Daily Current Affairs

19TH DECEMBER,2020 : MOST POWERFUL DAILY CURRENT AFFAIRS CONCEPTS

UPSC PRELIMS+MAINS 


A)  Schemes, Policies, Initiatives, Awards and Social Issues

1. The E20 fuel to cut vehicular emissions (TH)

Context: The government proposed the adoption of E20 fuel — a blend of 20% of ethanol and gasoline — as an automobile fuel in order to reduce vehicular emissions as well as the country’s oil import bill.

  • The current permissible level of blending is 10% of ethanol though India reached only 5.6% of blending in 2019.
  • The compatibility of vehicles with the percentage of ethanol in the blend would be defined by the vehicle manufacturer, which would have to be displayed on the vehicle with a sticker.
  • Ethanol can be used as a fuel for vehicles in its pure form, but it is usually used as a gasoline additive to increase octane and improve vehicle emissions.
  • Bioethanol is widely used in the USA and in Brazil.
  • Ethanol is a biofuel and a common by-product of biomass left by agricultural feedstock such as corn, sugarcane, hemp, potato, etc.

Ethanol Blended Petrol (EBP) Programme

  • Government has been implementing Ethanol Blended Petrol (EBP) Programme wherein OMCs sell petrol blended with ethanol up to 10%.
  • This programme has been extended to whole of India except Union Territories of Andaman Nicobar and Lakshadweep islands with effect from 01st April, 2019 to promote the use of alternative and environment friendly fuels.
  • This intervention also seeks to reduce import dependence for energy requirements and give boost to agriculture sector.
  • Government has notified administered price of ethanol since 2014.
  • For the first time during 2018, differential price of ethanol based on raw material utilized for ethanol production was announced by the Government.
  • These decisions have significantly improved the supply of ethanol thereby ethanol procurement by Public Sector OMCs has increased from 38 crore litre in Ethanol Supply Year (ESY) 2013-14 to contracted over 195 crore litre in ESY 2019-20.
  • Consistent surplus of sugar production is depressing sugar price.
  • Consequently, sugarcane farmer’s dues have increased due to lower capability of sugar industry to pay the farmers.
  • With a view to limit sugar production in the Country and to increase domestic production of ethanol, Government has taken multiple steps including, allowing diversion of B heavy molasses, sugarcane juice, sugar and sugar syrup for ethanol production.
  • Department of Food and Public Distribution (DFPD) has informed that ethanol produced either from molasses or sugarcane is same and equally beneficial.
  • National Biofuel Policy-2018 envisages an indicative target of 20% blending of ethanol in petrol (10% by 2022) and 5% blending of biodiesel in diesel in the whole country by 2030.

The important measures taken to increase the production of ethanol for blending include:

  • Encouraging production of ethanol from sugarcane juice and sugar/sugar syrup.
  • Fixing remunerative ex-mill price of ethanol from various feed stocks.
  • Extending interest subvention to distilleries.
  • Amendment to Industries (Development & Regulation) Act, 1951, for free movement of denatured ethanol for Ethanol Blended Petrol (EBP) Programme.
  • Reduction in Goods & Service Tax on ethanol meant for EBP Programme from 18% to 5%.
  • Extension of EBP Programme to whole of India except island UTs of Andaman Nicobar and Lakshadweep
  • Enhancing ethanol storage at Oil Marketing Companies locations.
  • Formulating an “Ethanol Procurement Policy on a long-term basis under Ethanol Blended Petrol (EBP) Programme”.
  • The authorized entities in addition to conventional fuels, are required to install facilities for marketing at least one new generation alternate fuels like Compressed Natural Gas (CNG), biofuels, Liquefied Natural Gas (LNG), electric vehicle charging points etc. at their proposed retail outlets (RO) within three years of operationalization of the said outlet.

World Biofuel Day 2020

  • World Biofuel Day 2020 (10th August) was celebrated with the theme “Biofuels towards Atmanirbhar Bharat”. 
  • World Biofuel Day is being celebrated by Ministry of Petroleum and Natural Gas since 2015.
  • This day also honors the research experiments by Sir Rudolf Diesel who ran an engine with peanut oil in the year 1893.
  • His research experiment had predicted that vegetable oil is going to replace fossil fuels in the next century to fuel different mechanical engines.
  • India being a large agricultural economy, there is large amounts of agricultural residues available, therefore the scope of producing Biofuels is immense in the country.
  • As India is deficient in edible oils, non-edible oil may be material of choice for producing biodiesel. Examples are Jatropha curcas, Pongamia, Karanja, etc.
  • Commonly used varieties of plants/trees for producing biofuels in India are: Jatropha, Sugarbeet, Sorghum, Pongamia etc.

Why does is attracting the attention of biofuel producers?

Karanja (Pongamia)

  • There are several non-edible oil yielding trees that can be grown to produce biofuel.
  • Karanja (Pongamia) is one of the most suitable trees.
  • It is widely grown in various parts of the country.

Salient features of Pongamia

  • It is a Nitrogen fixing tree and hence enriches the soil fertility
  • It is generally not grazed by animals.
  • It is tolerant to water logging, saline and alkaline soils,
  • It can be planted on degraded, waste/fallow and cultivable lands
  • Pongamia seeds contain 30-40% oil.
  • It helps in controlling soil erosion and binding sand dunes, because of its dense network of lateral roots.
  • Its root, bark, leaves, sap, and flower have medicinal properties.
  • Dried leaves are used as an insect repellent in stored grains.
  • Pongamia seed oil as a bio- fuel has physical properties very similar to conventional diesel.

National Policy on Biofuels

  • The Policy categorises biofuels as “Basic Biofuels” and “Advanced Biofuels.”
  • Basic Biofuels First Generation (1G) bioethanol & biodiesel.
  • Advanced Biofuels Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG, Compressed Bio-Gas etc.
  • The policy expands the scope of raw material for ethanol production by allowing use of:
  • sugarcane juice,
  • sugar containing materials like sugar beet, sweet sorghum,
  • starch containing materials like corn, cassava,
  • damaged food grains like wheat, broken rice, rotten potatoes that are unfit for human consumption.
  • The policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee to be chaired by the Prime Minister.

The policy promotes Advanced Biofuels by:

  • providing a viability gap funding scheme for second generation ethanol Bio refineries of Rs.5000 crore in 6 years;
  • additional tax incentives;
  • higher purchase price as compared to first generation biofuels.
  • The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, and short gestation crops.
  • Municipal solid waste has also been addressed with policy, with the option of converting it into drop-in fuels.

Allow use of maize for ethanol production, says CACP

  • The Commission for Agricultural Costs and Prices (CACP) has suggested that the government allow use of maize for production of ethanol in the country, a move that could help growers fetch better prices.
  • In fact, the National Policy on Biofuels, 2018, has identified corn among the potential feedstock for production of ethanol.
  • Recently, the government has allowed the diversion of surplus rice from FCI stocks for production of ethanol.
  • Further, CACP said procurement of maize under the Price Support Scheme (PSS) is neither feasible nor desirable as there is no assured mechanism for liquidation of stocks procured by public agencies and drives out private trade.

Different Generations of Biofuels

  • Biofuel is any fuel that is derived from biomass—that is, plant or algae or animal waste.
  • Since such feedstock material can be replenished readily, biofuel is considered to be a source of renewable energy, unlike fossil fuels such as petroleum, coal, and natural gas.
  • First-generation biofuel: They are produced from food crops.
  • Second-generation biofuel: They are derived from low-value biomass that possesses a high cellulose content, including wood chips, crop residues, and municipal waste.
  • Third-generation biofuel: They are obtained by the use of algae and cyanobacteria.
  • Some estimates state that algae and cyanobacteria could yield between 10 and 100 times more fuel per unit area than second-generation biofuels.
  • Fourth-generation biofuel: Fourth-generation technology combines genetically optimized feedstocks, which are designed to capture large amounts of carbon, with genomically synthesized microbes, which are made to efficiently make fuels.
  • Key to the process is the capture and sequestration of CO2, a process that renders fourth-generation biofuels a carbon negative source of fuel.
  • Plant-based biofuels in principle make little net contribution to global warming and climate change; the carbon dioxide (a major greenhouse gas) that enters the air during combustion will have been removed from the air earlier as growing plants engage in photosynthesis. Such a material is said to be “carbon neutral.”

Benefits of using biodiesel

  • It reduces vehicle emission which makes it eco-friendly.
  • It is made from renewable sources and can be prepared locally.
  • Increases engine performance because it has higher cetane numbers as compared to petro diesel.
  • It has excellent lubricity.
  • Increased safety in storage and transport because the fuel is nontoxic and bio degradable (Storage, high flash point)
  • Production of bio diesel in India will reduce dependence on foreign suppliers, thus helpful in price stability.
  • Reduction of greenhouse gases
  • additional income to farmers and
  • employment generation.

Disadvantages

  • Biofuels have a lower energy output than traditional fuels and therefore require greater quantities to be consumed in order to produce the same energy level.

What are the differences between Biofuel, Bioethanol, Biodiesel, and Biogas?

  • Put simply, biofuel is energy made from living matter, usually plants. Bioethanol, biodiesel, and biogas are types of biofuels.
  • Bioethanol (aka ethanol) is an alcohol produced from corn, sorghum, potatoes, wheat, sugar cane, even cornstalks and vegetable waste. It is commonly blended with gasoline (petrol).
  • Biodiesel is oil from plants or animals used as an alternative to or blended with diesel in automobiles and industrial fleets with diesel engines.
  • The leading exporter of biodiesel (soy) is Argentina.
  • Grease or oil from cooking can also be converted to biodiesel.
  • Diesel engines can automatically run off blends with 20% or less biodiesel.
  • Using more than 20% biodiesel or vegetable oil from cooking requires some infrastructure adjustments.
  • Bio-diesels contain natural oils and fats which are primarily made up of triglycerides.
  • These triglycerides when reacted chemically with lower alcohols in presence of a catalyst result in fatty acid esters.
  • These esters show striking similarity to petroleum derived diesel and are called “Biodiesel”.
  • As India is deficient in edible oils, non-edible oil may be material of choice for producing biodiesel. Examples are Jatropha curcas, Pongamia, Karanja, etc.
  • Biogas is created as a by-product of decomposing plant and animal waste in environments with low levels of oxygen: landfills, waste treatment facilities, and dairies.
  • Biogas is made up primarily of methane and carbon dioxide (greenhouse gasses), thus the natural incentives are strong to keep biogas from entering the atmosphere.
  • Biogas can be used for transportation, cooking, and electricity etc.

Repurpose Used Cooking Oil (RUCO)

  • In India, the same cooking oil is used for repeated frying which adversely affects the health due to formation of Total Polar Compounds (TPCs) during repeated frying.
  • These polar compounds are associated with diseases such as hypertension, atherosclerosis, Alzheimer’s disease, liver diseases among others.
  • The National Policy on Biofuels, released by the Government of India in 2018, envisages production of biofuel from UCO.
  • In order to safeguard consumer health, the Food Safety and Standards Authority of India (FSSAI) has fixed a limit for Total Polar Compounds at 25 percent beyond which the vegetable oil shall not be used.
  • From 1st July, 2018 onwards, all Food Business Operators (FBOs) are required to monitor the quality of oil during frying by complying with the said regulations.
  • Repurpose Used Cooking Oil (RUCO) is an ecosystem that will enable the collection and conversion of UCO to biodiesel.
  • Food Safety and Standards Authority of India (FSSAI) is implementing a strategy to divert UCO from the food value chain and curb current illegal usage.
  • On this occasion, a sticker on RUCO viz., Repurpose Used Cooking Oil and a mobile app to facilitate the collection of UCO shall also be released by FSSAI.

Total Polar Compounds

  • The determination of the percentage of Total Polar Compounds (% TPC) is one of the most reliable methods for monitoring the quality changes in oils during the frying process and it reflects the degradation of the oil after repeated use.
  • Since these polar compounds are not digestible, consumption can impact consumer health, posing a greater risk of heart disease in the long term.

Ethanol

  • Ethanol is a colourless volatile flammable liquid which is produced by the natural fermentation of sugars.
  • Ethanol fuel is ethyl alcohol, the same type of alcohol found in alcoholic beverages, used as fuel.
  • Vehicles do not need any modifications to use blended fuel, which typically is 10 percent ethanol and 90 percent gasoline.
  • Ethanol itself burns cleaner and burns more completely than petrol it is blended into.
  • In India, ethanol is mainly derived by sugarcane molasses, which is a by-product in the conversion of sugar cane juice to sugar by fermentation process.
  • In general, ethanol is produced from biomass mostly via a fermentation process using glucose which can be derived from sugars (sugar cane, sugar beet and molasses), starch (corn, wheat, grains) or cellulose (forest products) as raw materials. In this form, it is renewable.
  • The creation of ethanol via fermentation separates the base glucose molecules into both ethanol and carbon dioxide molecules.
  • Synthetic ethanol can also be produced from non-renewable sources like coal and gas.
  • Since ethanol is produced from plants that harness the power of the sun, ethanol is also considered as renewable fuel.
  • Ethanol begins its life as carbon stored in biomass; this is converted to ethanol, which is burnt as fuel that emits water and carbon dioxide. Photosynthesis converts the carbon back into biomass, to be used in the next cycle of ethanol production.
  • As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions and thereby reducing the occurrence of environmental pollution.
  • Ethanol also improves the engine’s efficiency by using less fuel.
  • An oxygenated fuel that contains 35% oxygen, ethanol reduces nitrogen oxide emissions from combustion. It also helps reduce carbon monoxide emissions, particulate matter and sulphur-di-oxide.

Problems in the promotion of ethanol

  • There are reportedly significant transaction barriers which impede smooth supplies of ethanol for blending.
  • In several States, State not only imposes levy on molasses but also regulates the movement of non-levy molasses.
  • Inter-state movement of ethanol requires No-Objection-Certificates (NOCs) from the State Excise Authorities along with permits from dispatching and receiving States.
  • Most States impose “Export/Import” duties on ethanol leaving and entering their boundaries.
  • Hence, in order to improve the availability of ethanol, the Union Government has fixed ethanol price based on distance, which has encouraged movement of ethanol to longer distances, including States lacking distilleries.
  • Further, ethanol produced from other non-food feedstocks besides molasses, like cellulosic and ligno-cellulosic materials including petrochemical route, has also been allowed to be procured subject to meeting the relevant Bureau of Indian Standards (BIS) specifications.

Impact on vehicle fuel economy

  • In general, vehicle fuel economy may decrease by about 3% when using E10 (10% ethanol blended fuel) relative to gasoline that does not contain fuel ethanol as the energy content of ethanol is about 33% less than pure gasoline.

Methanol

  • Methanol — or methyl alcohol — is a dangerous alcohol that can be fatal if swallowed; it is most commonly used in paint remover.
  • Methanol gets made from coal and costs only Rs 22 per litre as against the prevailing price of about Rs 80 per litre for petrol.
  • In cases of ‘hooch’ tragedy, toxicity often comes from drinking methanol, which results in blindness, tissue damage or death.
  • The Government has decided that India’s 1st 2G ethanol bio-refinery would be set up at Bhatinda.

India’s first methanol cooking fuel debuts in Assam

  • Assam Petrochemicals Limited (APL), India’s first public sector producer of methanol and formalin from natural gas as feedstock, has started a pilot project promoted by NITI Aayog.
  • Under this project, coal, petroleum and natural gas will be converted to pollution-free methanol to be used as fuel for cooking and transportation so that LPG (liquefied petroleum gas) consumption is reduced.
  • About 80% of LPG consumed in India is imported.
  • But India is the first country where the focus is on replacing LPG.
  • Methanol can be a major market in India, besides helping us reduce oil imports by 20%
  • In terms of heat value, a 14 kg LPG cylinder is equivalent to about 20 kg of methanol but methanol works out 30% cheaper.
  • Assam Petrochemicals Limited (APL) is also planning to produce methanol from biomass, municipal waste and flare gas from refineries and oil wells.
  • Methanol is not only a clean fuel, it is light and can be easily carried to hilly areas.

Drop-in fuels

  • A fuel that is completely interchangeable and compatible with a particular conventional (typically petroleum-derived) fuel.
  • A perfect drop-in fuel does not require adaptation of the fuel distribution network or the vehicle or equipment engine fuel systems, and can be used “as is” in vehicles and engines that currently operate on that particular fuel.
  • Some alternative fuels may become “drop-in” only after blending with conventional fuel to a certain prescribed proportion.

Pradhan Mantri JI-VAN (Jaiv Indhan- Vatavaran Anukool Fasal Awashesh Nivaran) Yojana

  • Pradhan Mantri JI-VAN (Jaiv Indhan- Vatavaran Anukool Fasal Awashesh Nivaran) Yojana is for providing financial support to Integrated Bio-Ethanol Projects using ligno-cellulosic biomass & other renewable feedstock.
  • The scheme focuses to incentivise 2G Ethanol sector through Viability Gap Funding and other means.
  • By: Ministry of Petroleum & Natural Gas

The scheme will also have the following benefits:

  • Meeting Government of India vision of reducing import dependence by way of substituting fossil fuels with Biofuels.
  • Achieving the GHG emissions reduction targets through progressive blending/ substitution of fossil fuels.
  • Addressing environment concerns caused due to burning of biomass/ crop residues & improve health of citizens.
  • Improving farmer income by providing them remunerative income for their otherwise waste agriculture residues.
  • Creating rural & urban employment opportunities in 2G Ethanol projects and Biomass supply chain.
  • Contributing to Swachh Bharat Mission by supporting the aggregation of non-­food biofuel feedstocks such as waste biomass and urban waste.
  • Indigenizing of Second Generation Biomass to Ethanol technologies.
  • The ethanol produced by the scheme beneficiaries will be mandatorily supplied to Oil Marketing Companies (OMCs) to further enhance the blending percentage under EBP Programme.

Why this scheme?

  • Ministry of Petroleum & Natural Gas has targeted to achieve 10% blending percentage of Ethanol in petrol by 2022.
  • Despite efforts of the Government such as higher ethanol prices and simplification of ethanol purchase system, the ethanol procurement is not sufficient for 10% blending on Pan India basis.
  • Therefore, an alternate route viz. Second Generation (2G) Ethanol from biomass and other wastes is being explored by MoP&NG to bridge the supply gap for EBP programme.
  • Centre for High Technology (CHT), a technical body under the aegis of MoP&NG, will be the implementation Agency for the scheme.

Sustainable Alternative Towards Affordable Transportation (SATAT) scheme

  • It envisages establishing 5000 Compressed Bio Gas (CBG) plants across the country by 2023.
  • Under this scheme, Oil Public Sector Undertakings have invited Expression of Interest (EoI) for procuring CBG from potential entrepreneurs and has offered an assured price for off take of CBG.

B) Economy

2. The concepts of Bad Bank and Non-Performing Assets (NPAs) (TH)

Context: The government is exploring all options, including recapitalisation and setting up of a bad bank for reducing the burden of non-performing assets and to improve the health of the country’s banking sector.

Analysis

What is a ‘bad bank’?

  • The concept of ‘bad bank’ was first mooted in India by Chief Economic Adviser Arvind Subramanian in 2017.
  • The bad bank model was first proposed in 1980s in the U.S. Subsequently, several other countries implemented the idea.
  • A bad bank is termed so simply because it houses bad loans, or in financial parlance – non-performing assets (NPAs).
  • It is basically a Public Sector Asset Rehabilitation Agency that would take on public sector banks’ chronic bad loans and focus on their resolution and the extraction of any residual value from the underlying asset.
  • This would allow government-owned banks to focus on their core operations of providing credit for fresh investments and economic activity and leaves the resolution to experts.
  • Aside from this, a government-led initiative may perhaps make it more palatable or even attractive an opportunity for investors to invest their money- both domestic and foreign.
  • Unlike a private asset reconstruction company, a government-owned bad bank would be more likely to purchase loans that have no salvage value from public sector banks. It would thus work as an indirect bailout of these banks by the government.
  • The CEA had proposed a significant part of the bad bank funding to come from the Reserve Bank of India.

How will it help the NPA problem?

  • With increase in the NPAs as a proportion to the total loans, banks turn risk-averse and hesitate to provide loans.
  • (As a result, no new institution/company/organization- no new jobs – no increase in GDP)
  • If managed well, a bad bank can clean up bank balance sheets and get them to start lending again to businesses.
  • However, it will not address the more serious corporate governance issues plaguing public sector banks that led to the NPA problem in the first place.
  • One of the key challenges with such a bad bank is also capital, which has been tough to mobilise in the past.
  • Those against the idea argue that a one-size-fits-all approach towards resolution via this bank may not be feasible.

Non-Performing Assets (NPAs)

  • A non-performing asset (NPA) is a loan or an advance for which the principal or interest payment remained overdue for a period of 90 days.
  • If accounts remain out of order’ in case of overdraft/Cash Credit accounts or the bills purchased/discounted remain overdue for a period of more than 90 days, such accounts will also be classified as NPA.
  • In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days or credits are not enough to cover the interest debited during the same period, these accounts should be treated as out of order‘”.
  • Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank.
  • In case of agricultural advance, the account is classified as NPA, if the instalment of principle or interest thereon remain overdue for two crop seasons for short duration crops.
  • In case of long duration crop loans, the account will be classified as NPA if the outstanding is overdue for more than one crop season.

Gross and Net NPAs

  • Gross NPA is the total amount of outstanding NPAs in the borrowable account, excluding the interest receivable.
  • As per RBI regulation, once the account is classified as NPA interest cannot be debited to the NPA account.
  • Sometimes, Gross NPA is also defined as the total value of loans on which interest income has not been received by the Bank for more than 90 days, divided by total loan portfolio of bank.
  • Net NPA means GNPA minus total provision for Bad and Doubtful Reserve (BDDR).
  • BDDR is a reserve created by the banks in order to safeguard their loan assets in case some loan asset fall bad or get NPA.
  • This is a method of safeguarding the interest of the shareholders in case Banks are suffering huge loss due to NPAs.
  • All Gross NPA less the BDDR, amounts to Net NPA.

NPAs and Provisioning Requirements

  • Setting aside of money from profits to compensate a probable loss caused on lending a loan is called Provisioning. Provisioning is done to cover risk.
  • In the case of loss accounts for which the recovery is found to be almost negligible, banks make provision up to 100 percent
  • In the case of doubtful accounts for which some recovery is expected, banks make provision depending upon the period of classification and the provision may be 90; 85; 80 percent etc.
  • Even banks make provision for standard assets also. It has to be noted that there is no guarantee that the personal loans granted to the borrowers will be recovered in full.
  • Provisioning provides some information about the financial loss that the bank is going to incur during the financial year on account of writing off loan accounts for which recoveries are expected to be almost nil.
  • When banks report profits, they give low dividends now a day because of the provisioning requirement.
  • Many banks have substantial NPAs now and they are setting apart a major chunk of their profit to meet the provisioning.

Provisioning Coverage Ratio (PCR)

  • It refers to the prescribed percentage of funds to be set aside by the banks for covering the prospective losses due to bad loans.
  • Earlier there was a bench mark Provisioning Coverage Ratio (PCR) of 70 percent of gross NPAs was prescribed by RBI, as a macro-prudential measure.
  • The Reserve Bank advised the banks to segregate the surplus of the provision under PCR vis-a-vis as required as per prudential norms into an account styled as “countercyclical provisioning buffer”.
  • This buffer is allowed to be used by the banks for making specific provisions whenever needed, of course, with the prior approval of RBI.
  • Coverage ratio = Net Equity (Equity- net NPA) / (Total assets – intangible assets).

Slippage Ratio

  • The slippage ratio is the rate at which good loans are turning bad.
  • Slippage ratio= Fresh accretion of NPAs during the year /Total standard assets at the beginning of the year multiplied by 100

Capital Adequacy Ratio

  • Also known as capital-to-risk weighted assets ratio (CRAR), it is used to protect depositors and promote the stability and efficiency of financial systems around the world.
  • Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading (the bare minimum capital under CRAR), and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
  • The minimum regulatory requirement of Capital Adequacy Ratio for Indian banks is 9%. 
  • Effective April 1, 2019, the limit for exposure to any business group has been reduced from 40% of total capital to 25% of tier I capital (which consists of equity and quasi-equity instruments).
  • The limit for a single borrower will be 20% of tier 1 capital (instead of 20% of total capital).
  • Government adopted the comprehensive 4R’s strategy consisting of recognition of NPAs transparently, resolution and recovering value from stressed accounts, recapitalising Public Sector Banks (PSBs), and reforms in PSBs and financial ecosystem to ensure a responsible and clean system.

Central Repository of Information on Large Credits (CRILC)

  • The Reserve Bank has created a Central Repository of Information on Large Credits (CRILC) of scheduled commercial banks, all India financial institutions and certain non-banking financial companies with multiple objectives, which, among others, include strengthening offsite supervision and early recognition of financial distress.
  • With a view to building a similar database of large credits extended by primary (urban) co-operative banks (UCBs), it has been decided to bring UCBs with assets of ₹5 crores and above under the CRILC reporting framework.

Substandard, Doubtful and Loss assets

  • Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.
  • Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months.
  • Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.
  • Loss assets: Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.

Stressed Assets Vs Restructured Loans

  • Stressed Assets are those loans which show signs of becoming non-performing assets.
  • Restructured loans are those assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.
  • Hence, under restructuring a bad loan is modified as a new loan.
  • So Stressed Assets = Non-performing Assets + Restructured loans

Written off assets

  • Written off assets are those the bank or lender doesn’t count the money borrower owes to it.
  • The financial statement of the bank will indicate that the written off loans are compensated through some other way.

Special Mention Account (SMA)

  • Special Mention Account (SMA) is an account which is exhibiting signs of incipient stress resulting in the borrower defaulting in timely servicing of her debt obligations, though the account has not yet been classified as NPA as per the extant RBI guidelines.

Tougher Lending Norms by RBI to check the growth of NPAs

  • Effective April 1, 2019, the limit for exposure to any business group has been reduced from 40% of total capital to 25% of tier I capital (which consists of equity and quasi-equity instruments).
  • The limit for a single borrower will be 20% of tier 1 capital (instead of 20% of total capital).

Prompt Corrective Action (PCA) Framework

  • Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
  • PCA is intended to help alert the regulator as well as investors and depositors if a bank is heading for trouble. The idea is to head off problems before they attain crisis proportions.
  • Essentially PCA helps RBI monitor key performance indicators of banks, and taking corrective measures, to restore the financial health of a bank.
  • While taking the decision on putting a bank under prompt corrective action (PCA) plan, the RBI assesses its standing on three counts, namely:
  • capital adequacy ratio (CAR),
  • net Non-Performing Assets (NPAs), and
  • return on assets (RoA).
  • Banks become PCA candidates when they feel the minimum requirements of CAR or net NPAs rise above 6 per cent or the RoA is negative for two years.
  • Breach of any one condition is seen as sufficient to trigger PCA.
  • Banks under PCA regime face restrictions on giving loans, as the aim is to turn the bank around and improve financial and credit profiles.
  • In addition, the lender may also be barred from recruiting staff, besides limiting the opening of new branches.
  • These steps are generally aimed at improving the bank’s performance and not adversely impacting its day-to-day operations.
  • Contrary to the perception, PCA does not really limit the normal lending operations of banks. While the RBI has placed restrictions on credit by PCA banks to unrated borrowers or those with high risks, it hasn’t invoked a complete ban on their lending.

C) Indices, Reports, Surveys, Committees and Organisations

3. National Commission for Minorities (PIB)

Context: The National Commission for Minorities celebrated “Minorities Day”.

  • December 18 was declared as The Minorities Rights Day in 1992 by the United Nations after the agency adopted the Statement on the individual’s Rights belonging to religious or Linguistic National or Ethnic Minorities.
  • It is observed in India by the National Commission for Minorities (NCM) which was established by The Union Government under the National Commission for Minorities Act, 1992.
  • Initially, as many as five religious communities, Muslims, Christians, Sikhs, Buddhists, and Zoroastrians (Parsis) were notified as minority communities by the Union Government. In a further notification in 2014, Jains were also notified as another minority community.

Analysis

  • The Constitution uses the word ‘minorities in some articles but does not define it anywhere and speaks of those ‘based on religion or language only’.
  • However, the rights of the minorities have been spelt out in the Constitution in detail.
  • The Constitution of India used the word ‘minorities’ or its plural form in some articles 29 to 30 and 350 A to 350 B.
  • Article 29 has the word ‘minorities’ in its marginal heading but speaks of “any section of citizens having a distinct language script and culture”.
  • This may be a whole community generally seen as a minority or group within a majority community.
  • Article 30 speaks specifically of two categories of minorities – religious and linguistic.
  • The remaining two articles – 350 A and 350 B relate to linguistic minorities only.
  • “As per the National Commission for Minorities Act, 1992, six communities are declared as minority communities viz Muslims, Christians, Sikhs, Buddhists, Jains and Zoroastrians (Parsis).

‘Common Domain’ and ‘Separate Domain’ of rights of minorities provided in the Constitution

  • The Constitution provides two sets of rights of minorities which can be placed in ‘common domain’ and ‘separate domain’.
  • The rights which fall in the ‘common domain’ are those which are applicable to all the citizens of our country.
  • The rights which fall in the ‘separate domain’ are those which are applicable to the minorities only and these are reserved to protect their identity.

‘Separate Domain’ of Minority Rights

  • The Minority Rights provided in the Constitution which fall in the category of ‘Separate Domain’ are as under:
  • right of ‘any section of the citizens’ to ‘conserve’ its ‘distinct language, script or culture’; [Article 29(1)]
  • restriction on denial of admission to any citizen, to any educational institution maintained or aided by the State, ‘on grounds only of religion, race, caste, language or any of them’; [Article 29(2)]
  • right of all Religious and Linguistic Minorities to establish and administer educational institutions of their choice; [Article 30(1)]
  • freedom of Minority-managed educational institutions from discrimination in the matter of receiving aid from the State; [Article30(2)]
  • special provision relating to the language spoken by a section of the population of any State; [Article 347]
  • provision for facilities for instruction in mother-tongue at primary stage; [Article 350 A]
  • provision for a Special Officer for Linguistic Minorities and his duties; and [Article 350 B]
  • Sikh community’s right of ‘wearing and carrying of kirpans; [Article 25]

Protection of weaker sections in Indian pluralistic society

  • The Constitution protects all sorts of weaker sections of the Indian citizenry – whether this ‘weakness’ is based on numbers or on social, economic or educational status of any particular group.
  • The Constitution, therefore, speaks of Religious and Linguistic Minorities, Scheduled Castes, Scheduled Tribes and Backward Classes and makes – or leaves room for making – for them special provisions of various nature and varying import.

National Commission for Minorities

  • The National Commission for Minorities is a statutory body established under the National Commission for Minorities Act, 1992.

What powers have been vested with the Commission?

  • The Commission shall have all the powers of a civil court trying a suit and, in particular, in respect of the following matters, namely:
  • summoning and enforcing the attendance of any person from any part of India and examining him on oath.
  • requiring the discovery and production of any document.
  • receiving evidence on affidavit.
  • requisitioning any public record or copy thereof from any court or office.
  • issuing commissions for the examination of witnesses and documents.
  • any other matter which may be prescribed.

What kind of complaints area not entertained by the Commission?

  • those not based on or relating to Minority status/rights/safeguards.
  • those concerning matters sub judice (pending before a court/quasi-judicial/body).
  • those for which ordinary judicial/quasi-judicial/administrative remedies are available elsewhere but have not been availed by complainant without any reasonable justification.
  • those relating to events which are one-year old or older.
  • those which are vague. anonymous, pseudonymous or frivolous.
  • those not directly addressed to the Commission and sent to it by way or copies of complaints/ representations addressed into any other authority.

What is the responsibility of the Central/ State Governments to which report/ recommendations have been sent by the Commission?

  • The Central/State Government/s shall cause the recommendations to be laid before each House of Parliament along with a memorandum explaining the action taken or proposed to be taken on the recommendations relating to the Union and the reasons for the non-acceptance, if any, of any of such recommendations.

Minorities’ commission to seek constitutional status

  • The National Commission for Scheduled Castes (Article 338) and the National Commission for Scheduled Tribes (Article 338A) and National Commission of Backward Classes (338B) enjoy constitutional status, while National Commission for Minorities is a statutory body.

Why Constitutional Status?

  • In its present form, the NCM has powers to summon officials, including chief secretaries and director generals of police, but has to rely on departments concerned to take action against them.
  • Note: For Schemes for the Welfare of Minorities refer 23rd Sep file.

D) Science and Technology, Defence, Space

4. BOSS, IMSAS & ASTRA Mk-I: Indigenous systems by DRDO (PIB)

Context: Defence Minister handed over three indigenously developed Defence Research and Development Organisation (DRDO) systems to Army, Navy and Air Force.

Analysis

Border Surveillance System (BOSS)

  • An all-weather electronic surveillance system successfully designed and developed DRDO.
  • The system has been deployed at Ladakh border area for day and night surveillance.
  • This system is designed for the use of the army.
  • The system facilitates monitoring and surveillance by automatically detecting the intrusions in harsh high-altitude sub-zero temperature areas with remote operation capability.

Indian Maritime Situational Awareness System (IMSAS)

  • The IMSAS is state-of-the-art, fully indigenous, high performance intelligent software system that provide Global Maritime Situational Picture, Marine planning tools and Analytical capabilities to Indian Navy.
  • The system provides Maritime Operational Picture from Naval HQ to each individual ship in sea to enable Naval Command and Control (C2).

ASTRA Mk-I

  • The ASTRA Mk-I is the indigenously developed first Beyond Visual Range (BVR) class of Air-to-Air Missile (AAM) system designed to be mounted on fighter aircraft.
  • The missile is designed to engage and destroy highly manoeuvring supersonic aircraft.
  • The missile has all weather day and night capability.
  • Globally, very few countries have expertise and capabilities to design and produce this class of weapon system.
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