel itself has been a problem for the government.
These vehicles, which can potentially run on 100 per cent petrol or 10 percent ethanol, were to get commercially launched before June-end.
Instead, they are working towards meeting the April 2023 deadline of making vehicles material-compliant for E20.
E20 is a blend of 20 per cent ethanol and 80 per cent petrol.
Carbon monoxide emissions were observed to be 50 percent lower in two-wheelers and 30 percent lower in four-wheelers compared to petrol under E20.

10. PM Swamitva Yojana

Subject: Governance

Section: Schemes

Context:

Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) scheme aims to map residential land ownership in the rural sector using modern technology like the use of drones.
It will create property ownership record of land in villages and empower rural population with grant of official document confirming their ownership of land titles.
Measurement: The residential land in villages will be measured using drones to create a non-disputable record. It is the latest technology for surveying and measuring of land. Drones will draw a digital map of every property falling within the geographical limits of a village and demarcate the boundaries of every revenue area.
The scheme will be carried out in close coordination with the Central Panchayati Raj ministry, Survey of India, Panchayati Raj departments and Revenue departments of various states.
Property card: Property card for every property in the village will be prepared by states using accurate measurements delivered by drone-mapping.
These cards will be given to property owners and will be recognised by the land revenue records department.
The scheme is piloted by the Panchayati Raj ministry of the Union government.
The property records for a village will also be maintained at the Panchayat level, allowing for the collection of associated taxes from the owners.
The money generated from these local taxes will be used to build rural infrastructure and facilities.

11. Govt may repurpose CoWin for its immunisation drive

Subject: Governance

Section: Schemes

Context: The Centre is planning to repurpose the CoWin platform for India’s Universal Immunisation Programme (UIP) and other national health programmes while continuing with its current function of recording Covid vaccination and issuing certificates.

Content:

CoWIN is a national platform for digital ecosystem to be used to effectively roll out and scale up the mechanism for COVID Vaccine Distribution System.
It was launched by the Ministry of Health and Family Welfare (MoHFW) to help agencies keep a track of Covid-19 vaccination programme and allow Indian citizens to apply for a Covid-19 vaccine shot.
As part of platform the government developed CoWIN-20 app for real-time monitoring of covid-19 vaccine.
It will integrate with real-time data from cold storage facilities with integration from eVIN (Electronic Vaccine Intelligence Network).

UNIVERSAL IMMUNIZATION PROGRAMME

Immunization Programme is one of the key interventions for protection of children from life threatening conditions, which are preventable. It is one of the largest immunization programme in the world and a major public health intervention in the country.
Immunization Programme in India was introduced in 1978 as Expanded Programme of Immunization (EPI)
The programme gained momentum in 1985 and was expanded as Universal Immunization Programme (UIP) to be implemented in phased manner to cover all districts in the country by 1989-90.
UIP become a part of Child Survival and Safe Motherhood Programme in 1992 Since, 1997, immunization activities have been an important component of National Reproductive and Child Health Programme and is currently one of the key areas under National Rural Health Mission (NRHM) since 2005
Under the Universal Immunization Programme, Government of India is providing vaccination to prevent seven vaccine preventable diseases i.e.
Diphtheria, Pertussis, Tetanus, Polio, Measles, severe form of Childhood Tuberculosis and Hepatitis B, Hiaemophilus influenza type b (Hib) and Diarrhea

12. CSK Fan Craze tie up for digital collectibles

Subject: Science and Technology

Section: Computer and IT

Context: Four-time IPL champions Chennai Super Kings (CSK) on Friday announced that it had signed an exclusive partnership with FanCraze, a cricket metaverse company, to issue digital collectibles and build

Web 3.0 experiences.

Concept –

A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable.
NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.
Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright.
NFTs give a person proof of ownership. This means that they can monetise the right to own
However, since the internet is so porous, owning an NFT doesn’t necessarily mean that a person has exclusive rights since anything digital can be duplicated endlessly.
The most common currencies used for an NFT transaction, which happen entirely online, are Bitcoin and Ether.
Since NFTs live on the blockchain, they’re easy to track. Tracking allows for transparency and the verification of their authenticity. The blockchain contains the entire history of all of its owners, past and present.
The token you have created will be listed in the marketplace for other people to bid. However, if you don’t want to opt for an auction, you can also set a fixed price on the selling page — and the royalties you want to receive from the initial sale as well as subsequent sales.

What is the difference between fungible and non-fungible tokens (NFTs)?

Both fungible tokens — like Bitcoin, Ether, Doge and other cryptocurrencies — and NFTs are a form of digital assets.
While cryptocurrencies carry monetary value, NFTs are valued as per their uniqueness, akin to a collector’s item.