Current Affairs - Banking & Finance

• The Ministry of Finance has allowed Housing Finance Companies (HFCs) with asset sizes of more than Rs. 100 crore to recover the dues using SARFAESI law.
• Prior to this, Finance Ministry allowed HFCs with assets over Rs. 500 crore to use SARFAESI law to recover dues.
• The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) allows banks and other financial institution to auction residential or commercial properties to recover loans.

• Indian Farmers Fertiliser Cooperative (IFFCO) will launch Nano Urea in the market shortly.
• 500-ml Nano Urea, which costs 240 rupees, is equivalent to 45kg of normal urea.
• Nano Urea is environment friendly and cuts the input cost of the farmers by 15 percent.
• Apart from enriching the soil, this new product will increase yield by 15 to 20 percent.
• The country needs 350 lakh metric tonnes of urea every year. Introduction of Nano urea is said to reduce the usage of ordinary urea used now, thereby saving 600 crore rupees subsidy given by the Government. The country’s dependence on import of urea will also come down.

• The Reserve Bank of India has appointed Rajesh Bansal, an expert in electronic cash transfers and digital financial services, as the Chief Executive Officer of the Reserve Bank Innovation Hub with effect from May 17.
• Reserve Bank Innovation Hub (RBIH) has been set up to test potential new capabilities, opportunities in technology and leverage on the same to create viable products or services and enable their adoption for wider reach and greater impact across the country.
• The Hub would develop internal infrastructure to promote fintech research and facilitate engagement with innovators and start-ups.
• RBIH is managed by an independent board consisting of industry and academic stalwarts as its members.

• The Reserve Bank of India (RBI) has revised its inflation-forecasting model to better capture how fiscal and monetary policy, interact with real-economy elements.
• The adjustments incorporate fiscal-monetary dynamics, India’s unique and often chaotic fuel pricing regime, and exchange-rate fluctuations and their impact on balance of payments.
• Dubbed as the Quarterly Projection Model 2.0, the RBI’s economists describe the framework as a forward-looking, open economy, calibrated, new-Keynesian gap model. The previous version had often been criticized for over-estimating upside risks to inflation.

The new model is broken into three blocks:

• Fiscal Block: The first, or fiscal block, decomposes the government’s primary deficit into structural and cyclical components. A shock to the former impacts inflation through aggregate demand and country risk premia; for instance, a structural increase in the deficit would create a positive output gap and the higher debt makes borrowings costlier and depreciates the currency, leading to higher inflation. A cyclical shock is negligible.
• Fuel Block: The second, or fuel block, takes into account India’s complex system of pricing. Items like petrol and diesel are priced on the basis of international oil prices, exchange rates, and local taxes, while liquefied petroleum gas and kerosene prices are market-determined but with lagged pass-through. Electricity costs are administered by state governments. Headline inflation goes up by 25 basis points in response to a fuel tax increase of 10 rupees per liter and inflation expectations edge higher and remains entrenched if tax reversals do not happen.
• Balance of Payments Block: The balance of payments block recognizes the costs associated with spurts in volatility in the exchange rate. In case of a capital outflow shock of 1% of GDP, and assuming the RBI intervenes and sterilizes 70% of this outflow, reserves will deplete by 0.7% of GDP and the exchange rate will depreciate, inducing inflationary pressure.

• The Union Cabinet has approved a bill to set up Development Finance Institution (DFI) with an initial capital infusion of 20 thousand crore rupees.
• The bill will be tabled in Parliament during the current Budget Session.
• DFI is expected to raise long-term funds for infrastructure development projects in the country.
• The initial grant to the DFI will be 5 thousand crore rupees and additional increments of grants will be made within the limit of 5 thousand crore rupees.

• In a major boost to India’s rice exports potential, the first consignment of ‘red rice’ was flagged off on 4th March 2021 to the USA.
• Iron rich ‘red rice’ is grown in Brahmaputra valley of Assam, without the use of any chemical fertilizer.
• The rice variety is referred as ‘Bao-dhaan’, which is an integral part of the Assamese food.
• APEDA is promoting rice exports through collaborations with various stakeholders in the value chains. The government had set up the Rice Export Promotion Forum (REPF), under the aegis of the APEDA.

• To assess equity, Economic Survey 2020-21 has introduced a bare necessities index.
• The Survey has underlined the need to focus on reducing variations in the access to bare necessities across states, between rural and urban areas, and between income groups.
• Inequalities in access to bare necessities like drinking water, sanitation, hygiene and housing conditions continue to exist between urban and rural India despite “widespread” improvements in each of these aspects, the Economic Survey for 2020-21 has shown.
• The BNI builds on the idea of Thalinomics in the Economic Survey for 2019-20, through which it had sought to examine the access to food in the country.
• The BNI summarises 26 indicators on five dimensions — water, sanitation, housing, micro-environment, and other facilities — and has been created for all states for 2012 and 2018 using NSO data. The index classifies areas on three levels of access — high, medium, low — to bare necessities.
• Government schemes such as the Jal Jeevan Mission, SBM-G (Swachh Bharat Mission-Gramin), PMAY-G (Pradhan Mantri Awaas Yojana), may design appropriate strategy to address these gaps to enable India to achieve the SDG (UN Sustainable Development Goals) goals of reducing poverty, improving access to drinking water, sanitation and housing by 2030.

EDISON Alliance to Ensure Equitable Access to Digital Economy

• At the Davos Summit 2021, the World Economic Forum (WEF) has launched Essential Digital Infrastructure and Services Network, or EDISON Alliance.
• The aim of this alliance is to ensure global and equitable access to the digital economy.
• The EDISON Alliance will prioritize digital inclusion as a platform of partners with a common purpose for achieving the Sustainable Development Goals. In 2021, the Alliance will focus on increasing digital inclusion in healthcare, education and financial services.

Global AI Action Alliance (GAIA)

• At the Davos Summit 2021, the World Economic Forum (WEF) has launched the Global AI Action Alliance (GAIA), an initiative to accelerate the adoption of inclusive, transparent and trusted artificial intelligence.
• The GAIA is a multi-stakeholder collaboration platform designed to accelerate the development and adoption of such tools globally and in industry sectors.
• It brings together over 100 leading companies, governments, international organisations, non-profits and academics united in their commitment to maximising AI's societal benefits while minimising its risks.

The Ministry of Corporate Affairs has released a new order notifying the amendments in the CSR rules for companies.

• The provisions of the 2019 Amendment to the Companies Act, 2013 pertaining to Corporate Social Responsibility (CSR) came into force on January 22.
• These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

New Provisions

• Every entity that intends to undertake any CSR activity will have to register itself with the Central Government by filing the form CSR-1 electronically with the Registrar of Companies, with effect from April 1, 2021.
• Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally.
• On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.

Besides this, companies undertaking CSR activities will have to share:

• Impact Assessment for big CSR projects.
• Carry forward and set off of CSR expenditure Annual action plan for CSR by Board every year in addition to CSR policy.
• Tweaks in reporting formats of Board Report.
• Mandatory disclosure of CSR projects and activities on company website.
• Capital Asset acquisition and its holding restricted to three bodies broadly.
• In the event of the company failing to spend the earmarked two percent of net profits towards CSR, it will "have to specify the reasons for not spending the amount" and, unless the unspent amount relates to any ongoing project, transfer it to a government notified fund.

The Central Board of Indirect Taxes & Customs (CBIC) has taken a new initiative to introduce its flagship “Liberalised MSME AEO Package” for micro, small and medium enterprises (MSMEs).

• Through this package, CBIC encourages all eligible MSMEs to avail advantages of faster Customs clearances for accredited stakeholders in the global supply chain viz. importers, exporters, logistic service providers, custodians, etc.
• To attract MSMEs to become Authorised Economic Operators (AEOs) and avail the various benefits, the CBIC has relaxed the compliance criteria provided the MSMEs have a valid certificate from their line-Ministry.
• The relaxed requirements allow MSMEs who have filed minimum 10 Customs clearance documents in one year and who have a clean compliance record over two years to apply for the scheme. The documentary requirements have also been appreciably simplified.

Benefits for AEOs

• The approved AEOs derive various benefits including the facility of Direct Port Delivery (DPD) of imported containers, Direct Port Entry (DPE) of their Export Containers, high level of facilitation in customs clearance of their consignments thereby ensuring shorter cargo release time, exemption from bank guarantees, as well as a Client Relationship Manager at the customs port as a single point of interaction.

The Reserve Bank of India (RBI) is now fully operationalising a College of Supervisors (CoS) to further strengthen supervision over regulated entities.

Objective of CoS

• To augment and reinforce supervisory skills among its regulatory and supervisory staff both at entry level and on a continuous basis.
• To facilitate the development of unified and focused supervision by providing training and other developmental inputs to the concerned staff.

Composition of the CoS

• The CoS will be headed by former deputy governor of RBI, N S Viswanathan and will have five other members.
• The CoS will have a full-time Director supported by an Academic Advisory Council (AAC).Rabi Narayan Mishra, former Executive Director, RBI, has been appointed as the Director of CoS.

Function of AAC

• The AAC will identify areas where skill building/up-skilling is required, plan and develop curricula of all programmes, benchmark the programmes with international standards/best practices, develop appropriate teaching methods, etc.