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Day: March 16, 2018

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March 2018
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RBI Notifications Finance and Banking

{op-ed snap] Credit tangle


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: LoUs, Letters of Comfort, etc.

Mains level: Possible effect of the banning of LoUs by the RBI.


RBI’s notification on LoUs

  1. The Reserve Bank of India has decided to ban such instruments as well as letters of comfort issued by bankers to businesses for international transactions
  2. This is the first major step by the central bank on the banking fraud issue,
  3. apart from asking banks to ensure there are no slip-ups between their core banking systems and the SWIFT mechanism used for international money transfers

Why is the industry unhappy with the decision?

  1. Industry is unhappy with the RBI decision as this would raise the cost for importers, who will now need to rely on more expensive instruments such as bank guarantees and letters of credit
  2. The move will also impact the competitiveness of exporters who import raw materials for their products
  3. Ban of LoUs will impact the $85 billion buyers’ credit market that was mostly conducted in accordance with the law of the land

RBI’s argument against the RBI’s inability to detect the fraud

  1. RBI’s governor stressed that the RBI didn’t have adequate powers to regulate public sector banks, and
  2. it could not remove any of their directors or liquidate such a lender, as it can in the case of private sector banks
  3. He made an eloquent demand that the owner of public sector banks (that is, the government) must consider making the RBI’s powers over banks ‘ownership-neutral’ and say what could be done with these banks
  4. The RBI’s stance is valid, as is its discomfort with knee-jerk reactions and the blame games since the fraud came to light

The way forward

  1. Perhaps the RBI could have tightened the norms for LoUs and introduced safeguards based on the latest learnings
  2. It is still not too late to do that


Letter of Comfort (LoC)

  1. A Letter of Comfort (LoC) is a letter issued to a lending institution by a stakeholder of the company acknowledging support of the attempt for financing asked by that company
  2. A letter of comfort does not imply that the parent company guarantees repayment of the loan being sought by the subsidiary company
  3. It merely gives reassurance to the lending institution that the parent company is aware of the credit facility being sought by the subsidiary company, and supports its decision
Fertilizer Sector reforms – NBS, bio-fertilizers, Neem coating, etc. Agriculture

DBT scheme for fertilizer subsidies gets cabinet nod


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Direct benefit transfer (DBT), Urea subsidy scheme

Mains level: Benefits of DBT scheme in various sectors


DBT for fertilizer subsidy payments

  1. The government has decided to implement direct benefit transfer (DBT) for fertilizer subsidy payments across India
  2. By this, the government seeks to prevent diversion of fertilizers for commercial use and generate data on the usage of the nutrients to help farmers

Rollout already began in most states

  1. The department of fertilizers has already rolled out the programme in most states
  2. Data obtained from it shows that transaction time and alleged instances of overcharging by retailers have come down
  3. Also, offtake has moderated, suggesting that overuse of subsidized fertilizers and their diversion for industrial use have declined

DBT model for fertilizer

  1. The DBT model for fertilizers, however, is slightly different from that for others such as cooking gas, in which the ultimate consumer gets the entitlement in their bank account
  2. DBT would entail 100% payment to fertilizer companies on sale of fertilizers to farmers at subsidized rates
  3. This is done because farmers cannot be forced to pay large amounts upfront for fertilizers and wait for reimbursement

Urea subsidy scheme

  1. The cabinet has also approved the continuation of the urea subsidy scheme for three years till 2020
  2. There will be no urea price hike till 2020
  3. The subsidy for locally produced and imported urea is part of the annual fertilizer subsidy outgo
Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc Industries

Trai planning a UPI-like system for public Wi-Fi hot spots


Mains Paper 3: Science & Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology

From UPSC perspective, the following things are important:

Prelims level: TRAI, Unified Payments Interface, WANI system

Mains level: Efforts for ensuring universal internet coverage in India


Policy for public Wi-Fi hotspots

  1. The Telecom Regulatory Authority of India (TRAI) aims to develop a framework similar to the Unified Payments Interface (UPI) to aid the rollout of public Wi-Fi hotspots in the country
  2. It has been conducting pilots for Wi-Fi hotspots in Noida and Bengaluru

A target of 5 lakh hotspots

  1. Department of telecommunications (DoT) which has separately set an ambitious target of deploying 500,000 Wi-Fi hotspots by December across the country from the current 38,000

How will the system work?

  1. TRAI is working on a framework which will ensure that the Wi-Fi hotspots can be provided in a seamless manner, in a grid situation
  2. It will be prescribing interoperable standards to authenticate the user, payment mechanism, and unbundling (operations)
  3. What UPI is for the payment ecosystem, this framework will be for the Wi-Fi hotspot ecosystem
  4. Launched in 2016, UPI is a system that powers multiple bank accounts into a single mobile app (of any participating bank), merging several banking features, seamless fund routing and merchant payments under one hood

Draft design of public Wi-Fi network project

  1. In July last year, Trai issued a draft design of public Wi-Fi network project under which any entity with a valid permanent account number (PAN) would be allowed to set up public data offices (PDOs)
  2. The draft design also provided detailed technical specifications for compliance by various providers to ensure full Wi-Fi access network interface (WANI) system interoperability
  3. Trai had also recommended a central registry managed by either itself or DoT or an entity approved by either of them containing information about the PDOs
Central Public Sector Undertakings : Policy Wise Finance and Banking

Govt discusses handing maintenance of seized properties to NBCC


Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: National Building Construction Corporation (NBCC), Prevention of Money Laundering Act (PMLA)

Mains level: Central government undertakings and their functioning


Properties confiscated under PMLA to be transferred

  1. The government is considering handing the task of maintaining, managing and earning revenue from immovable properties attached in money laundering cases to the National Building Construction Corporation (NBCC)
  2. These properties were seized, frozen or confiscated under the Prevention of Money Laundering Act (PMLA)


  1. The proposal to mandate NBCC to do the job was at the behest of the ED and mooted by the finance ministry about six months ago
  2. It was felt that lack of proper maintenance led to the decay of the properties and the agency had to continuously spend on their upkeep
  3. As of now, the ED manages the properties confiscated by it but does not have experience in how to do so

Provisions in PMLA

  1. There is no provision under PMLA for rental to earn revenue
  2. The government may consider amending necessary laws to ensure better upkeep of confiscated properties


National Building Construction Corporation (NBCC)

  1. It is a blue-chip Government of India Navratna Enterprise under the Ministry of Urban Development
  2. NBCC has a specialized subsidiary to handle tasks for managing the seized land the government and from central PSUs
  3. It is the sole land authorized agency for central undertakings
  4. The Company’s present areas of operations are categorized into three main segments

(i) Project Management Consultancy (PMC)

(ii) Real Estate Development

(iii) EPC Contracting

Oil and Gas Sector – HELP, Open Acreage Policy, etc. Energy

India likely to push for dropping ‘Asian premium’ on oil prices


Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora.

From UPSC perspective, the following things are important:

Prelims level: Asian premiumInternational Energy Forum, Oil Producing and Exporting Countries (OPEC)

Mains level: India’s high dependence on oil imports and measures to develop alternative power sources


Ending discriminatory premium on oil

  1. India is likely to lobby heavily for an end to the discriminatory “Asian premium” on oil prices and a “responsible” price mechanism
  2. The 16th International Energy Forum Ministerial Meeting will be held in New Delhi, India from 10-12 April 2018

IEF conference

  1. The IEF represents 90% of world consumption and production of oil and gas
  2. Key Oil Producing and Exporting Countries (OPEC) including Saudi Arabia and Iran’s petroleum ministers will attend the conference

What is Asian premium?

  1. IEF countries distinguished consumers in Asia from the U.S. and European countries in deciding oil prices
  2. The demands to abolish it have met with little success

Focus on renewable energy

  1. The thrust of the IEF conference will be on moving away from fossil fuels
  2. The outcomes would revolve around the whole issue of transition: of moving to electric vehicles, or renewables or decarbonization


International Energy Forum

  1. IEF is the world’s largest recurring gathering of energy ministers
  2. It is unique in that participants not only include IEA and OPEC countries, but also key international actors such as Brazil, China, India, Mexico, Russia, and South Africa
  3. The IEF is promoted by a permanent Secretariat based in the Diplomatic Quarter of Riyadh, Saudi Arabia
  4. The 16th IEF International Energy Forum Ministerial will take place on 10-12 April in New Delhi under the theme “The Future of Global Energy Security: Transition, Technology, Trade and Investment”
RBI Notifications Finance and Banking

‘RBI norms may push power projects worth Rs. 2.5 lakh crore into bankruptcy’


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Possible effect, of the decision, on stressed power projects.


Possible effect of scrapping loan restructuring programmes by the RBI

  1. According to experts, more than 50,000 MW of stressed power projects, worth more than Rs. 2.5 lakh crore, with bank exposure of more than Rs. 1.75 lakh crore, are likely to face bankruptcy proceedings
  2. As the RBI had scrapped all loan restructuring programmes in February

Government’s reaction on the RBI’s decision

  1. The government has called for a high-level meeting of all the stakeholders, including public and private sector power firms, lenders, coal suppliers and railways to discuss the gravity of the situation


  1. The RBI had recently scrapped all loan restructuring programmes and it’s recent guidelines on ‘Resolution of Stressed Assets’
  2. Revised Framework’ mandates the banks to classify even a day’s delay in debt servicing as default
WTO and India Global Groupings and Conventions

U.S. challenges India’s export subsidies at WTO


Mains Paper 2: IR | Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: Targeted Schemes

Mains level: Reason behind this challenge against Indian Subsidies.


US challenges India’s export subsidies

  1. The US has challenged India’s export subsidy programmes at the WTO
  2. The US had requested dispute settlement consultations with the Government of India at WTO on the issue
  3. It is different: Unlike the many trade disputes between India and America that are sector specific or product specific,
  4. the new move is broad and sweeping in targeting the whole range of Indian export subsidy programmes

Targeted Schemes

  1. A statement from the (United States Trade Representative)USTR has listed
    (1) the Merchandise Exports from India Scheme;
    (2) Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme;
    (3) Special Economic Zones;
    (4) Export Promotion Capital Goods Scheme, and a duty free imports for exporters programme
    as distorting trade in a way that allows Indian exporters “to sell their goods more cheaply to the detriment of American workers and manufacturers”

Argument against India

  1. According to the US, the above export subsidy programmes harm American workers by creating an uneven playing field on which they must compete
Euthanasia : Euphemism for Killing? Constitution

[op-ed snap] Is active euthanasia the next step?


Mains Paper 2: Governance | Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

From UPSC perspective, the following things are important:

Prelims level: Not mcuh

Mains level: The newscard talks against the APD. It supports the argument that there is no point of not allowing active euthanasia. As the passive euthanasia is legally and morally not much different from active euthanasia.



  1. If passive euthanasia is a guaranteed fundamental right, a rigid “active” versus “passive” euthanasia distinction (APD) is analytically unsustainable

Basis of the Common Cause v. Union of India decision

  1. The SC expounded the basis of its 2011 ruling in Aruna Shanbaug v. Union of India ,
  2. which permitted “passive” euthanasia, including “involuntary” passive euthanasia for mentally incompetent patients, in certain terminal cases
  3. Ruling that Article 21 of the Constitution guaranteed the “right to die with dignity”, the court also issued interim guidelines to enforce individuals’ living wills in case of future incompetence
  4. Aruna and Common Cause have incorporated the judicial APD evolved primarily by U.K. courts

There is not much difference between active and passive euthanasia

  1. There is no articulable reason why “withdrawal” (as opposed to “withholding”) of current treatment isn’t an illegal “active” decision that hastens death from the underlying cause
  2. It is much like a lethal injection that also accelerates imminent death
  3. More importantly, it may unjustly deny a recognised fundamental right to those who need assistance to access it

Points on which ‘passive’ euthanasia was constructed

  1. APD is an elaborate and flawed judicial construct arguably necessitated by overarching policy concerns, namely,
    (1) potential for abuse by unscrupulous individuals;
    (2) the spectre of criminal prosecution of benign doctors and families, etc.

The way forward

  1. Common Cause signals that APD’s days are numbered
  2. Whether couched as “dignified death” or “bodily autonomy”, there is no reasonable basis for negating the right vis-à-vis a patient whose circumstances warrant assistance to exercise it
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