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  • Skull found in China represents a new human species

    Scientists have announced that a skull discovered in northeast China represents a newly discovered human species they have named Homo longi, or “Dragon Man”.

    Answer this PYQ in the comment box:

    Q.The word ‘Denisovan’ is sometimes mentioned in media in reference to (CSP 2019):

    (a) fossils of a kind of dinosaurs

    (b) an early human species

    (c) a cave system found in North-East India.

    (d) a geological period in the history of Indian subcontinent

    Who is the “Dragon Man”, the latest Chinese discovery?

    • The cranium found in China has been dubbed the “Dragaon Man” or Homo longi, a name that has been derived from the Long Jiang or Dragon River in the Heilongjiang province of China where the city of Harbin is located.
    • The skull was reportedly discovered back in 1933, when a bridge was built over the Songhua River.
    • For thousands of years, the skull remained buried in sediments.
    • Because of the distinctive shape of the skull, which was found almost complete, some members of the team have suggested that it be declared a part of a new species of the genus Homo.
    • Significantly, the size of the skull, which has a considerable brain capacity, is comparable to that of modern humans and Neanderthals.

    Why is this discovery being considered significant?

    • For one, it brings new knowledge about the evolution of Homo sapiens.
    • It might help to bridge the gaps between our ancient ancestors called Homo erectus and us.
    • This knowledge is important because there is very little consensus in the scientific community about how different human species are related, and which species are our immediate ancestors.
    • Smithsonian for instance notes that some palaeontologists believe Homo heidelbergensis to be our immediate ancestors.
    • This species was discovered in 1908, and lived about 700,000 to 200,000 years ago in Europe and possibly China and some parts of Africa.

    Back2Basics: Species of Humans

    • Modern humans are the only human species that exist in the world today.
    • While the exact number of human species is a matter of debate, most scientists believe that there are at least 21 of them.

    As per the Smithsonian National Museum of Natural History, there are over 21 human species.  Major among these are:

    (1) Sahelanthropus tchadensis

    • Sahelanthropus tchadensis is believed to be the oldest member of the human family tree.
    • It lived about 7-6 million years ago somewhere around present-day Chad in Africa.
    • It had both ape-like and human-like features and was bipedalled, an ability that may have increased its chances of survival.

    (2) Homo erectus

    • Homo erectus lived about 1.89 million-110,000 years ago, in Northern, Eastern, and Southern Africa and Western and East Asia.
    • ‘Turkana Boy’ is the most complete fossil belonging to this species and is dated to be around 1.6 million years old.

    (3) Modern man

    • Homo neanderthalensis lived about 400,000-40,000 years ago and co-existed with Homo sapiens for a few thousand years.
    • They lived in Europe and in southwestern and central Asia.
    • Homo sapiens evolved about 300,000 years ago, and are found worldwide.

  • Species in news: Euphlyctis Kerala

    A new species of skittering frog has been identified from the surroundings of the Thattekkad bird sanctuary.

    Euphlyctis Kerala

    • The new species is named Euphlyctis Kerala in honor of the remarkable biodiversity of the State, which is also known for many endemic species of frogs.
    • The new species is known to be found in the freshwater bodies of the foothills of the Western Ghats, south of the Palakkad Gap.
    • Although multiple skittering frogs have been described from India for almost two centuries (since 1799), the taxonomic mess within this group created a lot of confusion due to “morphological character crypticity”.
    • Members of the genus Euphlyctis (skittering frogs) have their distribution range from Arabian Peninsula, Pakistan, India, Nepal, Sri Lanka, Myanmar, and Thailand.
    • As of now, Kerala is known to have 180 species of frogs and there could be many more new species awaiting formal descriptions.

  • Where is the Indian rupee headed?

    The article explains the factors affecting the Indian rupee’s value against the dollar in implications of change in value for the Indian economy.

    Factor’s affecting rupee’s value

    • First, India’s foreign exchange reserves need to be considered, which have been increasing quite rapidly.
    • Second, there are daily fluctuations caused by foreign portfolio investment (FPI) flows.
    • Third, there is the external factor of the dollar, when the US currency strengthens against the euro, the rupee tends to decline and vice-versa.
    • Fourth, there is the concept of the real effective exchange rate (REER), a construct of economists in which relative inflation comes into play.
    • If inflation in India is higher than in countries associated with its export basket of currencies, then the rupee is overvalued and will correct through depreciation.
    • Fifth, at what stage will the RBI intervene by buying or selling dollars to stabilize the Indian currency also matters.

    Let’s look at some of these factors in detail.

    Impact of the U.S. economy and Fed

    • The dollar is driven by the US economy as well as its Federal Reserve’s policies.
    • The Fed’s recent indication that it would raise its policy rate of funds in the years ahead was enough to strengthen the dollar and weaken the rupee.  As an increase in US rates could see global investor money flocking back to the US, the dollar gained in relative value.
    • The dollar should logically be strengthening, given improving US growth, now reinforced by the Fed.

    Inflation factor

    • The inflation factor, however, has been curious.
    • Indian inflation will be high in India and hence also the rupee’s REER.
    • To the extent the market understands this concept and uses it for valuation, it should be pushing the rupee downwards.
    • But the pressure will be less this time as global inflation is also being raised by rising commodity prices.
    • Indian inflation may not be so much higher as to warrant a deep depreciation.

    Increase in Forex reserves

    • An increase in forex reserves is an indication that India is getting in more dollars than we are spending.
    • This also means that our combined current and capital accounts are in surplus zone.
    • However, India’s current account will go into a deficit this year, as imports will be greater than exports, but will not be very high. Maybe 0.5-1% of GDP.
    • The capital account can get tricky.
    • Inward foreign direct investment was high in 2020-21.
    • At $60 billion in equity and $80 billion overall, it was one of the world’s highest.
    • Therefore, capital flows should remain strong.
    • External commercial borrowings could slow down amid weak investment within India.
    • So the fundamentals suggest that the rupee should be stable, with a tilt towards depreciation.

    The RBI intervention

    • The RBI’s surplus liquidity and accommodative stance have not worked in favour of the rupee.
    • In response to its April policy, when RBI affirmed its dovish stance, the rupee began falling on expectations that if RBI kept rates low at a time of high inflation and excessive market borrowing by the government, investors will potentially move out.
    • This pushed the rupee towards the 75 level against the dollar, but reverted with time as RBI kept infusing liquidity and managed the yield curve.
    •  In April, RBI bought $4.2 billion worth of the US currency.
    • Exports have grown smartly in the first two months of 2021-22, and at this stage, the central bank would not want to that trend by stalling the rupee’s depreciation.

    Conclusion

    Taking all these factors into account, one can foresee the rupee moving in the range of ₹74-75 to the dollar, unless there’s a shock of some sort, though none looks likely at present.

  • Microfinance institutions

    The microfinance institutions (MFI) faced several restrictions by RBI which were not applicable to banks, NBFC and small finance banks. This denied the MFIs level playing field. A recent Consultative document by the RBI frees MFIs from such restrictions. The article explains this in detail.

    Background of regulation of MFI’s  by RBI

    • RBI first allowed informal self-help groups to open savings accounts in banks and bank lending to these groups in 1991-92.
    • In 2000, RBI permitted all types of institutions to offer microcredit and bank loans extended to these institutions for on-lending were treated as part of the priority sector lending.
    • Beyond these, RBI was unwilling to bring in any regulations on the plea that as long as these are not deposit-taking institutions there is no need to regulate them. 
    • That was the stand of various RBI-appointed committees too, including the Vyas Committee of 2004.
    • Based on the Malegam Committee recommendations, RBI came out with detailed guidelines for microfinance institutions (not the microfinance sector) in 2011.
    • These guidelines introduced a new category of NBFCs, viz NBFC-MFIs (microfinance institutions).
    • It also set norms for income criteria for clients of MFIs, repayment period, borrower loan limits, interest rate norms and caps, limits on a number of lenders to a borrower and a host of other norms and criteria.

    How these norms created the issue of a level playing field?

    • After 2015-16, the entry of small finance banks, eight of which were MFIs, into the microfinance space started to create issues.
    • MFIs discovered to their dismay that while they had to adhere to a set of regulations, it was a free-for-all for non-MFIs (banks, SFBs and NBFCs).
    • The main issue was that non-MFIs need not adhere to the norm of number of lenders (two in the case of NBFC-MFIs) and per-borrower loan limits.
    • It prompted non-MFIs to target borrowers identified and nurtured by MFIs with higher loan amounts, leading to high levels of borrower indebtedness.
    • In addition, the interest rate cap (2.75 times the base rate declared quarterly by RBI) was squeezing the margins of small and medium MFIs, as none of them get loans from the biggest banks.

    Way forward

    • The recent Consultative Document by RBI frees MFIs from the restriction imposed by the 2011 regulations and gives them a level-playing field.
    • Another important feature for MFIs is that by doing away with the 50% income generation loans criteria and the repayment period norms.
    • RBI is facilitating credit flow into lifecycle needs like housing, water sanitation, education, health, renewable energy, etc, which are now as important as income generation.
    • On the interest rate front, initially, some upward correction could be there by medium and small MFIs based on their borrowing rates.
    • The document enhances the role for the regulator as the adoption of Board-approved policies to determine the norms of household indebtedness and to fix a transparent rate of interest by each institution and their implementation need a rigorous supervisory oversight

    Conclusion

    Providing a level playing field to the MFI is critical to their development, the document by RBI rightly does that. It will help in providing credit to those who remain outside the formal banking network.

    Source:

    https://www.financialexpress.com/opinion/unfettering-microfinance-recent-rbi-consultative-document-frees-mfis-from-shackles-imposed-by-2011-regulations/2277925/

  • Covid-19 Delta-plus Variant

    The Maharashtra government has tightened the Covid-19 unlocking process in the wake of a rise in cases of the Delta Plus variant.

    What is Delta Plus?

    • A variant that has emerged as a new threat, especially in India, Delta Plus (B.1.617.2.1/(AY.1) is a new mutant strain of the Delta variant of SARS-CoV-2.
    • It is technically the next generation of SARS-COV-2.
    • The Delta variant that was first detected in India eventually became a huge problem for the whole world.
    • However, the Delta Plus variant, at present, is limited to smaller areas in the country. This mutant of Delta was first detected in Europe in March 2021, but it came to light on June 13.
    • Although it is still under investigation, experts believe that the Delta Plus variant has increased transmissibility.

    What is known so far?

    • The new Delta plus variant has been formed due to a mutation in the Delta or B.1.617.2 variant.
    • Delta Plus (AY.1) is resistant to monoclonal antibodies cocktail.
    • Since it’s a new variant, its severity is still unknown.
    • 63 genomes of Delta (B.1.617.2) with the new K417N mutation have been identified by the GISAID (global science initiative) so far.
    • The mutation is in the spike protein of SARS-COV-2, which helps the virus enter and infect the human cells.
    • People reported symptoms like headaches, sore throats, runny noses, and fever.

    Are COVID-19 vaccines effective against the Delta Plus variant?

    • Medical experts say it is too early to predict the effectiveness of the existing vaccines on the new variant.
    • A detailed study would be required to establish any effect of the mutant on the immune system.
    • However, Union Health Ministry says that both Indian vaccines — Covishield and Covaxin are effective against the Delta variant.
    • There is fear that this new variant Delta Plus may spark the third wave of COVID-19, but there is a very low incidence of such cases, so there is no certainty.

  • Who is a Registered Valuer?

    A valuation report by a registered valuer is at the heart of the recent controversy surrounding a Rs 4,000 crore share allotment decision by PNB Housing Finance.

    Who is a Registered Valuer?

    • A registered valuer is an individual or entity which is registered with the Insolvency and Bankruptcy Board of India (IBIBI) as a valuer in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017.
    • Under Section 458 of the Companies Act, IBBI has been specified as the authority by the central government.
    • The concept of registered valuer was introduced in the Companies Act in 2017 in order to regulate the valuation of assets and liabilities linked to a company and to standardize the valuation procedure in line with global valuation standards.
    • Before the concept of registered valuer became part of the Companies Act, valuation was done in an arbitrary manner, often leading to question marks over the authenticity of the valuation.

    What does the valuation report comprise?

    • As per the Companies (Registered Valuers and Valuation) Rules, 2017, the valuer should, in his/its report, state 11 key aspects including disclosure of the valuer’s conflict of interest, if any.
    • Among others, it must include the purpose of valuation; sources of information; procedures adopted in carrying out the valuation; valuation methodology; and major factors that influenced the valuation.

    Who can become a registered valuer?

    • An individual needs to clear the Valuation Examination conducted by IBBI.
    • The rules state that an individual who has completed 50 years of age and has been substantially involved in at least ten valuation assignments of assets amounting to Rs 5 crore rupees or more, during the five years preceding the commencement of these rules, shall not be required to pass the Valuation Examination.
    • The individual should, however, have a postgraduate degree in the specified discipline (relevant for valuation of the class of asset for which the registration is sought) and should have at least three years of experience in the discipline thereafter.
    • As of March 31, 2021 there were 3,967 registered valuers in the country. Only 40 of them are registered entities; the rest are individuals.

    For what assets can a registered valuer undertake valuation?

    • A registered valuer can get themselves registered for valuation of assets such as land and building; plant and machinery; and securities and financial assets.
    • They can get registered for valuation of all three classes, and can undertake valuation of only the assets for which they have got the registration.

    Answer this PYQ in the comment box:

    Q.Which of the following statements best describes the- term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? (CSP 2017)

    (a) It is a procedure for considering the ecological costs of developmental schemes formulated by the Government.

    (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

    (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

    (d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.

  • What is Ambergris?

    In the past few weeks, there have been two cases where the Mumbai Police has arrested five persons trying to sell Ambergris or whale vomit.

    What is Ambergris?

    • Ambergris, French for grey amber, is generally referred to as whale vomit.
    • It is a solid waxy substance that floats around the surface of the water body and at times settles on the coast.
    • A sperm whale eats several thousand squid beaks a day.
    • Occasionally, a beak makes it way to the whale’s stomach and into its looping convoluted intestines where it becomes ambergris through a complex process, and may ultimately be excreted by the whale.

    Is it Ambergris valuable?

    • This excretion is so valuable it is referred to as floating gold.
    • As per the latest estimates given by Mumbai Police, 1 kg of ambergris is worth Rs 1 crore in the international market.
    • The reason for its high cost is its use in the perfume market, especially to create fragrances like musk.
    • It is believed to be in high demand in countries like Dubai that have a large perfume market. Ancient Egyptians used it as incense.
    • It is also believed to be used in some traditional medicines.

    Why are the laws on Ambergris?

    • Due to its high value, Ambergris has been a target for smugglers especially in coastal areas.
    • There have been several cases where the coastline of Gujarat has been used for such smuggling.
    • Since the sperm whale is a protected species, hunting of the whale is not allowed.
    • However, smugglers are known to have illegally targeted the fish in order to obtain the valuable Ambergris from its stomach.
    • However, Ambergris is produced only by an estimated one per cent of sperm whales.

  • Places in news: Black Sea

    Russia accused Britain of spreading lies over a warship confrontation in the Black Sea.

    What is the issue?

    • Russia annexed Ukraine’s Crimean Peninsula in 2014, a move that was not recognized by most countries in the world.
    • Russia has frequently responded at NATO warships visits near Crimea, casting them as destabilizing.
    • NATO members Turkey, Greece, Romania and Bulgaria are in the Black Sea, but warships from the US, UK and other NATO allies also have made increasingly frequent visits in a show of support to Ukraine.

    About Black Sea

    • The Black Sea is a marginal sea of the Atlantic Ocean lying between Europe and Asia; east of the Balkans (Southeast Europe), south of the East European Plain in Eastern Europe, west of the Caucasus, and north of Anatolia in Western Asia.
    • It is supplied by major rivers, principally the Danube, Dnieper, and Don.
    • The watersheds of many countries drain into the sea beyond the six that share its coast.
    • The Black Sea is bordered by Bulgaria, Georgia, Romania, Russia, Turkey, and Ukraine.

    Must answer this PYQ in the comment box:

    Q.Consider the following pairs:

    Sea

    Bordering country
    1. Adriatic Sea Albania
    2. Black Sea Croatia
    3. Caspian Sea Kazakhstan
    4. Mediterranean Sea Morocco
    5. Red Sea Syria

    Which of the pair given above are correctly matched? (CSP 2020)

    (a) 1, 2 and 4 only

    (b) 1, 3 and 4 only

    (c) 2 and 5 only

    (d) 1, 2, 3, 4 and 5

  • [pib] 6 years of Urban Transformation

    The Ministry of Housing and Urban Affairs (MoHUA) has commemorated 6 years of the three transformative Urban Missions vis. Smart Cities Mission (SCM), Atal Mission for Urban Rejuvenation and Urban Transformation (AMRUT) and Pradhan Mantri Awas Yojana-Urban (PMAY-U). All these missions were inaugurated in 2015.

    [A] Pradhan Mantri Awas Yojana – Urban (PMAY)

    • PMAY is an initiative in which affordable housing will be provided to the urban poor with a target of building 2 crore (20 million) affordable houses by 31 March 2022.
    • It has two components: for the urban poor and also for the rural poor.
    • This scheme is converged with other schemes to ensure houses have a toilet, Saubhagya Yojana electricity connection, Ujjwala Yojana LPG connection, access to drinking water, and Jan Dhan banking facilities, etc.

    [B] Atal Mission for Rejuvenation & Urban Transformation (AMRUT)

    • AMRUT was launched with the focus to establish an infrastructure that could ensure adequate robust sewage networks and water supply for urban transformation by implementing urban revival projects.
    • The components of the AMRUT consist of capacity building, reform implementation, water supply, sewerage and septage management, stormwater drainage, urban transport, and the development of green spaces and parks.
    • During the process of planning, the Urban Local Bodies (ULBs) will strive to include some smart features in the physical infrastructure components.
    • Rajasthan was the first state in the country to submit State Annual Action Plan under Atal Mission for Rejuvenation and Urban Transformation (AMRUT).

    [C] Smart Cities Mission

    • National Smart Cities Mission is an urban renewal and retrofitting program by the Government of India with the mission to develop smart cities across the country, making them citizen-friendly and sustainable.
    • The Union Ministry of Urban Development is responsible for implementing the mission in collaboration with the state governments of the respective cities.
    • All the participating cities from West Bengal have withdrawn from the Smart Cities Mission.
    • Mumbai and Navi Mumbai from Maharashtra have also been withdrawn from the Smart Cities Mission.

  • Bad bank

    The article suggests drawing the lessons from China’s experience with the bad bank as India India gets ready to operationalise a new bad bank.

    Bad bank in China and issues

    • In the aftermath of the Asian financial crisis, China set up dedicated bad banks for each of its big four state-owned commercial banks.
    • These bad banks were meant to acquire non-performing loans (NPLs) from those banks and resolve them within 10 years.
    • In 2009, their tenure was extended indefinitely.
    • Chinese banks can currently transfer NPLs only to the national or local bad banks.
    • One of China’s biggest bad banks is the China Huarong Asset Management Co. Ltd. (Huarong).
    • The Chinese government is its principal shareholder.
    • Recently this bad bank stoked financial stability concerns when it skirted a potential bond default.
    • An incentive to conceal: Recent research at the National University of Singapore and others highlights that Chinese bad banks effectively help conceal Non-Performing Loans.
    • The banks finance over 90 per cent of NPL transactions through direct loans to bad banks or indirect financing vehicles.
    • The bad banks resell over 70 per cent of the NPLs at inflated prices to third parties, who happen to be borrowers of the same banks.
    • The researchers conclude that in the presence of binding financial regulations and opaque market structures bad bank model could create incentives to hide bad loans instead of resolving them.
    • Broadening of tenure: In case of Huarong, the main source of the problem appears to be the gradual broadening of the original mandate and tenure of Chinese bad banks.

    Four lessons for India

    • India is about to operationalise a new bad bank, the National Asset Reconstruction Company Ltd. (NARCL).
    • The Chinese experience holds four important lessons for India.

    1) Finite tenure of bad bank

    • A centralised bad bank like NARCL should ideally have a finite tenure.
    • Such an institution is typically a swift response to an abrupt economic shock (like Covid) when orderly disposal of bad loans via securitisation or direct sales may not be possible.
    • The banks could transfer their crisis-induced NPLs to the bad bank and focus on expanding lending activity.
    • The bad bank in turn can restructure and protect asset value.
    • Over time, it could gradually dispose of the assets to private players.

    2) Narrow mandate

    •  A bad bank must have a specific, narrow mandate with clearly defined goals.
    • Transferring NPLs to a bad bank is not a solution in itself.
    • There must be a clear resolution strategy.
    • Otherwise, allowing a bad bank to exist in perpetuity risks a potential mission creep, which might in the long run threaten financial stability itself.

    3) Diversify the sources of funds for ARC

    • Indian banks remain exposed to these bad loans even after they are transferred to asset reconstruction companies (ARCs).
    • The RBI Bulletin (2021) notes that sources of funds of ARCs have largely been bank-centric.
    • The same banks also continue to hold close to 70 per cent of the total security receipts (SRs).
    • To address this problem, RBI has tightened bank provisioning while liberalising foreign portfolio investment norms.

    4) Resolution of bad loans should be through market mechanism

    • In a steady state, the resolution of bad loans should happen through a market mechanism and not through a multitude of bad banks.
    • In India, the Narasimham Committee (1998) had envisaged a single ARC as a bad bank.
    • Yet, the SARFAESI Act, 2002 ended up creating multiple, privately owned ARCs.
    • As a result, regulations have treated ARCs like bad banks, although functionally they are closer to stressed asset funds registered as Alternative Investment Fund Category II (AIFs).
    • With the setting up of NARCL as a centralised bad bank, the regulatory arbitrage between ARCs and AIFs must end.
    • While AIFs should be allowed to purchase bad loans directly from banks and enjoy enforcement rights under the SARFAESI Act.
    • ARCs should be allowed to purchase stressed assets from mutual funds, insurance companies, bond investors and ECB lenders.
    • ARC trusts should be allowed to infuse fresh equity in distressed companies, within IBC or outside of it.
    • Lastly, the continued interest of the manager/sponsor of ARCs should be at par with AIFs, that is, at least 2.5 per cent in each scheme or Rs 5 crore, whichever is lower.

    Conclusion

    The Chinese experience should nudge Indian policymakers to limit the mandate and tenure of NARCL, while facilitating market-based mechanisms for bad loan resolution in a steady state.