Daily Prelims Notes 30 April 2022
- April 30, 2022
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
30 April 2022
Table OF Contents
- Heatwaves linked to man-made climate change
- What factors affect the Indian summer monsoon?
- El Niño-Southern Oscillation can affect tuna fish in the Indian Ocean, says FAO report
- How genetics helped crack a Sepoy Mutiny era mystery
- Assafoetida (Heeng) Plant
- Unusual Rainfall During October- November
- Disposable mask to improve cement
- Russian oil exports
- Core sector output growth slows downto 4.3% in March on high base effect
- Need to update IT Act; no privacy concern in CERT-In guidelines
- Amarnath Sehgal
- Declaration to keep Internet free
- Official Languages of State
- Farmer distress
- Reciprocal Cross-Holdings
- Currency and Finance Report
1. Heatwaves linked to man-made climate change
Subject: Environment
Context- India is gripped in the wrath of a long spell of heatwaves that too in the early month of April.
Concept-
- Three eminent scientists with expertise in how atmospheric, land and ocean systems were influenced by greenhouse gas emissions, drew upon their decades of research to explain how the accumulation of greenhouse gases in the atmosphere exacerbated temperatures in the oceans and the land and caused increased glacier melt, heightened sea level rise and led to changes in the biosphere.
What is a Heatwave and when is it declared?
- 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 and South Central parts of India.
- It is a condition of air temperature which becomes fatal to the human body when exposed.
- The IMD declares a heatwave when the maximum temperature crosses a certain threshold — 40°C in the plains, 37°C along the coast, and 30°C in hilly regions.
- Alternatively, a heatwave is declared if the maximum temperature rises by between 5°C and 6.4°C above normal.
- A severe heatwave is declared when the maximum temperature rises more than 4°C above normal.
- A third condition for a heatwave arises when an area records a maximum temperature of more than 45°C and up to 47°C on any given day.
How are they formed?
- Heatwaves form when high pressure aloft (3,000–7,600 metres) strengthens and remains over a region for several days up to several weeks.
- This is common in summer (in both Northern and Southern Hemispheres) as the jet stream ‘follows the sun’.
- On the equator side of the jet stream, in the upper layers of the atmosphere, is the high pressure area.
- Under high pressure, the air subsides (sinks) toward the surface, warming and drying adiabatically, inhibiting convection and preventing the formation of clouds.
- Reduction of clouds increases shortwave radiation reaching the surface.
- A low pressure at the surface leads to surface wind from lower latitudes that brings warm air, enhancing the warming.
- Alternatively, the surface winds could blow from the hot continental interior towards the coastal zone, leading to heat waves.
**** For Further Reading Refer To Optimize Ias DPN 28 April 2022.
2. What factors affect the Indian summer monsoon?
Subject: Geography
Section: Climatology
Context- Large-scale, global factors as well as short-term, local factors affect the summer monsoon.
Concept-
- Ongoing research over the last 30-50 years has identified many factors that affect the Indian summer monsoon.
- These range from long-term, large-scale global effects such as the El Niño, La Niña, Indian Ocean Dipole, and more, to more short-term and local effects such as dust clouds and even patterns of irrigation.
What are El Niño and La Niña? How do they affect the Indian monsoon?
- ‘El Niño’, meaning ‘the boy child’ , refers to a large-scale warming of the sea surface, along the central and east-central Pacific Ocean around the Equator.
- The ‘La Niña’ meaning the ‘the girl child’ refers to the opposite conditions – a cooling of the sea surface in the areas where the El Niño occurs.
- The two phenomena occur cyclically to form the El Niño Southern Oscillation or the ENSO.
- The warming in the tropical Pacific Ocean because of El Niño weakens the southeast trade winds flowing to the intertropical convergence zone over India.
- Since these winds are the main driving force of the Indian summer monsoon, El Niño events are associated with weak monsoons and lower than average rainfall.
- The La Niña has the opposite effect to the El Niño and is responsible for stronger monsoons and above-average rainfall.
Indian Ocean Dipole: Equatorial Indian Ocean Oscillation
- The Indian Ocean Dipole or IOD is caused by alternate warming and cooling in the Indian Ocean along the Equator from west to east, much like the ENSO.
- Positive IOD and EQUINOO events are associated with more rainfall as these events increase moisture transport from the southeastern parts of the Indian Ocean.
Atlantic sea surface temperature variability:
- A warming of the surface of the Atlantic Ocean weakens the monsoon, just as cooling of the ocean’s surface has the opposite effect.
- The effect of this phenomenon is known as the Atlantic Niño.
Mascarene High:
- The Mascarene High is a semi-permanent high-pressure zone in the south Indian Ocean, about 4,000 km from India, near the Mascarene Islands.
- The Mascarene High begins developing in mid-April and is a major factor in driving the circulation between the northern and southern hemispheres that powers the summer monsoon winds towards the Indian subcontinent from the Indian Ocean.
How does irrigation affect the Indian summer monsoon?
- According to a 2019 study in the journal Climate Dynamics, the trend of decreasing rainfall over the Indo-Gangetic plains could be due to the extensive irrigation in this area.
- The winter irrigation (November-March) actually strengthens the monsoon rains over the region for the following year and also reduces intra-seasonal variations in rainfall.
- However, with year-round irrigation, there is a noticeable decrease in the summer monsoon rainfall (June-September).
- This is likely because irrigation affects soil moisture levels and temperature simultaneously, which affects atmospheric stability.
Other short term factors affecting Monsoon Rainfall:
- Aerosols and dust are other local factors that have been shown to affect the monsoon rainfall in India.
- Dust transported to the Arabian sea from the Middle-Eastern deserts (the Sahara and the Sinai) could increase rainfall in India and south Asia over short time scale.
- Dust aerosols likely heat up the atmosphere over north Africa and west Asia, which increases the flow of moisture over India. This results in rainfall, usually within a week of the event, over central India.
- This warming induced by dust (from the Middle-Eastern deserts) over the Arabian Sea, acts as a source of energy to speed up the monsoon circulation towards the Indian region.
3. El Niño-Southern Oscillation can affect tuna fish in the Indian Ocean, says FAO report
Subject: Environment
Section: Climatology
Context- Along the same lines, the international food agency has published a report titled El Niño Southern Oscillation (ENSO) Effects on Fisheries and Aquaculture, which captures the impacts of ENSO events on global fisheries.
Concept-
Impact on fisheries in the Pacific:
- El Niño, described as an unusual and warm ocean current off the coast of Peru.
- In the Pacific Ocean, during the warm (El Niño) phase, the thickness of the top layer of the eastern Pacific Ocean classically increases, thus preventing cold and nutrient-rich deep waters from reaching the surface, dampening primary production, on which fish depend for food.
- In the eastern Pacific, small pelagic fish such as anchovy can be dramatically impacted while more tropical pelagic fish, like tuna or dolphin fish, are favoured and become more accessible to fishers close to the coast.
- Strong El Niño events has differential impacts on benthic and demersal species, which results in those that survive (for example scallops, octopus, shrimp and lobsters) as well as those that don’t (for instance crabs, clam and some hake species).
Impact on tuna in the Indian Ocean:
- El Niño events usually reduce monsoonal precipitation and alter the probability of extreme events, which may affect inland fisheries and aquaculture in India.
- The ENSO events affect tuna fish in the Indian Ocean. However, globally tuna catches are not impacted by ENSO.
- Tuna have the capability to cope with ENSO events by migrating to other areas.
- The Pacific and the Indian oceans are connected via the Indonesian Archipelago. But the main impact of El Niño on the Indian Ocean is mediated by the atmosphere.
- An El Niño usually induces warming over the Indian Ocean, as it reduces the cloud cover over this ocean by modifying the atmospheric circulation.
- El Niño is also responsible for the generation of the Indian Ocean Dipole in the Indian Ocean (though it is not the only generating mechanism), which is known to shift the tuna population.
- The impact of ENSO on tuna fisheries occurs indirectly mainly via the Indian Ocean Dipole, which results in a shift of the tuna population in the Indian Ocean rather than an overall decrease or increase over the entire basin.
- Tunas have a preferred temperature range.
- Tropical tunas (yellowfin, skipjack and bigeye) prefer higher temperatures than temperate tunas like albacore. Neritic tunas (found in shallow seas) have a variety of temperature ranges depending on the species.
- Warming water tends to change the distribution of the species.
- They move to areas where they can find their preferred water temperature. This may affect migrations, feeding and spawning (reproduction), and so may have a profound effect on the long-term viability of the populations.
About Tuna Fish:
- A tuna is a saltwater fish that belongs to the tribe Thunnini, a subgrouping of the Scombridae (mackerel) family.
- Tuna, opah and mackerel sharks are the only species of fish that can maintain a body temperature higher than that of the surrounding water.
- Found in warm seas, the tuna is commercially fished extensively as a food fish, and is popular as a blue water game fish.
4. How genetics helped crack a Sepoy Mutiny era mystery
Subject: Science & Tech
Section: Biotechnology
Context- Scientists tap DNA tech to ascertain the origin of the martyred soldiers.
Concept-
- The scientists used mitochondrial DNA and stable isotope analysis to ascertain the origin of the martyrs.
About Mitochondrial DNA:
- The mtDNA is composed of a double-stranded, circular DNA molecule, which is arranged into a single chromosome.
- Mitochondrial DNAs are molecules with high copy number, and a higher evolutionary importance compared to nuclear DNA.
- They have specific uniparental inheritance only from mothers to their child, which is useful for tracing matrilineal kinship in many generations.
About Mitochondrial DNA Analysis:
- Mitochondrial DNA (mtDNA) analysis is used by forensic scientists when samples such as teeth, bones, and hairs without a follicle (root) are collected from crime scenes or disaster areas.
- MtDNA is also used when nuclear DNA is present in very low quantities or is highly degraded and does not provide a full STR profile.
- Mitochondrial DNA is maternally inherited.
- The high sensitivity of mtDNA analysis allows forensic scientists to obtain information from old items of evidence associated with cold cases and small pieces of evidence containing little biological material.
Subject: Environment
Section: Ecology
Context- As Himalayan farmers grow the country’s first asafoetida plants, changing weather threatens to play spoilsport.
Concept-
- Farmers growing Ferula assafoetida, a perennial herb valued for its resin asafoetida (heeng), as part of an initiative by the Institute Of Himalayan Bioresource Technology.
- Although asafoetida has a long history of use in India, both as a flavouring agent and folk medicine, every pinch of it is imported from the Mediterranean regions of Central and East Asia whose cold arid regions offer a suitable environment for the plant to thrive even in the wild.
- Heeng is not cultivated in India. Government data states that India imports about 1,200 tonnes of raw heeng worth Rs 600 crore from Iran, Afghanistan and Uzbekistan.
- Regions with sandy soil, very little moisture and annual rainfall of not more than 200mm are considered conducive for heeng cultivation in India.
- Some initial experiments were conducted in high altitude districts of Mandi, Kinnaur, Kullu, Manali and Palampur in Himachal Pradesh.
About AssaFoetida (Heeng) Plant:
- Ferula assafoetida is a species of Ferula endemic to Southern Iran.
- F assafoetida grows in cool but dry conditions.
- The plant can withstand a maximum temperature between 35 and 40 degree, whereas during winters, it can survive in temperatures up to minus 4 degree. During extreme weather, the plant can get dormant.
- Though the plant can tolerate temperatures up to 35 degree C, it requires abundant sunshine and thrives in a temperature varying from 10-20 degree C.
- It is a soft- stemmed plant that grows up to 1.5 m in height and has dissected leaves with carrot-like roots.
- After five years, when the plant starts flowering around May, its stem is cut close to the crown and the root is laid bare.
- It exudes a milky substance called oleo gum resin, which is allowed to dry until it turns pale yellow or brown and then scraped off. These scrapings have a strong pungent smell.
- To turn it into an edible spice, the raw extract is mixed with wheat or rice flour.
- One plant produces 20 to 25 grams of asafoetida. While its price depends on the quality, 1 kg of pure asafoetida is sold up to ‘25,000 and 1 ha can earn about ‘10 lakh every five years.
What are some of the benefits of asafoetida?
- Published studies list out a range of medicinal properties of heeng, including relief for digestive, spasmodic and stomach disorders, asthma and bronchitis.
- The herb is commonly used to help with painful or excessive bleeding during menstruation and premature labour.
- Being an anti-flatulent, the herb is fed to new mothers.
6. Unusual Rainfall During October- November
Subject: Geography
Section: Climatology
Context- The catastrophe unleashed during October and November 2021 defies logic as none of the two rain-bearing weather systems was active during the period.
Concept-
- The south-west monsoon began withdrawing on October 6. Though it should have completely withdrawn from the country by October 15, the process continued till October 26, during which the wind system remained weak.
- The delayed withdrawal of the southwest monsoon also pushed the entry of the northeast monsoon, which brings rainfall over the southern peninsular region, towards the end of the month.
Then what caused the incessant rainfall?
- Analysts link the sustained rains to the interplay of a few unique weather events at a time when the atmospheric temperature was unusually high.
- The entire northern hemisphere, including the oceans, has remained warm from January through October in 2021, with the only exception of the Siberian High.
- The Arctic sea-ice loss this year led to high sea-level pressure over western Europe and northeastern China, which steered planetary waves southeastward instead of their eastward trajectory.
- These waves, which produce circulation anomalies in the upper atmosphere, entered India late in the season and delayed the monsoon withdrawal.
- Then La Niña kicked in on October 14. This cooling phase of the El Niño Southern Oscillation (enso) phenomenon, during which the sea surface temperatures over the eastern and central Pacific Ocean remain cooler than average, affects the trade winds which carry this weather disturbance across the world.
- In India, La Niña generally triggers the formation of low-pressure areas, which contribute to increased rainfall.
- Thus, a moisture-laden atmosphere combined with La Niña conditions is likely to have created conducive conditions for the formation of more low- pressure areas, and rainfall events.
- The other reason for the unusual rains is the warming up of the Arabian Sea over the past decade.
- This causes higher evaporation which increases the chances of the formation of a low-pressure area.
- Traditionally, the sea surface temperature of the Arabian Sea was 1.5-2 per cent lower than that of the Bay of Bengal. But the temperature has increased recently,
- Another weather anomaly that brought more than usual showers is the way low- pressure areas moved north and interacted with the Western Disturbances—extratropical storms in the upper layers of the atmosphere that travel from the Mediterranean region and bring most of the rainfall and snowfall to the north and northwestern India during the winter season.
7. Disposable mask to improve cement
Subject: Environment
Section: Pollution
Context: In a paper published in the journal, Materials Letters, a Washington State University research team showed that the mixture using mask materials was 47% stronger than commonly used cement after a month of curing.
Concept:
Production of cement is a carbon-intensive process, responsible for as much as 8% of carbon emissions worldwide. Microfibers are already sometimes added to cement concrete to strengthen it, but they’re expensive. The microfiber-reinforced concrete can potentially reduce the amount of cement needed for a project or make the concrete last longer, saving carbon emissions as well as money for builders and owners.
Made of a polypropylene or polyester fabric where it contacts the skin and an ultra-fine polypropylene fiber for the filtering layers, medical masks have fibers that can be useful for the concrete industry. If they are not reused, disposable masks can remain in the environment for decades and pose a risk for the ecosystem.
Subject: Economy
Section: External Sector
According to data published by the Centre for Research on Energy and Clean Air (CREA), The European Union was the top purchaser of fossil fuels from Russia, since the country invaded Ukraine in February 24 this year, with imports worth€44 billion that accounted for 71 percent of Russia’s exports of the commodity worth €63 billion in the period.
Largest importers
The largest importers were Germany (€ 9.1 billion), Italy (€6.9 billion), China (€6.7 billion), the Netherlands (€5.6 billion), Turkey (€4.1 billion) and France (€3.8 billion).
Interestingly, despite the West’s focus on India’s economic dealings with Russia, New Delhi’s purchase of crude and fossil fuel from the country in the period was much below$1 billion and even lower than purchases made by the US, according to data projected in the report.
9. Core sector output growth slows down to 4.3% in March on high base effect
Subject: Economy
Section: National Income
Context:
Output growth of the eight core industries output slowed in March 2022 to 4.3 per cent,largely due a high base effect of 12.6 per cent in the same month last year. The latest growth was also lower than 6 percent in February 2022.
Concept:
The six core industries that saw positive growth rate in Marchare natural gas (7.6%); refinery products (6.2%); fertilisers (15.3%); steel (3.7%); cement (8.8%); and electricity (4.9%).Only coal and crude oil saw contraction at 0.1% and 3.4%,respectively.
- The eight core industries included are- Coal, Crude oil, Natural Gas, Petroleum refinery products, Fertilizer, Cement, Steel, and Electricity generation.
- These eight industries comprise 40.27% of the weight of the items included in the Index of Industrial Production.
- These industries have a major impact on general economic activities and also industrial activities. They significantly impact most other industries as well. The core sector represents the capital base of the economy
Base effect:
- The base effect refers to the impact of the rise in price level (i.e. last year’s inflation) in the previous year over the corresponding rise in price levels in the current year (i.e., current inflation).
- If the price index had risen at a high rate in the corresponding period of the previous year leading to a high inflation rate, some of the potential rise is already factored in, therefore a similar absolute increase in the Price index in the current year will lead to a relatively lower inflation rates.
- On the other hand, if the inflation rate was too low in the corresponding period of the previous year, even a relatively smaller rise in the Price Index will arithmetically give a high rate of current inflation.
10. Need to update IT Act; no privacy concern in CERT-In guidelines
Subject: Science and Technology
Section: IT
Information Technology Act, 2000 — the country’s core legal framework that regulates entities on the internet such social media platforms and e-commerce companies.
Promulgated in 2000, the IT Act was developed to promote the IT industry, regulatee-commerce entities and prevent cybercrime. While over the years, certain sections of the Act have been updated, with the most recent one being changes to the social intermediary rules, the Act itself was last amended in 2008 to accommodate new developments in the IT space at that time.
Concept:
- CERT-In (the Indian Computer Emergency Response Team) is a government-mandated information technology (IT) security organization created in 2004.
- The purpose of CERT-In is to respond to computer security incidents, report on vulnerabilities and promote effective IT security practices throughout the country.
- According to the provisions of the Information Technology Amendment Act 2008, CERT-In is responsible for overseeing administration of the Act.
- CERT-In has been designated to serve as the national agency to perform the following functions in the area of cyber security:
- Collection, analysis and dissemination of information on cyber incidents.
- Forecast and alerts of cyber security incidents
- Emergency measures for handling cyber security incidents • Coordination of cyber incident response activities.
- Issue guidelines, advisories, vulnerability notes and whitepapers relating to information security practices, procedures, prevention, response and reporting of cyber incidents.
- Such other functions relating to cyber security as may be prescribed.
Critical information Infrastructure
- Information Infrastructure is the term usually used to describe the totality of inter-connected computers and networks, and information flowing through them
- Certain part of information infrastructure is dedicated for management / control etc. of infrastructure providers’ e.g. Power generation, Gas/oil pipelines, or support our economy or national fabric e.g. Banking / Telecom etc., and its failure or outage on our National well-being or National Security marks them as being Critical.
- Information infrastructure supporting the operations of Critical Infrastructure (CI) designates such infrastructure as Critical Information infrastructure (CII).
- IT Act, 2000: “Critical Information Infrastructure means the computer resource, the incapacitation or destruction of which, shall have debilitating impact on national security, economy, public health or safety”.
NCIIPC has broadly identified the following as ‘Critical Sectors’:-
- Power & Energy
- Banking, Financial Services & Insurance
- Telecom
- Transport
- Government
- Strategic & Public Enterprises
Subject: History
Section: Art and Culture
Context: 100 years of Amarnath Sehgal: The artist who captured the agony of Partition in bronze
- Amar Nath Sehgal (5 February 1922 – 28 December 2007) was a noted Indian modernist sculptor, painter, poet and art educator.
- Became an art educator, teaching at College of Art, Delhi and in time a noted modern sculptor to his generation.
- Later, he also became a pioneer of intellectual property rights especially moral rights in copyright for artists in India, after he fought a 13 year long legal case with Government of India.
- A bronze mural which he created for the Vigyan Bhavan, Delhi in the 1960s, was removed without his consent, during renovations in 1979. He filed the case at Delhi High Court in 1992, and the courts finally awarded him damages in 2005.
- 1993, he was awarded the Lalit Kala Akademi Fellowship by the Lalit Kala Akademi, India’s National Academy of Art, the highest honour in the fine arts conferred by the Government of India.
- In 2008, he was posthumously awarded the Padma Bhushan, by Government of India.
12. Declaration to keep Internet free
Subject: Polity
Context: India yet to sign Declaration to keep Internet free
Concept:
- Countries like the US, the European Union, the UK, Canada and France have signed ‘Declaration for the Future of the Internet’.
- Declaration is agreement to prevent digital authoritarianism.
- Declaration represents a political commitment among the partners to advance a “positive vision for the Internet and digital technologies.”
- Declaration’s principles include commitment to protecting human rights and fundamental freedoms of all people, promoting a global Internet that advances the free flow of information, advancing “inclusive and affordable” connectivity, promoting trust in the global digital ecosystem, including through protection of privacy and protecting, strengthening and the multi-stakeholder approach to governance that keeps the Internet running for the benefit of all.
- India, China and Russia among large that are nations not part of this Declaration.
13. Official Languages of State
Subject: Polity
Section: Msc
Context: The Union Home Minister recently urged the use of Hindi as the lingua franca, rather than English, in inter-State communication.
Concept:
- Part XVII of the Constitution deals with the official language in Articles 343 to 351
- The Constitution does not specify the official language of different states. In this regard, it makes the following provisions.
- The legislature of a state may adopt any one or more of the languages in use in the state or Hindi as the official language of that state. Until that is done, English is to continue as official language of that state.
- Under this provision, most of the states have adopted the major regional language as their official language. For example, Andhra Pradesh has adopted Telugu, Kerala—Malayalam, Assam—Assamese, West Bengal—Bengali, Odisha—Odia.
- Notably, the choice of the state is not limited to the languages enumerated in the Eighth Schedule of the Constitution.
- For the time being, the official language of the Union (i.e., English) would remain the link language for communications between the Union and the states or between various states. But, two or more states are free to agree to use Hindi (instead of English) for communication between themselves.
- The Official Language Act (1963) lays down that English should be used for purposes of communication between the Union and the non-Hindi states (that is, the states that have not adopted Hindi as their official language). Further, where Hindi is used for communication between a Hindi and a non-Hindi state, such communication in Hindi should be accompanied by an English translation.
- When the President (on a demand being made) is satisfied that a substantial proportion of the population of a state desire the use of any language spoken by them to be recognised by that state, then he may direct that such language shall also be officially recognised in that state. This provision aims at protecting the linguistic interests of minorities in the states.
Subject: Economy
Section: Indian Economy
Context:
The National Bank of Agriculture and Rural Development (Nabard) will create a Farmer Distress Index (FDI)to identify the farmers, who are in real need of support and assistance.
Need?
According to a recent study by Nabard, more than 60% of the ‘very high’ and ‘high’ distress small and marginal farmers did not get loan waiver benefits in the last many years.
Farmers with largely non-irrigated lands who grow lower-value crops, especially those which are not procured by the government at minimum support prices have little access to the financial system.
The Index
The index will integrate high frequency data on weather conditions, climatic conditions, debt burden on farmers, agricultural commodities and the market.
It would measure variables such as monsoon rains, excessive rainfalls, drought and dry spells, variations in temperature and soil moisture, yield of major crops in each district, area under irrigation, depth of underground water and unusual frost. Marketing opportunities available to the farmer including MSP support will also be assessed.
The index will also have metrics on the existing level of debt burden of the farmers, their access to crop insurance.
Subject: Economy
Section: Indian Economy
Context:
A clause in the Reserve Bank of India’s Master Circular on Basel-III Capital Regulations relating to ‘Reciprocal Cross-Holdings in the Capital of Banking, Financial, and Insurance Entities’ may prevent banks from going all out to invest in LIC’s IPO.
Concept :
According to the Circular, banks are required to apply a “corresponding deduction approach” to reciprocal cross-holdings in the capital of other banks, financial institutions, and insurance entities.
As LIC has investments in the form of equity, Additional Tier (AT)-1 and Tier-2 capital in various banks, investments made by the latter in the corporation’s upcoming IPO could impact their capital adequacy.
So, banks will need to assess whether the returns they may get from investing in LIC’s IPO more than offsets the capital deduction impact of the investment. This will require full deduction from the regulatory capital of the investing entity (bank) to the extent of the investment to be made by them in LIC.
Concept:
Reciprocal cross holding means a holding by a bank of the regulatory capital fund instruments or other capital instruments issued by financial sector entities where those entities also hold own funds instruments of the regulatory capital issued by the bank.
Law?
In regards to cross holding of capital where the Basel is of the view that reciprocal cross-holdings of bank capital artificially designed to inflate capital position of banks should be deducted, RBI has said that a 10% limit of the total capital be prescribed up to which cross-holdings of capital and other regulatory investments could be permitted and any excess investments above the limit would be deducted from total capital.
Bank Capital
According to Basel-III norms, banks’ regulatory capital is divided into Tier 1 and Tier 2, while Tier 1 is subdivided into Common Equity Tier-1 (CET-1) and Additional Tier-1 (AT-1) capital.
- Tier 1 capital is a bank’s core capital and includes disclosed reserves—that appears on the bank’s financial statements—and equity capital. This money is the funds a bank uses to function on a regular basis and forms the basis of a financial institution’s strength.
- Common Equity Tier 1 capital includes equity instruments where returns are linked to the banks’ performance and therefore the performance of the share price. They have no maturity. CET1 is the highest quality of capital, and can absorb losses immediately as they occur. This category includes common shares, retained earnings, accumulated other comprehensive income, and qualifying minority interest, minus certain regulatory adjustments and deductions.
- Additional Tier 1 Capital includes noncumulative, non redeemable preferred stock and related surplus, and qualifying minority interest. These instruments can also absorb losses, although they do not qualify for CET1.
- Together, CET and AT-1 are called Common Equity. Under Basel III norms, minimum requirement for Common Equity Capital has been defined.
- Tier 2 capital is a bank’s supplementary capital. Undisclosed reserves, subordinated term debts, hybrid financial products, and other items make up these funds.
16. Currency and Finance Report
Subject: Economy
Section: Indian Economy
Context:
In its recent report “Currency and Finance Report” RBI has said that it would take more than a decade to recover from economic losses due to covid-19.
Details:
The pre-COVID trend growth rate works out to 6.6% and excluding the slow down years it works out to 7.1%. Taking actual growth rate of (-) 6.6% for 2020-21,8.9% for 2021-22 and assuming growth rate of 7.2% for 2022-23 and 7.5% beyond that, India is expected to overcome COVID-19 losses in 2034-35.
The output loss for individual years have been worked out at Rs19.1 lakh crore, Rs 17.1 lakh crore and Rs 16.4 lakh crore for 2020-21,2021-22 and 2022-23, respectively.