28 03 20...2020/03/28  · reduction in repo rate and widening of monetary policy corridor reduction...

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Daily News Simplified - DNS 28 03 20 Notes SL. NO. TOPICS THE HINDU PAGE NO. 1 RBI cuts rates, allows loan moratorium RBI’s guns boom RBI unleashes its fire power 01 06 11 2 Shift to upscaling food rationing now 06 3 SC relaxes BS-IV deadline 11 4 India set to participate in WHO’s medicine trial 09 5 India to set up electronic platform to fight virus 09 6. Arunachal Pradesh tribes revive indigenous lockdown ritual 16

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Page 1: 28 03 20...2020/03/28  · Reduction in Repo Rate and widening of Monetary Policy Corridor Reduction in Repo Rate: The RBI has decided to reduce the Repo rate by 75 basis points from

Daily News Simplified - DNS

28 03 20

Notes SL. NO.

TOPICS THE HINDU

PAGE NO.

1

RBI cuts rates, allows loan moratorium

RBI’s guns boom

RBI unleashes its fire power

01

06

11

2 Shift to upscaling food rationing now 06

3 SC relaxes BS-IV deadline 11

4 India set to participate in WHO’s medicine trial 09

5 India to set up electronic platform to fight virus 09

6. Arunachal Pradesh tribes revive indigenous lockdown ritual 16

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Title RBI cuts rates, allows loan moratorium (The Hindu – Pg. 01)

Syllabus Prelims: Indian Economy Theme RBI’s package to deal with COVID-19 Highlights Context: The outbreak of COVID-19 has put economic activity and financial markets in India under severe

stress. Finance is considered as lifeline of the economy and hence keeping it flowing is of utmost importance. Hence, the RBI has unleashed a form of economic bazooka to mitigate the impact of COVID-19. These measures have been announced to revive economic growth and preserve financial stability. The action taken by RBI can be delineated under four categories: • Rescheduling of Payments – Term Loans and Working Capital Loans • Reduction in Repo rate and widening of Monetary Policy Corridor • Measures to enhance liquidity by around Rs 3.74 lakh crores. • Deferment of last tranche of Capital Conservation Buffer (CCB)

Since the last MPC meeting in February 2020, the RBI has injected liquidity of Rs 2.8 lakh crore (1.4% of GDP) through various instruments. After the recent announcement, RBI's total injection since Feb 2020 works out to be 3.2% of GDP, which is considered to be hugely significant.

Rescheduling of Payments – Term Loans and Working Capital Loans What are term loans? Term loans are the loans which have to be repaid over certain duration of time ranging from 1 year to 30 years. These loans can be given either at fixed or floating rate of interest. Usually, such loans are availed by both individuals and companies. The individuals may avail loans for purpose of constructing houses, Education, Vehicle, Personal expenses etc. while the companies avail loans for set up a new unit or expand the existing unit. RBI's Announcement: The RBI has permitted the banks to allow a moratorium of 3 months on the payment of instalments of all the term loans which are outstanding as on March 1, 2020. This means that the borrowers would not have to pay EMIs for the next 3 months. Further, the RBI has also allowed the banks to defer the recovery of the interest on the working capital loans given to companies for a period of 3 months. Some important points related to this announcement are: • Moratorium is not a loan waiver. Rather, it is the deferment of the principal and Interest for a period

of 3 months. • Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium

period • It is only an enabling provision. The Banks are required to take the final decision on the moratorium

on term loans • Usually, in case of delay of more than 30 days, the loans are categorized as Special Mention Account

(SMA). If the delay is more than 90 days, the loan is categorized as NPA. Further, delay in payments could adversely affect the credit score of the borrowers. However, in this case, since the RBI has enabled moratorium, the term loans would not be labelled as SMA or NPA during the moratorium period of 3 months. The Credit score of the borrowers would also not be affected.

• This facility can be availed by all banks- commercial banks (including small finance banks, RRBs), Cooperative banks, NBFCs (including HFCs), All India Financial Institutions (such as NABARD, EXIM Bank, NHB, SIDBI etc.).

Benefits: • Relief for the Individuals and companies whose cashflows/incomes have got affected by COVID-19 • Benefits the Banks as they are not required to classify such loans as NPAs during the moratorium

period. • Default in the repayment of loans could have led to contagion impact on entire financial sector.

Hence, RBI's action has preempted such an impact.

Reduction in Repo Rate and widening of Monetary Policy Corridor Reduction in Repo Rate: The RBI has decided to reduce the Repo rate by 75 basis points from 5.15% to 4.4%. At the same time, the Reverse Repo was reduced by 90 basis points from 4.90% to 4%. The MSF has also been reduced by 75 basis points from 5.40% to 4.65%. Widening of Monetary Policy Corridor: • The MSF, Repo and Reverse Repo are all part of Liquidity Adjustment facility (LAF). Presently, these

policy tools are placed in a 50-basis points corridor with Repo placed in middle (5.15%), MSF at 25 basis points higher (5.40%) and Reverse Repo at 25 basis points lower (4.90%). So, difference between the Upper limit (MSF) and Lower Limit (Reverse Repo) is 50 basis points.

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• However, now, the RBI has reduced Repo and MSF by 75 basis points, while Reverse Repo has been reduced by 90 basis points leading to asymmetric corridor. The purpose of such a higher reduction in Reverse Repo is to make it unattractive for the banks to deposit their surplus funds with the RBI as part of Reverse Repo. The lower interest rates on Reverse Repo would compel the banks to inject the liquidity into the economy instead of maintaining the same with the RBI. Hence, now the difference between Upper limit (MSF) and Lower Limit (Reverse Repo) is 65 basis points.

Measures to enhance liquidity in the Economy

The RBI has adopted multi-pronged approach to ensure that COVID-19 does not lead to shortage of liquidity in the economy. These measures include Targeted Long-Term Repo Operations (LTROs), Reduction in CRR, Relaxation in daily maintenance of CRR and Relaxation in borrowings under MSF. These measures will inject a total liquidity of Rs 3.74 lakh crore to the system. Targeted Long-Term Repo Operations: The RBI would inject Rs 1 lakh crore into the economy through the targeted long-term repo operations (LTROs) of 3 years tenor. The interest rate on the term repos would be floating interest rate, linked to policy Repo Rate. According to the RBI, the liquidity availed by banks has to be deployed in investment grade corporate bonds, commercial paper and other financial instruments. Hence, it is referred to as Targeted LTROs. Reduction in Cash Reserve ratio (CRR): The moratorium on the term loans by the banks could have an adverse impact on the cash flows of the banks. Hence, in order to improve their liquidity situation, the RBI has decide to reduce the CRR from existing 4% to 3%. The reduction in CRR would release Rs 1.37 lakh crores for the banks which then can be injected into the economy. Relaxation in daily maintenance of CRR: All the banks are required to maintain 100 percent of the CRR requirement on an average basis during the fortnight. This means that it is not necessary for the banks to maintain 100% of the CRR requirement on all days during the fortnight. However, the average CRR with the RBI for the entire fortnight has to be 100% of CRR requirement. Further, the RBI stipulates the daily minimum CRR balances for the banks. Presently, it is 90% of the CRR requirement on a daily basis. The RBI has now decided to reduce the requirement of minimum daily CRR balance maintenance from 90 per cent to 80 per cent. This is a one-time dispensation available up to June 26, 2020. Relaxation in borrowings under Marginal Standing Facility (MSF): The MSF is a tool used by the Banks to borrow money from the RBI on an overnight basis. The mechanism is similar to Repo transaction. In case of Repo, the Banks use G-Secs which are not part of SLR. However, the MSF enables the banks to borrow money even when the Bank does not have G-Secs outside the SLR. This is so because, in case of MSF, the banks use G-Secs which are part of SLR. Since, the banks use G-Secs which are part of SLR, the RBI imposes limits on banks' borrowings under MSF. Presently, the Banks can borrow only up to 2% of their NDTL. The RBI has decided to increase the borrowing limit to 3% of NDTL. This measure will be applicable up to June 30, 2020.

Deferment of last tranche of Capital Conservation Buffer (CCB) As part of BASEL-III requirements, the RBI has mandated the Banks to maintain CAR of 9% and an additional Capital Conservation Buffer (CCB) of 2.5%. The banks were required to fulfil the CCB requirements by end of March 31,2020. The RBI has now given additional time till September 30,2020 for the banks to comply with the Capital Conservation buffer requirements.

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Personal Notes

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Title 2. Shift to upscaling food rationing now (The Hindu Pg. No. 06) Syllabus Mains: GS Paper III: Indian Economy Theme Reforms in PDS System Highlights Context: The Article highlights that state needs to upscale rationing of foods for the poor and needy as

according to the author, Rs. 1.7-lakh crore package of social security measures to deal with the COVID-19 pandemic in the period of the 21-day lockdown is not enough. The implementation of the National Food Security Act ensures a proper Public Distribution System (PDS), the Mid-day Meal Scheme, and the Integrated Child Development Services scheme (ICDS). Thus, we have the necessary infrastructure for distribution of food in urban and rural areas. Arguments of the Author

• The author says that universal rationing is needed with an expanded food basket, and special measures for cooked food in urban areas for the vulnerable population.

• The burden of the current lockdown is borne disproportionately by the large unorganised workforce, comprising hundreds of millions of casual daily wage-workers and self-employed workers.

• As the ability of such workers to purchase food diminishes, there is a chance that such segment of the population might enter a phase of hunger and undernourishment.

• Thus, food rationing at a much larger scale is necessary to avoid large scale hunger and under-nourishment.

Steps taken by the government - PM Garib Kalyan Ann (अ"न) Yojana • Government of India would not allow anybody, especially any poor family, to suffer on account

of non-availability of food grains due to disruption in the next three months. • 80 crore individuals, i.e, roughly two-thirds of India’s population would be covered under this

scheme. • Each one of them would be provided double of their current entitlement over next three months. • This additionality would be free of cost. • To ensure adequate availability of protein to all the above mentioned individuals, 1 kg per

family, would be provided pulses according to regional preferences for next three months. These pulses would be provided free of cost by the Government of India.

National Food Security Act

Section 2(4) - "Eligible Households" means households covered under the priority households and the Antyodaya Anna Yojana referred to in sub-section (1) of section 3; Section 2(23) - "Targeted Public Distribution System" means the system for distribution of essential commodities to the ration card holders through fair price shops. Section 3 - Right to receive foodgrains at subsidised prices by persons belonging to eligible households under Targeted Public Distribution System Every person belonging to priority households, identified under sub-section (1) of section 10, shall be entitled to receive five kilograms of foodgrains per person per month at subsidised prices specified in Schedule I from the State Government under the Targeted Public Distribution System: Provided that the households covered under Antyodaya Anna Yojana shall, to such extent as may be specified by the Central Government for each State in the said scheme, be entitled to thirty-five kilograms of foodgrains per household per month at the prices specified in Schedule I. Section 10 - State Government to prepare guidelines and to identify priority households The State Government shall, within the number of persons determined under section 9 for the rural and urban areas, identify—

(a) the households to be covered under the Antyodaya Anna Yojana

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(b) the remaining households as priority households to be covered under the Targeted Public Distribution System.

Key Points of the Plan by the Author Free Rations of Rice & Wheat

• For all rural households, free rations of rice and wheat at double the normal entitlement must be distributed. This is because the current entitlement by the government is about half the quantity of daily cereal intake recommended by the Indian Council of Medical Research.

• The government of India has now doubled rations (rice or wheat) to all priority households, from 5 kg to 10 kg per person per month. However, this falls short, as the rations are not to all households but only priority households. Further, the rations are not free as only the additional 5 kg is free.

No need to categorise households for food distribution • The provision of rations must be universal as this is not the time to demarcate households into

different categories. • The system of identification of priority households is not error-proof and no household wrongly

excluded should be outside the ambit of rationing today. • This upscaling is feasible as the country has stocks of 58 million tonnes of rice and wheat. And

also because the wheat harvest is currently underway in north India. Additional Rations for Cooking must be distributed

• For all rural households, additional rations of cooking oil, sugar, salt and lentils should be provided on a regular basis including Soap. The distribution can be done on weekly or fortnightly basis.

• Apart from dal, which the government has announced to distribute, it should also distribute more commodities.

Ensuring nutritional security – Mil, Eggs & Vegetables • Supply of milk, vegetable and eggs will not only ensure basic food security but also address the

issue of malnutrition. Special arrangement for urban areas

• For urban areas, we need a combination of provision of dry goods and of cooked food. All households with ration cards can be given the same entitlements as proposed for rural households.

• For the vast numbers of workers and migrants in towns and cities, however, we must set up arrangements for preparation and delivery of cooked food. Use of community kitchens

• The large numbers of closed community kitchens (schools and colleges, company and office canteens, for example) and restaurant workers now sitting idle or laid off can be brought together to undertake a massive programme of provision of cooked meals at subsidised rates.

• This will require careful planning and technology to distribute food while ensuring physical distancing. All state sponsored canteens can be used to provide cooked food to the needy in times of present crisis.

Way Forward These measures must be carried forward for at least another three months. An imaginative massive exercise of expanded rations could not only provide succour in this pandemic but also bring in a policy shift that will help sustain a nourished and healthy population.

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Personal Notes

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Title 3. SC relaxes BS-IV deadline (The Hindu Pg. No. 11) Syllabus Prelims: Environment and Biodiversity Theme Extension of BSIV deadline Highlights Context

In a relief to automobile dealers, the Supreme Court on Friday extended the March 31, 2020 deadline for the sale and registration of BSIV vehicles. Important Points for the exam

• The BS or Bharat Stage norms are emission standards instituted by the government to regulate the output of air pollutants from internal combustion engine equipment, including motor vehicles.

• The Environment Ministry is responsible for deciding the fuel standard in the country. The Central Pollution Control Board implements these standards.

• The BS regulations are based on the European emission standards. • Hero MotoCorp, the world’s largest two-wheeler manufacturer, has become the first

two-wheeler manufacturer in India to receive the BS-VI certification. • Apart from engine calibration, there will be various after treatment additions such as

selective catalytic reduction and diesel particulate filters to meet carbon monoxide, hydrocarbons, nitrous oxide and particulate matter limit of BS VI norms.

• Advantages of BS-VI fuel Over BS-IV Fuel Parameters BS-IV fuel BS-VI Fuel PM 2.5 (mg/m3) 120 20 - 40 Sulphur 50 ppm 10 ppm NOx (Petrol Passenger Vehicle)

80mg 60mg

NOx (Diesel Passenger Vehicle)

250mg 80mg

Hydrocarbons Significant reduction in BSVI

Personal Notes

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Title 4. India set to participate in WHO’s medicine trial (The Hindu Pg. No. 09) Syllabus Prelims: International Relations Theme Preparedness against Covid-19 Highlights Context:

• India is all set to join World Health Organisation’s “Solidarity trial” aimed at rapid global search for drugs to treat COVID-19 .

• The country has stayed away so far from this multi-country trial due to its small sample size and because our contribution would have looked minuscule.

• The Solidarity Trial will test four different drugs or combinations — remdesivir, a combination of two drugs, lopinavir and ritonavir, the two drugs plus interferon beta, and chloroquine — and will compare their effectiveness to what is called standard of care, the regular support hospitals treating COVID-19 patients use now.

Personal Notes

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Title 5. India to set up electronic platform to fight virus (The Hindu Pg. No. 09) Syllabus Prelims: Science & Technology Theme Electronic platform to fight Virus Highlights Context:

• India has proposed a shared electronic platform for all SAARC nations to share and exchange information, knowledge, expertise and best practices for jointly combating the coronavirus epidemic.

• It was informed that considerable work has already gone into the creation of the platform, which could also serve as a multipurpose vehicle to further discuss and conduct activities such as online training for emergency response personnel, knowledge partnerships, sharing of expertise in disease surveillance, including the corresponding software, and joint research for new diagnostic and therapeutic interventions for epidemic diseases.

• The Indian side proposed that till such time the electronic platform is fully operational, a network of experts representing the Health Services of all SAARC countries may set up on email/whatsapp to enable exchange of all relevant information between the SAARC countries on real time basis.

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Personal Notes

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Title 6. Arunachal Pradesh tribes revive indigenous lockdown ritual (The Hindu Pg. No. 16) Syllabus Prelims: Art and Culture Theme Tribal lockdown rituals Highlights Context:

• A tribal lockdown ritual has staged a comeback in Arunachal Pradesh during Covid-19 lockdown.

Which tribe is implementing this?

• The Galos, one of the 26 major tribes of Arunachal Pradesh, dominate West Siang district.

What is this ritual all about?

• Arr-Rinam is the Galo equivalent of lockdown imposed by consensus for 48 hours whenever an epidemic strikes.

• Arr-Rinam, which follows the Ali-Ternam ritual to ward off an epidemic, has been a part of our culture.

o Ali-Ternam — Ali means epidemic and Ternam forestall — and Arr-Rinam were last performed almost four decades ago when a water-borne disease had affected many members of the community.

• They have been performing these rituals periodically for livestock, primarily the semi-wild mithun, that are prone to contagious diseases.

• But they did make a departure from tradition by adhering to the government’s social distancing guidelines, ensuring only a few people participated.

Are there other such rituals in various other tribes?

• The Adi community inhabiting East Siang and Lower Dibang Valley districts too performed a similar ritual called Motor that they believe lets shamans with legendary powers to locate wild herbs to combat an epidemic.

• In districts such as Papum Pare and East Kameng, the dominant Nyishi community observed Arrue involving self-quarantine.

o They observed rituals such as Khyasang-Ratar and Merii for preventing the entry of an epidemic to a village.

Personal Notes