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  • Global Geological And Climatic Events

    Taam Ja’: World’s Deepest Blue Hole

    Prelims Only | Enviro & Biodiversity | Mains Paper 1: Salient Features Of World’S Physical Geography

    Why in the news?

    Researchers have made a discovery in Mexico, uncovering the world’s deepest blue hole, known as Taam Ja’ Blue Hole (TJBH).

    What are Blue Holes?

    • Blue holes, such as TJBH, are formed in coastal regions with soluble bedrock, such as limestone, marble, or gypsum.
    • Water percolates through the rock, dissolving minerals and widening cracks, ultimately leading to the formation of sinkholes.
    • Famous examples: 410-foot Great Blue Hole in Belize, the 663-foot Dean’s Blue Hole in the Bahamas and the 328-foot Blue Hole in the Red Sea near Dahab, Egypt.

    About Taam Ja’ Blue Hole (TJBH)

    • TJBH extends at least 1,380 feet (420 meters) below sea level, making it the deepest known underwater sinkhole in the world.
    • It is located in Chetumal Bay off the southeast coast of the Yucatan Peninsula.
    • It was first discovered in 2021, was originally thought to be 900 feet deep.
    • This discovery surpasses the previous record-holder, the Sansha Yongle Blue Hole in the South China Sea, by an impressive 480 feet.

    Research Expedition and Findings

    • Scientists utilized a conductivity, temperature, and depth (CTD) profiler to collect data about the environmental conditions within the blue hole.
    • Despite reaching depths of 1,640 feet (500 meters), the CTD profiler was unable to reach the bottom of TJBH, indicating its remarkable depth.
    • Data from the profiler suggested the presence of different water layers within the blue hole, with conditions resembling those of the Caribbean Sea at depths below 1,312 feet (400 meters).

    PYQ:

    [2017] In the context of mitigating the impending global warming due to anthropogenic emissions of carbon dioxide, which of the following can be the potential sites for carbon sequestration?

    1. Abandoned and uneconomic coal seams.

    2. Depleted oil and gas reservoirs.

    3. Subterranean deep saline formations.

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

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  • Festivals, Dances, Theatre, Literature, Art in News

    Unveiling of Raja Ravi Varma’s Indulekha Painting

    Prelims Only | History | Mains Paper 1: Arts & Culture

    Why in the News?

    The first true copy of Raja Ravi Varma’s painting “Indulekha” will be unveiled at Kilimanoor Palace, the birthplace of the legendary artist, on his 176th birth anniversary celebrations.

    About the Indulekha Painting:

    • The painting depicts Indulekha, the protagonist of the first modern Malayalam novel by O. Chandu Menon, published in 1889.
    • The painting holds significance as it is believed to have inspired Ravi Varma’s famous work, “Reclining Lady.”
    • The oil painting portrays Indulekha holding a letter, dated 1892.
    • It exhibits meticulous attention to detail and symmetry, characteristic of Ravi Varma’s style.

    Who was Raja Ravi Varma (1848-1906)?

    • Raja Ravi Varma was born in April 1848 in Kilimanoor, Kerala, to a family which was very close to the royals of Travancore.
    • Often referred to as the father of modern Indian art, he is widely known for his realistic portrayal of Indian gods and goddesses.
    • While he majorly painted for the royalty, he is also credited for taking art to the masses with his prints and oleographs.
    • Patronised by Ayilyam Thirunal, the then ruler of Travancore, he learnt watercolour painting from the royal painter Ramaswamy Naidu.
    • He later trained in oil painting from Dutch artist Theodore Jensen.

    Fame as a notable painter

    • Following a portrait of Maharaja Sayajirao of Baroda, he has commissioned 14 Puranic paintings for the Durbar Hall of the new Lakshmi Vilas Palace at Baroda.
    • Depicting Indian culture, Varma borrowed from episodes of Mahabharata and Ramayana for the same.
    • He also received patronage from numerous other rulers, including the Maharaja of Mysore and Maharaja of Udaipur.
    • As his popularity soared, the artist won an award for an exhibition of his paintings at Vienna in 1873.
    • He was also awarded three gold medals at the World’s Columbian Exposition in Chicago in 1893.
    • Viceroy Lord Curzon honoured him with the Kaisar-i-Hind Gold Medal for his service.

    Nature of his artforms

    • Much of his celebrated art also borrows heavily from Indian mythology.
    • In fact, he is often credited with defining the images of Indian gods and goddesses through his relatable and more realistic portrayals often painted with humans as models.
    • The depictions include Lakshmi as the goddess of wealth, Saraswati as the goddess of knowledge and wisdom, and Lord Vishnu with his consorts, Maya and Lakshmi.
    • Raja Ravi Varma aspired to take his art to the masses and the intent led him to open a Lithographic Press in Bombay in 1894.
    • The first picture printed at Varma’s press was reportedly The Birth of Shakuntala, followed by numerous mythological figures and saints such as Adi Shankaracharya.

    Major works

    • It is believed that he had made around 7,000 paintings before his death at the age of 58.
    • But only one painting is now left in ‘Chithrashala,’ the artist’s studio at Kilimanoor Palace — an unfinished portrait of ‘Parsi lady’ which was his last work.
    • Some of his popular works include ‘Lady in the Moonlight’, ‘Nair Lady Adorning Her Hair’, ‘Malabar Lady with Violin’, ‘Lady with Swarbat’, and ‘Maharashtrian Lady with Fruits’.
    [2018] The well-known painting “Bani Thani” belongs to the

    (a) Bundi school

    (b) Jaipur school

    (c) Kangra school

    (d) Kishangarh school

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  • Capital Markets: Challenges and Developments

    SEBI board approves amendment to Mutual Funds rules

    Prelims Only | Economics | Mains Paper 3: Indian Economy

    Why in the news?

    • The Securities & Exchange Board of India (SEBI) has recently approved amendments to SEBI (Mutual Funds) Regulations, 1996, aimed at enhancing the regulatory framework for Asset Management Companies (AMCs).
      • These amendments mandate AMCs to establish institutional mechanisms to deter potential market abuse, including front-running, following recent instances observed by the market regulator.

    What are Mutual Funds?

    • A mutual fund is a pool of money managed by a professional Fund Manager.
    • It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.
    • And the income / gains generated from this collective investment is distributed proportionately amongst the investors after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or NAV.
    • SEBI regulates mutual funds through the SEBI (Mutual Funds) Regulations, 1996.

    Categories of Mutual Funds:

    1. An actively managed fund is a mutual fund scheme in which the fund manager “actively” manages the portfolio and continuously monitors the fund’s portfolio, deciding on which stocks to buy/sell/hold and when, using his/her professional judgement, backed by analytical research.
    2. A passively managed fund, by contrast, simply follows a market index, i.e., in a passive fund , the fund manager remains inactive or passive inasmuch as, he/she does not use his/her judgement or discretion to decide as to which stocks to buy/sell/hold , but simply replicates / tracks the scheme’s benchmark index in exactly the same proportion.

    Fund Structure

    • Mutual funds in India operate under a three-tier structure, comprising the
    1. Asset Management Company (AMC),
    2. Trustees, and
    3. Custodians.
    • The AMC manages the fund’s investments, the Trustees oversee the operations, and the Custodians safeguard the fund’s assets.

    Key highlights of the recent update:

    • Institutional Mechanism: AMCs are required to implement enhanced surveillance systems, internal controls, and escalation processes to identify and address specific types of misconduct, such as front-running, insider trading, and misuse of sensitive information.
    • Whistleblower Mechanism: To foster transparency, AMCs are mandated to have a whistleblower mechanism.
    • Recording of Communication: SEBI has exempted face-to-face interactions during market hours from the requirement of recording all communication by dealers and fund managers. This exemption will be effective upon the implementation of the institutional mechanism by AMCs.
    • Prudential Norms for Passive Schemes: SEBI has streamlined prudential norms for passive schemes, allowing equity passive schemes to invest up to the weightage of constituents in the underlying index, subject to a 35% cap on investment in sponsor group companies.

    PYQ:

    [2014] What does venture capital mean?

    (a) A short-term capital provided to industries

    (b) A long-term start-up capital provided to new entrepreneurs

    (c) Funds provided to industries at times of incurring losses

    (d) Funds provided for replacement and renovation of industries

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  • Forest Conservation Efforts – NFP, Western Ghats, etc.

    Chunk of India’s forests ‘missing’ after 27-year-delay to file reports | Analysis

    Explained | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    Why in the news?

    SC ordered MoEFCC to upload State Expert Committee reports on unclassed forests due to concerns over the Forest (Conservation) Act Amendment 2023 constitutionality, impacting protection and potential diversion of these forests.

    What are unclassed forests?

    • Unclassed forests, also known as deemed forests, are forest areas that may belong to various entities such as government bodies (forests, revenue departments, railways), communities, or private owners. However, these forest areas have not been officially notified as forests.
    • The State Expert Committees (SECs) were tasked with identifying all such unclassed forests across the country (referring to Forest Working Plans and Land Revenue Records).
    • Additionally, SECs were required to physically identify any land patches that exhibit characteristics of forests, as per the dictionary meaning of forests, irrespective of their ownership status.

    What are the present issues?

    1. The missing forests in SECs 
    • Undermined the previous judgment: MoEFCC informed a Parliamentary Committee that SECs had identified unclassed forests, aligning with the proposed Forest (Conservation) Act Amendment, despite earlier criticism that the law undermined the Godavarman judgment.
      • However, an RTI application revealed that MoEFCC claimed not to have the SEC reports, raising questions about its assurance to the Parliamentary Committee.
    • Lack of verified data: Following a Supreme Court order, MoEFCC uploaded the SEC reports, but they showed a lack of verifiable data on the identification, status, and location of unclassed forests.
    • States not constituted SECs: Seven states and Union Territories, including Goa, Haryana, and Tamil Nadu, hadn’t constituted SECs, while others hadn’t fully complied with Supreme Court directives.
    • Non-traceable Forest: Ladakh formed an SEC only after the dissolution of Jammu & Kashmir, and Puducherry’s report was declared “not traceable”, further highlighting inconsistencies in the process.
    1. Disagreement with FSI data 
    • Insufficient timeline: Many states argue that the one-month timeline provided by the Supreme Court was insufficient for comprehensive work due to the voluminous nature of the task.
    • Relied on Existing data: Instead of conducting ground-truthing, physical cadastral surveys, and demarcation of unclassed forest lands, most states relied on existing data from forest and revenue departments. Some states, like Manipur and Sikkim, simply quoted figures from the Forest Survey of India (FSI).
    • Question on Data: The reliability of data is questioned, with Haryana’s report lacking clarity on data sources and creation dates. Only nine states provided the extent of unclassed forests, while others focused on different types of forest areas specified in the order.
    1. Lack of clarity in the Reports:
    • Failed to specify the geographic locations: Most states and UTs failed to specify the geographic locations of forests in their SEC reports, rendering the information provided largely unhelpful for accurate identification and protection.
      • But Tripura was an exception, providing Khaitan numbers for forest areas beyond those officially recorded, but the classification of land remained unclear.
    • Lack of on-ground verification: SEC is lagging that on-ground verification may have led to the widespread destruction of forests that should have been identified and protected nearly three decades ago.
      • Instances like Kerala’s SEC excluding ecologically significant areas like Pallivasal unreserve and Chinnakanal unreserve, critical for wildlife corridors and conservation, showcase the lack of diligence in identifying and protecting vital forest areas.

    Suggested Measures:

    • Extended Timeline: Provide states with a more realistic timeline to conduct comprehensive surveys and data verification, considering the voluminous nature of the task and the need for accuracy.
    • Ground Truthing and Surveys: Mandate states to conduct ground-truthing, physical cadastral surveys, and demarcation of unclassed forest lands to ensure accurate identification and mapping of forest areas.
    • Data Verification: Implement mechanisms for verifying and cross-referencing data obtained from various sources, such as forest and revenue departments and the Forest Survey of India, to ensure reliability and consistency.

    Main PYQ: 

    Q Examine the status of forest resources of India and its resultant impact on climate change.(UPSC IAS/2020)

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  • Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

    The poultry industry needs urgent reforms

    Explained | Agriculture | Mains Paper 3: Economics Of Animal-Rearing

    Why in the news?

    The current outbreak of H5N1 was a disaster waiting to happen, as experts have been sounding alarm bells on the unsafe conditions at industrial livestock production for more than 10 years now.

    Scale of spreading H5N1 virus:

    • Global Spread of H5N1 in humans: The H5N1 virus has spread globally, affecting various species including humans, polar bears in the Arctic, and seals and seagulls in Antarctica.
    • In India Spread of H5N1 in humans:  The first H5N1 patient was reported in Maharashtra in 2006. An outbreak in December 2020 and early 2021 spread across 15 States
    • Human Fatality Rate: As per WHO, the fatality rate for H5N1 among humans is estimated at 52%, with 463 deaths recorded since 2003 out of 888 diagnosed cases.
    • Transmission from Birds and Contaminated Environments: Almost all human infections with H5N1 are linked to close contact with infected birds or contaminated environments, emphasizing the importance of biosecurity measures.
    • Spread in other species: This pathogen has crossed many species barriers, causing mortality among the polar bears in the Arctic and seals and seagulls in Antarctica.

    Causes for the spread of H5N1 (avian influenza or bird flu) infection:

    • Contact with infected birds: Humans can contract H5N1 if they come into direct contact with the body fluids, such as saliva, respiratory droplets, or feces, of infected birds.
    • Poultry Trade and Movement: The transportation and trade of infected poultry, poultry products, and crowded live poultry markets provide an environment for the virus to spread between birds and potentially to humans.
    • Antibiotic Resistance: The 269th Law Commission of India Report in 2017 highlighted evidence from the Tata Memorial Centre regarding the use of non-therapeutic antibiotics in poultry farming, leading to antibiotic resistance due to unhygienic living conditions.
    • Environmental Factors: Factors like proximity to bodies of water, reduced rainfall, and presence near major highways have been associated with increased risk of H5N1 outbreaks. These environmental conditions may facilitate the spread of the virus.

    Regulation: The Central Pollution Control Board (CPCB) has classified poultry units with more than 5,000 birds as a polluting industry that requires compliance and regulatory consent to establish and operate.

    Way Forward:

    • Draft Rules for Welfare: The Law Commission 269th recommended a set of draft rules for the welfare of chickens in the meat and egg industries, aligning with existing laws and international best practices for animal care, waste management, and antibiotic use.
    • Weaknesses in Draft Rules: The Draft Rules for the egg industry released by the Ministry of Agriculture and Farmers’ Welfare in 2019 were criticized for being weak and tokenistic, failing to meet the recommendations of the Law Commission.
    • Need for Oversight and Enforcement: Given the reclassification of the poultry industry as a highly polluting ‘orange category’ industry by the Central Pollution Control Board (CPCB), strict oversight for compliance and enforcement of environmental regulations is essential.

    Mains PYQ:

    Q What is the basic principle behind vaccine development? How do vaccines work? What approaches were adopted by the Indian vaccine manufacturers to produce COVID-19 vaccines? (UPSC IAS/2022)

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  • Tax Reforms

    The rising share of Personal Income Tax and Indirect Tax is a concern

    Explained | Economics | Mains Paper 3: Indian Economy

    Why in the news?

    Recent data show that Personal Income Tax Collections have increased, while collections from Corporate Taxes have reduced.

    The present context of the rising share of Personal Income Tax and Indirect Tax:

    • Shift in Tax Composition: The data illustrates a significant shift in the composition of tax revenue, with personal income tax forming a larger share compared to corporate tax. This trend is accentuated by the sharp decline in corporate tax following the 2019 tax cuts.
    • Progressive vs. Regressive Taxation: Direct taxes, such as personal income tax, are considered progressive as they are based on income levels, whereas indirect taxes, like GST, are regressive, impacting all consumers uniformly regardless of their income.
      • The increasing share of indirect taxes implies a heavier burden on lower-income individuals.
    • Trend in Tax Composition: Chart 2 demonstrates a historical trend where indirect taxes had been decreasing since the 1980s, whereas direct taxes were on the rise. However, recent years have witnessed a reversal of this trend, with indirect taxes increasing and direct taxes declining.
    • International Comparison: Comparisons with BRICS economies indicate that India’s effective personal income tax rate is among the highest. This implies that Indian taxpayers may face relatively higher tax rates compared to individuals in other emerging economies.

    Concerns due to rising share of Personal Income Tax and Indirect Tax:

    • Impact on Middle and Lower Income Groups: The rising share of personal income tax and indirect taxes places a greater burden on poorer citizens and the middle class. This is particularly concerning as the majority of personal income tax filers fall within the ₹1 lakh-₹5 lakh annual income bracket, indicating that middle-income earners are disproportionately affected.
    • Comparison with BRICS Economies: Data comparisons with BRICS economies reveal that India’s effective personal income tax rate is among the highest. This suggests that individuals in India may be facing relatively higher tax rates compared to their counterparts in other emerging economies.
    • Concern for Equity and Economic Stability: The data underscores a growing concern regarding the equitable distribution of the tax burden. The heavier reliance on personal income tax and indirect taxes may exacerbate income inequality and strain the finances of middle and lower-income households.

    Way Forward:

    • Progressive Tax Reforms: Implementing progressive tax reforms can help alleviate the burden on middle and lower-income groups. This could involve revising tax brackets and rates to ensure that higher-income individuals contribute proportionally more to tax revenue.
    • Enhanced Direct Tax Compliance: Improving direct tax compliance measures, such as increasing tax enforcement efforts and reducing tax evasion loopholes, can help enhance revenue collection from high-income individuals and corporations.

    Mains PYQ 

    Q What is the meaning of the term ‘tax expenditure’? Taking housing sector as an example, discuss how it influences the budgetary policies of the government. (UPSC IAS/2013)

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  • Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

    Court’s nudge on Hospital charges, a reform opportunity

    Explained | Governance | Mains Paper 2: Health & Education

    Why in the news? 

    The SC while hearing a PIL in February’24, directed the Central Government to find ways to regulate the rates of Hospital Procedures in the Private sector.

    • The SC also warned against applying Central Government Health Scheme (CGHS) rates for treatment services at private healthcare facilities until standardized rates are set.

    About Central Government Health Scheme (CGHS) Rates:

    CGHS is a health care scheme provided by the Indian Government for its central government employees and pensioners.

    • Commencement Year: 1954
    • Objective: To provide comprehensive health coverage to Central Government Employees (Allopathy/Homoeopathy)
    • Present change: The rates of the Central Government Health Scheme (CGHS) for general surgery have been revised since February 2024.

    Benchmark for Pricing:

    • Standard Treatment Guidelines (STGs): These can establish relevant clinical needs, the nature and extent of care, and the costs of total inputs required.
      • They address confounders and ensure clinical autonomy while enabling the valuation of healthcare resources consumed for precise cost determination.
    • Pooled payments by government: Formulating and adopting STGs require providers’ revenues to be tied to fewer payers.
      • This necessitates reimbursements from pooled payments with low Out-Of-Pocket (OOP) payment levels, supported by the government.
    • Coordination between payers and providers: Governments can support the agreement on pricing that provides a reasonable and sustainable surplus over input costs.
      • However, the ability of providers to access markets with OOP payments could hinder this effort.

    Challenges faced during benchmarking of the price:

    • Private sector issues 
        • Private sector dominance: In India, over half of the total health expenditure is OOP, with the private sector predominantly composed of small-scale providers. Standardizing rates faces implementation uncertainties, and enforcement mechanisms for adherence remain unclear.
        • Resistance from providers: Concerns arise about the feasibility of regulatory measures if providers do not adhere to prescribed procedure rates, as seen in various health schemes.
    • Weak implementation
      • Limitations of regulations: While price caps can influence behavior in the short term, weak enforcement mechanisms lead to temporary effects as the overall environment remains unchanged.
      • Enforcement challenges: Despite suggested measures, enforcement remains weak, with only a fraction of states and union territories implementing the Clinical Establishment Act.
    • Data-related issues: Although the insurance industry initiated STGs for hospitals in 2010, progress was hindered by a lack of representative and accurate costing data due to limited participation from private hospitals.

    Government Initiatives:

    • Developing STGs: The Pradhan Mantri Jan Arogya Yojana and the Department of Health Research have made significant strides in developing STGs for common conditions and adopting a comprehensive costing framework.
    • Efforts are also ongoing to create an Indian version of Diagnostics-Related Groups (DRGs)

    Way Forward:

    • Addressing anticipated challenges: Anticipated challenges in implementing rate standardization policies need to be identified and addressed proactively to ensure successful outcomes.
    • Evidence-based policy: Conduct rigorous research and evaluation to generate evidence on the impact of regulatory measures on affordability, care quality, and provider behavior, informing future policy decisions.
    • Ensuring broader stakeholder participation: It is essential to involve a wide range of stakeholders in the development and implementation of rate standardization policies to increase their effectiveness and acceptance.

    Mains PYQ 

    Q Public health system has limitation in providing universal health coverage. Do you think that private sector can help in bridging the gap? What other viable alternatives do you suggest? (UPSC IAS/2015)

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  • Tribes in News

    Chin-Kuki-Zo Tribes: Backdrop of Ethnic Conflict in Manipur

    Prelims Only | Trivia | Mains Paper 1: Population & Associated Issues

    Why in the news?

    Manipur CM took it to social media where he alleged an “unnatural growth” in the population of the “Chin-Kuki-Zo” tribes in the state, posing a perceived threat to indigenous communities and national security.

    About Chin-Kuki-Zo Tribes

    Chin Tribe Kuki Tribe Zo Tribe
    Ethnic Composition Major ethnic group in Myanmar’s Chin State; known for distinct customs and language. Heterogeneous group in Northeast India; recognized for diverse subtribes. Diverse ethnic group in Northeast India, Myanmar, and parts of Bangladesh.
    Geographical Distribution Primarily in Myanmar’s Chin State; significant populations in Indian states like Mizoram. Mainly in Northeast India; also found in Chin State, Myanmar. Inhabits Northeast India, particularly Mizoram and Manipur; also in parts of Myanmar and Bangladesh.
    Language Chin language, part of Kuki-Chin subgroup of Tibeto-Burman family. Kuki-Chin languages; various dialects with distinct variations. Mizo-Kuki-Chin languages; different dialects within Tibeto-Burman family.
    Culture and Traditions Vibrant music, dance, festivals; celebrates Chin National Day. Rich oral traditions, folk music; celebrates festivals like Chavang Kut. Rich oral literature, vibrant festivals; celebrates Chapchar Kut and Mim Kut.
    Livelihood Historically practiced subsistence agriculture; now diversified livelihoods. Historically practiced shifting (Jhum) cultivation; now engaged in various occupations. Historically practiced shifting (Jhum) cultivation; now diverse livelihood patterns.
    Religion Predominantly Christianity with some traditional animistic beliefs. Predominantly Christianity with traditional animistic practices. Predominantly Christianity with remnants of traditional beliefs.
    Socio-Political Organization Advocates for cultural identity and rights; e.g., Chin National Front. Promotes Kuki identity; active organizations like Kuki National Organization. Promotes Zo identity; e.g., Zomi Council and Mizo Zirlai Pawl.

    Issues with their migration

    The Chin-Kuki-Zo tribes in Manipur are contributing to the conflict in the state due to various factors.

    • There have been longstanding demands from various tribal groups for greater recognition of their ethnic identity and autonomy within Manipur.
    • Land ownership and control are significant issues among the Chin-Kuki-Zo tribes in Manipur.
    [2016]  Consider the following pairs: (2016)

    Community sometimes  mentioned in the news In the affairs of
    1. Kurd Bangladesh
    2. Madhesi Nepal
    3. Rohingya Myanmar

    Which of the pairs given above is/are correctly matched?

    (a) 1 and 2
    (b) 2 only
    (c) 2 and 3
    (d) 3 only

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  • RBI Notifications

    RBI’s New Guidelines for Asset Reconstruction Companies (ARCs)

    Prelims Only | Economics | Mains Paper 3: Indian Economy

    Why in the news?

    The RBI has introduced updated guidelines for Asset Reconstruction Companies (ARCs) through a master direction, effective from April 24, 2024.

    What is an Asset Reconstruction Company (ARC)?

    Description
    About ARC is a special financial institution that acquires debtors from banks at a mutually agreed value and attempts to recover the debts or associated securities.
    Regulation
    • ARCs are registered under the RBI.
    • Regulated under the SARFAESI Act, 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act).
    Objective ARCs take over a portion of the bank’s non-performing assets (NPAs) and engage in asset reconstruction or securitization, aiming to recover the debts.
    Functions
    • Asset Reconstruction: Acquisition of bank loans or other credit facilities for realization.
    • Securitization: Acquisition of financial assets by issuing security receipts.
    Foreign Investment 100% FDI allowed in ARCs under the automatic route.
    Limitiations
    • ARCs are prohibited from undertaking lending activities.
    • They can only engage in securitization and reconstruction activities.
    Working
    • Bank with NPA agrees to sell it to ARC at a mutually agreed value.
    • ARC transfers assets to trusts under SARFAESI Act.
    • Upfront payment made to bank, rest through Security Receipts.
    • Recovery proceeds shared between ARC and bank.
    Security Receipts Issued to Qualified Institutional Buyers (QIBs) for raising funds to acquire financial assets.
    Significance
    • Banks can clean up their balance sheets and focus on core banking activities.
    • Provides a mechanism for resolution of NPAs and debt recovery.

    What are the new guidelines laid out by the RBI?

    • Enhanced Capital Requirements:
        • Minimum Capital Requirement Increase: ARCs are now mandated to maintain a minimum capital requirement of Rs 300 crore, a significant increase from the previous Rs 100 crore stipulation established on October 11, 2022.
        • Transition Period for Compliance: Existing ARCs are granted a transition period to reach the revised Net Owned Fund (NOF) threshold of Rs 300 crore by March 31, 2026.
        • Interim Requirement: However, by March 31, 2024, ARCs must possess a minimum capital of Rs 200 crore to comply with the new directives.
    • Supervisory Actions for Non-Compliance:
        • ARCs failing to meet the prescribed capital thresholds will face supervisory action, potentially including restrictions on undertaking additional business until compliance is achieved.
    • Expanded Role for Well-Capitalized ARCs:
      • Empowerment of Well-Capitalized ARCs: ARCs with a minimum NOF of Rs 1000 crore are empowered to act as resolution applicants in distressed asset scenarios.
      • Investment Opportunities: These ARCs are permitted to deploy funds in government securities, scheduled commercial bank deposits, and institutions like SIDBI and NABARD, subject to RBI specifications. Additionally, they can invest in short-term instruments such as money market mutual funds, certificates of deposit, and corporate bonds commercial papers.
      • Investment Cap: Investments in short-term instruments are capped at 10% of the NOF to mitigate risk exposure.

    PYQ:

    [2018] With reference to the governance of public sector banking in India, consider the following statements:

    1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
    2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

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  • Coal and Mining Sector

    [pib] Critical Minerals Summit

    PIBPrelims Only | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Why in the news?

    The Ministry of Mines has organized a pivotal summit in New Delhi aimed at fostering collaboration, sharing knowledge, and driving innovation in Critical Mineral beneficiation and processing.

    What are Critical Minerals?

    • Critical Minerals are indispensable for economic development and national security, with their scarcity or concentration in specific regions posing potential supply chain vulnerabilities.
    • The declaration and identification of Critical Minerals is an ongoing process, influenced by technological advancements, market dynamics, and geopolitical factors.

    Critical Minerals in India:

    • India has identified 30 Critical Minerals (July 2023) based on factors like disruption potential, import reliance, and cross-sectoral usage.
      • Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, Rare Earth Elements, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium and Cadmium.

    Critical Minerals

    Global Perspective:

    Various nations have outlined their lists of Critical Minerals based on unique circumstances:

    • The US recognizes 50 minerals critical for national security and economic development.
    • Japan has identified 31 minerals crucial for its economy.
    • The UK, EU, and Canada have their respective lists, reflecting their strategic priorities.

    India became the 14th member of the Mineral Security Partnership (MSP) in June 2023. 

    • MSP seeks to bolster critical minerals supply chains to support economic prosperity and climate objectives.
    • It seeks to ensure that critical minerals are produced, processed and recycled by catalyzing investments from governments and private sector across the full value chain.
    • Members: The other member countries are United States, Australia, Canada, Finland, France, Germany, Italy, Japan, Norway, the Republic of Korea, Sweden, the United Kingdom and the European Commission.

    Note: Copper, gold and silver are not on the list of minerals under MSP (Wiki).

    Various Government Initiatives:

    • MMDR Act Amendment (2023):   24 minerals were designated as critical and strategic under the Mines and Minerals (Development and Regulation) Act.
    • National Mineral Policy (2019): The updated policy emphasizes the exploration and exploitation of Critical Minerals to harness India’s mineral potential effectively.
    • Khanij Bidesh India Ltd (KABIL): A joint venture comprising National Aluminium Company Ltd (NALCO), Hindustan Copper Ltd (HCL), and Mineral Exploration Corporation Ltd (MECL), KABIL aims to secure a consistent supply of Critical Minerals by acquiring and developing assets overseas.
    • Indian Rare Earths Limited (IREL): It is a PSU that plays a significant role in the research and production of rare earth minerals.

    India’s Critical Mineral Imports:

    • Lithium Imports: In FY23, India imported 2,145 tonnes of lithium carbonate and lithium oxide, costing Rs 732 crore.
    • Nickel and Copper Imports: The country imported 32,000 tonnes of unwrought nickel and 1.2 million tonnes of copper ore, costing Rs 6,549 crore and Rs 27,374 crore, respectively.
    • Import Dependence: India relies entirely on imports for lithium and nickel, and 93% for copper.

    Country-wise dependence:

    1. China: India heavily relies on China for the import of critical minerals like lithium, cobalt, nickel, and graphite.
    2. Australia: India is actively engaged with Australia for acquiring mineral assets, particularly lithium and cobalt, to secure its supply chain for critical minerals.
    3. Argentina, Bolivia, and Chile: India is engaging with these countries, known for their reserves of battery metals like lithium and cobalt, to diversify its sources for critical minerals.

     

    PYQ:

    [2019] With reference to the management of minor minerals in India, consider the following statements:

    1. Sand is a ‘minor mineral’ according to the prevailing law in the country.
    2. State governments have the power to grant mining leases of minor minerals, but the powers regarding the formation of rules related to the grant of minor minerals lie with the Central Government.
    3. State Governments have the power to frame rules to prevent illegal mining of minor minerals.

    Which of the statements given above is/are correct?

    (a) 1 and 3

    (b) 2 and 3

    (c) 3 only

    (d) 1, 2 and 3

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