11-September-2024-Daily-Current-Affairs

‘GROWTH OF CREDIT OUTPACING DEPOSITS CAN TIGHTEN LIQUIDITY’

TOPIC: (GS3) ECONOMY– SOURCE: THE HINDU

The Indian banking system is facing a potential liquidity crunch as credit growth outpaces deposit growth. A recent survey conducted by FICCI-IBA highlights the challenges faced by banks in raising lower-cost deposits to maintain their credit growth.

Key Findings

• Credit Growth vs. Deposit Growth: The survey indicates that credit growth has been outpacing deposit growth, leading to concerns about liquidity.
• Infrastructure Sector: The infrastructure sector has witnessed a significant increase in credit flow, driven by the government’s capital expenditure push.
• Shift to Higher-Cost Deposits: Customers’ preference for higher-yielding investments and longer lock-in periods has led to a decrease in the share of current and savings accounts (CASA) deposits.
• Deposit Crunch: Raising lower-cost CASA deposits has become a top agenda for banks to manage their credit costs effectively.

Implications

• Tightening Liquidity: The mismatch between credit growth and deposit growth could lead to tighter liquidity conditions in the banking system.
• Higher Interest Rates: Banks may be forced to raise interest rates on loans to attract deposits, which could impact borrowing costs for businesses and consumers.
• Impact on Economic Growth: A liquidity crunch could hinder economic growth by making it more difficult for businesses to access credit.

The relationship between credit growth, deposits, and liquidity in banking can be illustrated with a simple example:

• Imagine a bank as a water tank. The water in the tank represents the bank’s deposits, while the water flowing  out of the tank represents the credit that the bank lends to customers.
• Balanced Situation: If the water flowing in (deposits) equals the water flowing out (credit), the tank remains at a stable level. This means the bank has sufficient liquidity to meet its obligations.
• Credit Growth Outpacing Deposits: If the water flowing out (credit) exceeds the water flowing in (deposits), the tank level will start to decrease. This represents a situation where the bank’s credit growth is outpacing its deposit growth, leading to a potential liquidity crunch. In this scenario, the bank may need to raise interest rates on loans to attract more deposits or reduce its lending activities to maintain liquidity. ( which means this makes money costlier.)
• Deposits Outpacing Credit Growth: If the water flowing in (deposits) exceeds the water flowing out (credit), the tank level will rise. This represents a situation where the bank has excess liquidity. While this may seem like a positive situation, excessive liquidity can lead to other issues, such as asset bubbles and credit risk. (which means there is slow down in economy bank intrests may change)

Conclusion

The Indian banking system is facing a crucial challenge in maintaining liquidity. The survey findings underscore the need for banks to focus on raising lower-cost deposits and managing their credit growth effectively. Addressing these issues will be crucial for ensuring the stability and resilience of the Indian banking system.

Multiple choice question

1. With reference to the banking sector in India, consider the following statements:
2. An increase in bank deposits generally improves the liquidity situation in the market.
3. A rise in the Cash Reserve Ratio (CRR) by the Reserve Bank of India (RBI) enhances the liquidity situation in the banking system.
4. High liquidity in the market often leads to lower interest rates on loans.

Which of the statements given above is/are correct?

1. 1 and 2 only
2. 1 and 3 only
3. 2 and 3 only
4. 1, 2, and 3

ANSWER: B

EXPLANATION:

An increase in bank deposits improves the liquidity in the market as banks have more funds to lend.

A rise in the CRR means banks have to keep a larger portion of their deposits with the RBI, which reduces the liquidity in the banking system.

High liquidity generally leads to lower interest rates, as banks have more funds to lend, reducing the cost of borrowing.

INDIA BATS FOR NEW DISCLOSURE NORMS FOR CROSS-BORDER CREDIT CARD TRANSACTIONS UNDER FATF

TOPIC: (GS3) ECONOMY– SOURCE: THE HINDU

The Financial Action Task Force (FATF) is a global body that sets standards for combating money laundering and terrorist financing.

India underwent a mutual evaluation process in November 2023, and the report is scheduled to be released on September 18. The report will assess India’s compliance with FATF standards and identify areas for improvement.

• FATF Recommendations: The FATF is working on new disclosure norms for cross-border credit card transactions.
• Industry Consultation: An international consultative forum will be held in Mumbai in April 2025 to discuss the new norms and address industry concerns.
• India’s Performance: India has received a high rating in 37 out of 40 parameters assessed by the FATF.
• Travel Rule Compliance: India has achieved high-level technical compliance with the FATF’s Travel Rule guidelines.
• Priority Action Areas: The FATF has identified areas where India needs to strengthen its measures to combat money laundering and terrorist financing.
• Impact on Financial Institutions: The new disclosure norms could increase compliance costs for financial institutions and payment companies.
• Balance Between Regulation and Industry Concerns: The FATF aims to find a balance between ensuring compliance and avoiding undue burdens on the industry.

FINANCIAL ACTION TASK FORCE (FATF)

FATF is an inter-governmental policy-making and standard-setting body dedicated to combating money laundering and terrorist financing.Objective

• Establish international standards to combat money laundering and terrorist financing.
• Develop and promote policies at national and international levels against financial crimes.

Origin and Mandate

• Established in 1989 during the G7 Summit in Paris to address money laundering.
• In 2001, the mandate expanded to include combating terrorism financing.

Headquarters

• Paris, France.

Membership

• Comprises 39 members, including the United States, India, China, Saudi Arabia, Britain, Germany, France, and the EU.
• India became a member in 2010.

FATF Lists

• Blacklist: Countries that are non-cooperative in combating money laundering and terror financing, known as NCCTs. It includes North Korea, Iran, and Myanmar.
• Grey List: Countries considered safe havens for supporting terror funding and money laundering. It serves as a warning before potential blacklisting.

Consequences of Blacklisting

• Restricted access to financial aid from institutions like the IMF, World Bank, ADB, and the EU.
• Imposition of international economic and financial sanctions and restrictions.

Conclusion

The upcoming release of India’s mutual evaluation report by the FATF is a significant event. The report will assess India’s progress in combating money laundering and terrorist financing and identify areas for improvement. The new disclosure norms for cross-border credit card transactions, while aimed at enhancing transparency and security, could also present challenges for financial institutions. It will be crucial for India to address these challenges and maintain its strong position in the global fight against financial crime.

Multiple choice question

1. With reference to the Financial Action Task Force (FATF), consider the following statements:
2. The FATF is an intergovernmental body established to combat money laundering, terrorist financing, and other related threats to the global financial system.
3. Countries placed on the FATF’s “Grey List” face immediate sanctions and are barred from receiving financial aid from international institutions.
4. India is a founding member of the FATF.

Which of the statements given above is/are correct?

1. 1 only
2. 1 and 2 only
3. 2 and 3 only
4. 1, 2, and 3

ANSWER: A

EXPLANATION:

The FATF is an intergovernmental organization established in 1989 to develop policies to combat money laundering, terrorist financing, and other threats to the global financial system.

Countries on the “Grey List” do not face immediate sanctions but are subject to increased monitoring, which can indirectly affect their financial relations with international institutions.

India is not a founding member of the FATF; it joined the organization in 2010

PM MODI CONVENES FIRST MEETING OF NATIONAL RESEARCH FUND BOARD

TOPIC: (GS2) POLITY AND GOVERNANCE – SOURCE: THE HINDU

Prime Minister Narendra Modi convened the first meeting of the Governing Board of the Anusandhan National Research Foundation (ANRF) in New Delhi on September 10, 2024.

The ANRF, established as a funding body for science and engineering research, aims to promote research excellence and innovation in India.

Key Points

Objectives: The ANRF seeks to:

• Galvanize science and engineering research in India.
• Establish a ₹50,000 crore corpus for research funding.
• Encourage research funding to state universities and private industry.
• Promote inclusive growth, capacity building, and innovation ecosystems.
• Bridge the gap between academic research and industrial applications.

Governance: The ANRF Governing Board consists of 15 members, including one industrialist, Romesh Wadhwani.

Funding: The ANRF has been allocated ₹2,000 crore in the Union Budget for the current financial year.

Initiatives: The ANRF plans to launch a “hub and spoke model” to pair universities for mentorship and collaboration. It will also identify and address obstacles in the Indian research ecosystem.

Advantages of the Anusandhan National Research Foundation (ANRF)

• Increased Research Funding: The ANRF’s allocation of ₹50,000 crore will significantly boost research funding in India, enabling researchers to pursue ambitious projects and make significant contributions to their fields.
• Bridging the Gap Between Academia and Industry: The ANRF’s “hub and spoke model” will facilitate collaborations between universities and industries, promoting the translation of research into practical applications and fostering innovation.
• Promotion of Inclusive Growth: By supporting research in diverse areas and regions, the ANRF can contribute to inclusive growth and development.
• Capacity Building: The ANRF can provide opportunities for capacity building and skill development among researchers, enabling them to conduct high-quality research.
• Strengthening India’s Global Research Landscape: By fostering research excellence, the ANRF can enhance India’s reputation as a global research hub and attract international collaboration.

initiatives undertaken by the Indian government to develop scientific temper:

• National Science Day (NSD): Celebrated on February 28th each year to commemorate the discovery of the Raman effect by Indian physicist C.V. Raman, NSD aims to promote scientific awareness and understanding among the public.
• National Science and Technology Entrepreneurship Development Board (NSTEDB): This government body provides financial assistance, incubation support, and mentoring to budding scientists and entrepreneurs.
• Science and Technology in India (STI): This initiative aims to promote science and technology in India through various programs, including research grants, fellowships, and international collaborations.
• National Research Foundation (NRF): Established in 2021, the NRF aims to promote scientific research and innovation in India by providing funding and support to researchers.

Conclusion

The establishment of the ANRF marks a significant step towards strengthening research and innovation in India. By providing funding, mentorship, and support, the ANRF aims to foster a vibrant and dynamic research ecosystem that can contribute to India’s economic growth and development.

Multiple choice question

1. Consider the following statements regarding the Anusandhan National Research Foundation (ANRF):
2. ANRF aims to create a ₹50,000 crore corpus for research funding in India.
3. The Governing Board of ANRF includes members from both academia and industry.
4. ANRF’s primary focus is on promoting research funding exclusively to central universities.

Which of the statements given above is/are correct?

1. 1 and 2 only
2. 1 and 3 only
3. 2 and 3 only
4. 1, 2, and 3

ANSWER: A

EXPLANATION:

ANRF aims to establish a ₹50,000 crore corpus for research funding.

The Governing Board includes members from both academia and industry, including industrialist Romesh Wadhwani.

ANRF encourages research funding to state universities and private industries, not exclusively to central universities.

ACCESS TO ELECTRICITY IN RURAL AREAS HAD DIFFERENTIAL BENEFITS, SAYS STUDY

TOPIC: (GS2) POLITY AND GOVERNANCE – SOURCE: THE HINDU

The Rajiv Gandhi Grameen Vidyut Yojana (RGGVY), launched in 2005, aimed to provide electricity access to around four lakh villages in India.

However, a study by the University of Chicago and the University of Maryland reveals that the benefits of electrification were unevenly distributed among villages of different sizes.

Key Findings

• Disproportionate Benefits: Larger villages with more than 1,000 residents experienced more significant benefits from electrification than smaller hamlets with fewer than 300 people. Villages with 2,000 or more people saw substantial economic gains.
• Economic Gains: In villages with about 2,000 people, full electrification led to a doubling of per-capita expenditure, an increase of approximately ₹1,428 per month. Smaller villages with 300 residents saw minimal change in per-capita monthly expenditure.
• Cost-Effectiveness: Smaller villages showed a “zero return” from electrification after 20 years, with a less than 27% chance of generating economic benefits that exceed costs. Villages with 1,000 residents had a 13% return, while villages with 2,000 people had a 33% return, making them more cost-effective.
• Policy Implication: Researchers suggest that smaller, remote villages may benefit more from alternative solutions like solar home systems or minigrids instead of traditional grid expansion.

Progress in Rural Electrification

• High Penetration: India has achieved a high rate of rural electrification, with over 99% of rural households having access to electricity as of 2022.
• Government Initiatives: Government schemes like DDUGJY and SAUBHAGYA have played a crucial role in achieving this milestone.
• Last-Mile Connectivity: The government has focused on connecting all households and villages to the power grid.

Challenges and Opportunities

• Power Outages: Despite high penetration, power outages remain a significant challenge in rural areas.
• Disparities in Consumption: Rural households consume significantly less electricity compared to urban areas.
• Infrastructure Constraints: Inadequate infrastructure, such as transmission and distribution networks, can hinder the reliable supply of electricity.
• Affordability: Electricity tariffs in rural areas can be high, making it difficult for households to afford the cost of electricity.
• Renewable Energy Integration: Rural areas present opportunities for integrating renewable energy sources, such as solar and wind power, to reduce dependence on fossil fuels.

Impact of Rural Electrification

• Economic Growth: Access to electricity can boost economic activity in rural areas by enabling the establishment of small-scale industries, agricultural processing units, and other enterprises.
• Improved Quality of Life: Electrification improves living standards by providing access to essential services like education, healthcare, and communication.
• Social Empowerment: Electrification can empower women and marginalized communities by providing them with new opportunities and reducing their dependence on traditional sources of energy.
• Environmental Benefits: The adoption of renewable energy sources in rural areas can contribute to environmental sustainability.

Conclusion

The study highlights the need for tailored electrification strategies to address the varying economic impacts on different village sizes, emphasizing that larger villages derive more significant benefits, whereas remote, smaller villages may require alternative solutions for effective electrification.

IMPACT OF COVID-19 LOCKDOWNS ON ADOLESCENT BRAIN DEVELOPMENT

TOPIC: (GS3) SCIENCE AND TECHNOLOGY– SOURCE: SCIENCE DAILY

The COVID-19 pandemic forced unprecedented lockdowns worldwide, significantly impacting daily life, particularly for adolescents. A recent study published in the Proceedings of the National Academy of Sciences examined the effects of these lockdowns on adolescent brain development.

Key Findings

• Accelerated Cortical Thinning: The study found that the brains of female adolescents experienced accelerated cortical thinning during the pandemic compared to male adolescents.
• Social Isolation: The researchers attributed this accelerated brain development to social isolation caused by the lockdowns, which disproportionately affected girls.
• Dependence on Social Interaction: Adolescent girls are more dependent on social interaction for stress relief, and the lack of in-person social contact during the pandemic may have contributed to accelerated brain maturation.
• No Negative Impact: While the accelerated cortical thinning was notable, it did not necessarily indicate a negative outcome. Some experts suggest that this process might be a natural part of brain maturation.

Implications

• Long-Term Effects: The long-term effects of accelerated cortical thinning on adolescent development remain uncertain. Further research is needed to understand the implications for mental health and cognitive function.
• Importance of Social Interaction: The study highlights the crucial role of social interaction in adolescent development. Efforts should be made to promote social connections and support for adolescents, especially during times of crisis.

CORTICAL THINNING

• Imagine your brain is like a big, round balloon. The outside layer of the balloon, where the colours and patterns are, is similar to the cortex in your brain. The cortex is the part of your brain responsible for thinking, feeling, and remembering.
• Thinning means the cortex is getting smaller or thinner. This can happen as you get older, but it’s usually a slow process. In the study you mentioned, they found that the brains of some teenage girls were thinning faster than usual during the pandemic.
• This might be because they weren’t able to go out and see their friends as much, which can affect how our brains develop. It’s like not using a muscle for a long time – it might get weaker

Conclusion

The COVID-19 pandemic had a significant impact on adolescent brain development, with girls experiencing more accelerated cortical thinning than boys. While the long-term implications of this finding are unclear, the study emphasizes the importance of social interaction and support for adolescent mental health and well-being.

ANTIMICROBIAL RESISTANCE (AMR): A GROWING THREAT IN INDIA

TOPIC: (GS3) SCIENCE AND TECHNOLOGY– SOURCE: INDIAN EXPRESS

Antimicrobial resistance (AMR) is a critical global health issue that threatens the effectiveness of antibiotics and other antimicrobial drugs. In India, AMR is a significant concern due to the overuse and misuse of antibiotics, leading to the emergence of drug-resistant “superbugs.”

Key Findings

• Prevalence of AMR: AMR is a common problem in India, affecting a wide range of pathogens.
• Most Common Pathogens: The most common resistant pathogens in India include Escherichia coli (E. coli), Klebsiella pneumoniae, and Acinetobacter baumannii.
• Rising Resistance: Resistance to various classes of antibiotics, including carbapenems, has been increasing in recent years.
• Overuse of Antibiotics: A significant proportion of patients in India are prescribed antibiotics, often without proper diagnosis or for non-bacterial infections.
• Limited Treatment Options: The emergence of AMR limits the available treatment options for infections, making them more difficult to treat.

Challenges

• Lack of Awareness: Many individuals and healthcare providers are unaware of the importance of appropriate antibiotic use and the consequences of AMR.
• Limited Access to Diagnostics: The lack of access to diagnostic tests can lead to the inappropriate use of antibiotics.
• Weak Surveillance Systems: India’s AMR surveillance systems need to be strengthened to track the emergence and spread of resistant pathogens.

Recommendations

• Promoting Appropriate Antibiotic Use: Educating healthcare providers and the public about the appropriate use of antibiotics is crucial.
• Strengthening Surveillance: Investing in AMR surveillance systems to track the emergence and spread of resistant pathogens.
• Improving Diagnostics: Ensuring access to accurate and timely diagnostic tests to guide antibiotic treatment.
• Developing New Antibiotics: Promoting research and development of new antibiotics to address the growing challenge of AMR.
• Implementing One Health Approach: Adopting a One Health approach that considers the interconnectedness of human, animal, and environmental health to address AMR.

Conclusion

AMR is a serious public health threat in India, with significant implications for patient care and healthcare costs. Addressing AMR requires a multi-faceted approach involving education, surveillance, research, and policy interventions. By implementing these measures, India can mitigate the impact of AMR and ensure the continued effectiveness of antibiotics.

NATIONAL TESTING HOUSE (NTH) TO CERTIFY DRONES

TOPIC: (GS2) POLITY AND GOVERNANCE – SOURCE: INDIAN EXPRESS

The National Testing House (NTH) has been approved as a certification body for unmanned aircraft systems (UAS), or drones, in India. This significant milestone aligns with the government’s push to foster a robust and globally competitive drone ecosystem.

Key Points

• Certification Body: NTH has been recognized as a certification body for drones by the Quality Council of India.
• Drone Rules 2021: Securing type certification under Drone Rules 2021 is mandatory for operating drones in India.
• NTH’s Role: NTH will evaluate drone models to ensure their compliance with national and international standards.

• Krishi raj Drone Certification: NTH is conducting a two-stage certification process for the Krishiraj 1.0 agricultural drone.
• Faster Certification: NTH has achieved this stage of certification faster than its peers in the industry, demonstrating its efficiency and expertise.
• Cost-Effective Certification: NTH offers drone certification services at a lower cost compared to multinational companies.

Conclusion

The approval of NTH as a certification body for drones is a positive development for India’s drone industry. It will facilitate the growth and development of the drone ecosystem by providing efficient and cost-effective certification services. This will contribute to India’s efforts to become a global leader in drone technology.

INDIA’S FOUR-POINT PRINCIPLE ON THE RUSSIA-UKRAINE CONFLICT

TOPIC: (GS2) INTERNATIONAL RELATIONS – SOURCE: THE HINDU

India has consistently advocated for a peaceful resolution to the Russia-Ukraine conflict. The country has outlined a four-point principle to guide its approach to the crisis.

India’s External Affairs Minister has put forward a four-point principle to address the Russia-Ukraine conflict, stressing the importance of peace, dialogue, and Russia’s inclusion in any settlement process.

India’s Four-Point Principle on the Russia-Ukraine Conflict:

• Commitment to Peace: India advocates for peace and opposes war as a means to resolve disputes.
• Importance of Negotiation: A resolution cannot be achieved through war; negotiations are necessary for a lasting solution.
• Inclusion of Russia: For any peace process to succeed, Russia must be part of the discussions.
• Active Engagement: India is continuously concerned and involved in seeking a resolution to the conflict.

India’s Role Amid the Conflict:

• India has refrained from committing to organizing or proposing a peace conference related to the Russia-Ukraine conflict.
• External Affairs Minister S underscored India’s active engagement, citing National Security Adviser Ajit Doval’s visit to Russia.
• Historically, India’s stance was that the conflict was primarily a European issue, not one that directly impacted India.

Conclusion

India’s four-point principle provides a framework for its approach to the Russia-Ukraine conflict. By advocating for peace, negotiations, and Russian involvement, India is seeking to contribute to a peaceful and just resolution to the crisis.