Daily Prelims Notes 8 May 2023
- May 8, 2023
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
8 May 2023
Table Of Contents
- MSCI tweak: What triggered the sell-off in HDFC twins?
- Chartered accountants, company secretaries now under ambit of money laundering law
- Territorial Army
- Justice Balakrishnan Commission
- Space Science and Technology Awareness Training (START)
- Indian prisoner dies in Pakistan a week before repatriation
1. MSCI tweak: What triggered the sell-off in HDFC twins?
Section: Monetary Policy
Market participants said MSCI intends to delete HDFC from MSCI Global Standard Index and at the same time add HDFC Bank to the large cap segment of MSCI Global Standard Indexes
This means that the weight of the merged entity will be lower than what HDFC Ltd currently has in the MSCI India Index.
Currently HDFC Ltd weight is 6.74 per cent in MSCI India Index and as per our preliminary calculations the merged entity would have slightly lower weight of about 6.5 per cent.
HDFC Bank will merge parent HDFC in its ambit to enable seamless delivery of home loans and leverage on the large base of customers of HDFC Bank.
The merger is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. It will also enable the underwriting of larger ticket loans, including infrastructure loans, an urgent need of the country.
What is MSCI India Index?
Morgan Stanley Capital International (MSCI) has set up many global indices, one of which is a composite of Indian stocks-the MSCI India index.
Many reputed Indian companies across sectors are included in the index. These companies amount to at least 85% of the total equity offered by Indian companies.
How is the MSCI India Index formed?
The MSCI India is a weighted index just like the Sensex. This means every stock on the index has a particular weightage, which depends on a number of parameters.
The three most important are: the returns (dividend) that investors receive on the shares; the company’s total turnover, and its market capitalization.
Why FIIs use MSCI India index?
- Foreign investors want international markets to invest their funds. They want to know more about the stability and volatility in the prices of shares.
- The MSCI India Index acts as an indicator of the soundness of the Indian capital market.
- The weightage of a company depends on its performance in different categories such as the total turnover, market capitalization and dividend return.
- Greater the weightage, higher will be the amount of foreign investment into the stocks. In simple words, the amount of funds that a foreigner will invest in an Indian share will be directly dependent on the stock’s weightage on the MSCI index. If the weightage of a company is reduced then there is always a possibility of foreign investors withdrawing their funds.
2. Chartered accountants, company secretaries now under ambit of money laundering law
Section: Fiscal Policy
Notifying changes to the Prevention of Money Laundering Act, the Finance Ministry has brought in practicing chartered accountants, company secretaries, and cost and works accountants carrying out financial transactions on behalf of their clients into the ambit of the money laundering law.
Lawyers and legal professionals, however, seem to have been kept out in the new definition of entities covered under the PMLA.
Prevention of Money Laundering Act
- The PMLA was enacted in 2002 and it came into force in 2005. The chief objective of this legislation is to fight money laundering, that is, the process of converting black money into white.
- The Act enables government authorities to confiscate property and/or assets earned from illegal sources and through money laundering.
- Under the PMLA, the burden of proof lies with the accused, who has to prove that the suspect property/assets have not been obtained through proceeds of crime.
- The provisions of this act are applicable to all financial institutions, banks(Including RBI), mutual funds, insurance companies, and their financial intermediaries.
PMLA Amendment 2019
- The amendment seeks to treat money laundering as a stand-alone crime.
- Till now Money Laundering was not an independent crime; rather depended on another crime, known as the ‘predicate offence’ or ‘scheduled offence’, the proceeds of which are made the subject matter of crime of money laundering.
- It also expands the ambit of “proceeds of crime” to those properties which “may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence.
- The most crucial amendments are the deletion of provisions in sub-sections (1) of Section 17 (Search and Seizure) and Section 18 (Search of Persons).
- These provisions required the pre-requisite of an FIR or charge sheet by other agencies that are authorised to probe the offences listed in the PMLA schedule.
- An explanation is added to Section 45 that clarifies that all PMLA offences will be cognisable and non-bailable.
- Therefore, ED will be empowered to arrest an accused without a warrant, subject to certain conditions.
- Another vital amendment makes concealment of proceeds of crime, possession, acquisition, use, projecting as untainted money, or claiming as untainted property as independent and complete offences under the Act.
- Section 72 will now give power to the Centre to set up an Inter-Ministerial Coordination Committee for inter-departmental and inter-agency coordination for operational and policy level cooperation, for consultation on anti-money laundering and counter-terror funding initiatives.
Recent Changes in notification:
An activity will be recognised under the PMLA if these professionals carry out financial transactions on behalf of their client such as
- buying and selling of any immovable property;
- managing of client money, securities or other assets;
- management of bank, savings or securities accounts;
- organisation of contributions for the creation, operation or management of companies;
- creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities
Earlierthe government had widened the ambit of reporting entities under money laundering provisions to incorporate more disclosures for non-governmental organisations and defined politically exposed persons (PEPs) under the PMLA in line with the recommendations of the FATF
The new changes have been made in the sub-clause (vi) of clause (sa) of sub-section (1) of section 2 of the PMLA, which defines different categories of persons covered under the law.
The financial professionals who have obtained certificates of practice as chartered accountants, company secretaries, cost and work accountants would be defined as relevant persons for reporting transactions on behalf of their individual clients.
The amendments are expected to aid investigative agencies further in their probe against dubious transactions involving shell companies and money laundering,
As per the FATF recommendations relating to designated non-financial businesses and professions to be followed by member countries, professionals such as lawyers, notaries, other independent legal professionals and accountants should be required to report suspicious transactions when, on behalf of or for a client, they engage in a financial transaction linked to buying and selling of real estate;
Managing of client money, securities or other assets; management of bank, savings or securities accounts; organization of contributions for the creation, operation or management of companies; creation, operation or management of legal persons or arrangements, and buying and selling of business entities
Countries are strongly encouraged to extend the reporting requirement to the rest of the professional activities of accountants, including auditing,” the FATF recommendations stated
Financial Action Task Force
- The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 during the G7 Summit in Paris.
- The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
- Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
- Member Countries: it consists of thirty-seven member jurisdictions. India is one of the members.
- Defence Minister Rajnath Singh has approved the posting of women officers with Engineer Regiments of the Territorial Army (TA) along the Line of Control (LoC).
- It aims to commemorate its raising by the first Governor General C Rajagopalachari on this day in 1949.
- The Territorial Army (TA) was raised by the Britishers in 1920 through Indian Territorial Act of 1920 and it was org into two wings namely – ‘The Auxiliary Force‘ for Europeans & Anglo-Indians and ‘The Indian Territorial Force‘ for Indian Volunteers.
- After Independence Territorial Army Act was passed in 1948 and the Territorial Army was formally inaugurated by the first Indian Governor General Shri C Rajagopalachari on 09 Oct 1949.
- The Territorial Army is part of Regular Army and its present role is to relieve the Regular Army from static duties and assist civil administration in dealing with natural calamities and maintenance of essential services in situations where life of the communities is affected or the Security of the Country is threatened and to provide units for Regulars Army as and when required.
- Any citizen between the age of 18-42 can be a part of the service.
- The pensionable age for a soldier below officer’s rank in the TA is the same as that of a regular soldier — 15 years.
- The TA units were also actively involved in operations during the 1962, 1965 and 1971 wars.
- Since 2020, the Indian military has been recalibrating the TA for better operational and intelligence roles, especially in the Andaman Islands to keep an eye out for possible Chinese intrusions in the region.
- Motto: The motto of the Territorial Army of India is ‘SavdhaniVaShoorta’ (Vigilance and Valour).
4. Justice Balakrishnan Commission
- Former Chief Justice of India K. Balakrishnan, who heads the Inquiry Commission into whether Dalit converts to religions other than Sikhism or Buddhism should get Scheduled Caste status, said his panel could deliver its report in a year, and that too before the election year of 2024.
- The Union Government has appointed a three-member commission, headed by former Chief Justice of India K G Balakrishnan, to consider the possibility of granting SC status to “new persons who have historically belonged to the Scheduled Castes’’ but have converted to religions other than Hinduism, Buddhism and Sikhism.
Need Of The Commission:
- The new commission has been set up at a time when the Supreme Court is hearing a PIL filed by the National Council of Dalit Christians (NCDC), which has been fighting for SC status since 2020 — there have been numerous other cases filed in the apex court on the matter since 2004. In August, the Supreme Court had directed the Centre to submit its current position on the issue.
- The contention of Dalit Christian and Muslim organisations has been that these communities continue to face discrimination.But, these organisationscriticised the latest move by the Centre as a “delaying tactic’’.
- The commission will also examine the implications of any decision in this matter on existing SCs, and the changes they go through on converting to other religions in terms of customs, traditions, social and other discrimination, and deprivation.
Constitution Order of 1950
- When enacted, the Constitution (Scheduled Castes) Order of 1950, initially provided for recognizing only Hindus as SCs, to address the social disability arising out of the practice of untouchability.
- The Order was amended in 1956 to include Dalits who had converted to Sikhism and once more in 1990 to include Dalits who had converted to Buddhism.
- Both amendments were aided by the reports of the Kaka Kalelkar Commission in 1955 and the High-Powered Panel (HPP) on Minorities, Scheduled Castes, and Scheduled Tribes in 1983 respectively.
- The 1950 Order (post amendments in 1956 and 1990), mandates that anybody who is not a Hindu, Sikh or Buddhist cannot be granted SC status.
Ranganath Report 2007
- The recommendation of Scheduled Caste reservation for Dalit converts to Christianity and Islam was made in the 2007 report of the Justice Ranganath Mishra Commission for Religious and Linguistic Minorities.
- Dalit Christians and Muslims face discrimination not only from upper-caste members of their own religion but also from the broader Hindu-dominated society.
- The exclusion of Dalit converts to Christianity and Islam from the SC category violates the constitutional guarantee of equality and is against the basic tenets of these religions, which reject caste discrimination.
- The denial of SC status to Dalit converts to Christianity and Islam has led to their socio-economic and educational backwardness and has deprived them of access to reservations in education and employment opportunities (as provided under article 16).
- Centre Stand :
- The Centre had discredited the report, but the apex court believes it contains valuable information that could help determine if excluding Dalit converts from the SC category is unconstitutional according to the Constitution Order of 1950.
5. Space Science and Technology Awareness Training (START)
Subject : Science and technology
Section :Space technology
- The Indian Space Research Organisation (ISRO) has announced a new introductory-level online training programme called Space Science and Technology Awareness Training (START).
- The START programme is part of the ISRO’s efforts to enable Indian students to become professionals in Space Science and Technology, as the organisation’s Space Science exploration programme continues to expand into new domains.
- START is aimed at postgraduate and final-year undergraduate students of Physical Sciences and Technology.
- The programme will cover various domains of Space Science, including Astronomy and Astrophysics, Heliophysics and Sun-Earth interaction, Instrumentation, and Aeronomy. It will be delivered by scientists from Indian academia and ISRO centres.
- The programme is intended to provide students with an introductory-level training in Space Science and Technology, giving them an overview of different facets of the field, research opportunities, and career options.
- The training will also emphasize the cross-disciplinary nature of Space Science, giving students insights into how the individual aptitudes can be applied to the field.
- The lectures will also cover topics on the Indian Space Science exploration program and research opportunities in Space Science and technologies.
6. Indian prisoner dies in Pakistan a week before repatriation
Subject: International Relations
Section: International Convention
- An Indian prisoner, who was to be repatriated next week, died in a hospital in Karachi, civil society activists revealed on Sunday.
- The deceased, Zulfiqar, was expected to enter India along with 199 fishermen set to be released by Pakistan.
Agreement on Consular Access
- In 2008, India and Pakistan signed the Agreement on Consular Access.
- Section 4 of the agreement states that the governments of both nations would provide consular access. This has to be provided within three months to citizens of another country, under arrest, detention, or imprisonment in the other country.
- Section 5 of the agreement provides that within one month of confirmation of the national status and completion of sentences both governments should release and return people.
Vienna Convention on Consular Relations of 1963.
- The Vienna Convention on Consular Relations is an international treaty that defines consular relations between independent states.
- A consul, (who is not a diplomat) is a representative of a foreign state in a host country, who works for the interests of his countrymen.
- Article 36 of the Vienna Convention states that foreign nationals who are arrested or detained in the host country must be given notice without delay of their right to have their embassy or consulate notified of that arrest.
- If the detained foreign national so requests, the police must fax that notice to the embassy or consulate, which can then verify the person.
- The notice to the consulate can be as simple as a fax, giving the person’s name, the place of arrest, and, if possible, something about the reason for the arrest or detention.