UPSC Prelims Research: Indian Economy 2019

Q.With reference to land reforms in independent India, which one of the following statements is correct?

(a) The ceiling laws were aimed at family holdings and not individual holdings.

(b) The major aim of land reforms was providing agricultural land to all the landless.

(c) It resulted in cultivation of cash crops as a predominant form of cultivation.

(d) Land reforms permitted no exemptions to the ceiling limits.

Answer: (b) The major aim of land reforms was providing agricultural land to all the landless.

Notes:

• The unit of application of ceiling differs from State to State. In Andhra Pradesh, Assam, Bihar, Punjab, Haryana, Uttar Pradesh, West Bengal, Madhya Pradesh and Maharashtra, it is on the basis of an ‘land holder’, whereas in the other States it is one the basis of a ‘family’.
• In order to bring about uniformity, a new policy was evolved in 1971 which changed unit of application of ceiling to family rather than the individual for land holdings lowered ceiling for a family of five. Fewer exemptions from ceilings where also given for economic delopment and public welfare.
• After Independence, the immediate goal of the Government was to increase foodgrains production by switching over from cash crops to food crops, therefore, Land reforms were not focussed on cash crops and hence it did not lead to cash crops being predominant form of cultivation. Also, the Land reforms in Haryana and Punjab were the reason for introducing Green Revolution. It focussed more on food crops production as predominant form of cultivation and not cash crops.
• The Land Reforms in India-aimed at the redistribution of ownership holdings and reorganising operational holdings from the view point of optimum utilisation of land. It has also aimed at providing security of tenure, fixation of rents and conferment of ownership.

Land Reforms in India:

Pre Independence:

• Under the British Raj, the farmers did not have the ownership of the lands they cultivated, the landlordship of the land lied with the Zamindars, Jagirdars etc.
• Several important issues confronted the government and stood as a challenge in front of independent India.
  • Land was concentrated in the hands of a few and there was a proliferation of intermediaries who had no vested interest in self-cultivation.
    • Leasing out land was a common practice.
  • The tenancy contracts were expropriative in nature and tenant exploitation was almost everywhere.
  • Land records were in extremely bad shape giving rise to a mass of litigation.
  • One problem of agriculture was that the land was fragmented into very small parts l for commercial farming.
    • It resulted in inefficient use of soil, capital, and labour in the form of boundary lands and boundary disputes.

Post Independence:

• Since its independence in 1947, there has been voluntary and state-initiated/mediated land reforms in several states with dual objective of efficient use of land and ensuring social justice. The most notable and successful example of land reforms are in the states of West Bengal and Kerala.
• A committee, under the Chairmanship of J. C. Kumarappan was appointed to look into the problem of land. The Kumarappa Committee’s report recommended comprehensive agrarian reform measures.
• The Land Reforms of the independent India had four components:
  1. The Abolition of the Intermediaries
  2. Tenancy Reforms
  3. Fixing Ceilings on Landholdings
  4. Consolidation of Landholdings.
• These were taken in phases because of the need to establish a political will for their wider acceptance of these reforms.
  • Other than these state-sponsored attempts of reforming land ownership and control, there was another attempt to bring changes in the regime which achieved limited success; famously known as Bhoodan movement.
• Abolition of the Intermediaries:
  • Abolition of the zamindari system: The first important legislation was the abolition of the zamindari system, which removed the layer of intermediaries who stood between the cultivators and the state.
  • The reform was relatively the most effective than the other reforms, for in most areas it succeeded in taking away the superior rights of the zamindars over the land and weakening their economic and political power.
    • The reform was made to strengthen the actual landholders, the cultivators.
  • Advantages: The abolition of intermediaries made almost 2 crore tenants the owners of the land they cultivated.
    • The abolition of intermediaries has led to the end of a parasite class. More lands have been brought to government possession for distribution to landless farmers.
    • A considerable area of cultivable waste land and private forests belonging to the intermediaries has been vested in the State.
    • The legal abolition brought the cultivators in direct contact with the government.
  • Disadvantages: However, zamindari abolition did not wipe out landlordism or the tenancy or sharecropping systems, which continued in many areas. It only removed the top layer of landlords in the multi-layered agrarian structure.
    • It has led to large-scale eviction. Large-scale eviction, in turn, has given rise to several problems – social, economic, administrative and legal.
  • Issues: While the states of J&K and West Bengal legalised the abolition, in other states, intermediaries were allowed to retain possession of lands under their personal cultivation without limit being set.
    • Besides, in some states, the law applied only to tenant interests like sairati mahals etc. and not to agricultural holdings.
      • Therefore, many large intermediaries continued to exist even after the formal abolition of zamindari.
    • It led to large-scale eviction which in turn gave rise to several socio-economic and administrative problems.
• Tenancy Reforms:
  • After passing the Zamindari Abolition Acts, the next major problem was of tenancy regulation.
    • The rent paid by the tenants during the pre-independence period was exorbitant; between 35% and 75% of gross produce throughout India.
  • Tenancy reforms introduced to regulate rent, provide security of tenure and confer ownership to tenants.
    • With the enactment of legislation (early 1950s) for regulating the rent payable by the cultivators, fair rent was fixed at 20% to 25% of the gross produce level in all the states except Punjab, Haryana, Jammu and Kashmir, Tamil Nadu, and some parts of Andhra Pradesh.
  • The reform attempted either to outlaw tenancy altogether or to regulate rents to give some security to the tenants.
  • In West Bengal and Kerala, there was a radical restructuring of the agrarian structure that gave land rights to the tenants.
  • Issues: In most of the states, these laws were never implemented very effectively. Despite repeated emphasis in the plan documents, some states could not pass legislation to confer rights of ownership to tenants.
    • Few states in India have completely abolished tenancy while others states have given clearly spelt out rights to recognized tenants and sharecroppers.
    • Although the reforms reduced the areas under tenancy, they led to only a small percentage of tenants acquiring ownership rights.
• Ceilings on Landholdings:
  • The third major category of land reform laws were the Land Ceiling Acts. In simpler terms, the ceilings on landholdings referred to legally stipulating the maximum size beyond which no individual farmer or farm household could hold any land. The imposition of such a ceiling was to deter the concentration of land in the hands of a few.
  • In 1942 the Kumarappan Committee recommended the maximum size of lands a landlord can retain. It was three times the economic holding i.e. sufficient livelihood for a family.
  • By 1961-62, all the state governments had passed the land ceiling acts. But the ceiling limits varied from state to state. To bring uniformity across states, a new land ceiling policy was evolved in 1971.
    • In 1972, national guidelines were issued with ceiling limits varying from region to region, depending on the kind of land, its productivity, and other such factors.
    • It was 10-18 acres for best land, 18-27 acres for second class land and for the rest with 27-54 acres of land with a slightly higher limit in the hill and desert areas.
  • With the help of these reforms, the state was supposed to identify and take possession of surplus land (above the ceiling limit) held by each household, and redistribute it to landless families and households in other specified categories, such as SCs and STs.
  • Issues: In most of the states these acts proved to be toothless. There were many loopholes and other strategies through which most landowners were able to escape from having their surplus land taken over by the state.
    • While some very large estates were broken up, in most cases landowners managed to divide the land among relatives and others, including servants, in so-called ‘benami transfers’ – which allowed them to keep control over the land.
    • In some places, some rich farmers actually divorced their wives (but continued to live with them) in order to avoid the provisions of the Land Ceiling Act, which allowed a separate share for unmarried women but not for wives.
• Consolidation of Landholdings:
  • Consolidation referred to reorganization/redistribution of fragmented lands into one plot.
    • The growing population and less work opportunities in non- agricultural sectors, increased pressure on the land, leading to an increasing trend of fragmentation of the landholdings.
    • This fragmentation of land made the irrigation management tasks and personal supervision of the land plots very difficult.
  • This led to the introduction of landholdings consolidation.
    • Under this act, If a farmer had a few plots of land in the village, those lands were consolidated into one bigger piece of land which was done by either purchasing or exchanging the land.
  • Almost all states except Tamil Nadu, Kerala, Manipur, Nagaland, Tripura and parts of Andhra Pradesh enacted laws for consolidation of Holdings.
  • In Punjab and Haryana, there was compulsory consolidation of the lands, whereas in other states law provided for consolidation on voluntary basis; if the majority of the landowners agreed.
  • Advantages: It prevented the endless subdivision and fragmentation of land Holdings.
    • It saved the time and labour of the farmers spent in irrigating and cultivating lands at different places.
    • The reform also brought down the cost of cultivation and reduced litigation among farmers as well.
  • Result: Due to lack of adequate political and administrative support the progress made in terms of consolidation of holding was not very satisfactory except in Punjab, Haryana and western Uttar Pradesh where the task of consolidation was accomplished.
    • However, in these states there was a need for re-consolidation due to subsequent fragmentation of land under the population pressure.
  • Need of re-consolidation: The average holding size in 1970-71 was 2.28 hectares (Ha), which has come down to 1.08 Ha in 2015-16.
  • While Nagaland has the largest average farm size, Punjab and Haryana rank second and third in the list respectively.
    • The holdings are much smaller in densely populated states like Bihar, West Bengal and Kerala.
  • The multiple subdivisions across generations have reduced even the sub divisions to a very small size.

Q. Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

(a) Curbing imports of non-essential goods and promoting exports

(b) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds

(c) Easing conditions relating to external commercial borrowing

(d) Following an expansionary monetary policy

Answer: (d) Following an expansionary monetary policy

Appreciation & Depreciation of Currency

• In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency.
• Currency Appreciation: It is an increase in the value of one currency in relation to another currency.
  • Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances and business cycles.
  • Currency appreciation discourages a country’s export activity as its products and services become costlier to buy.
• Currency Depreciation: It is a fall in the value of a currency in a floating exchange rate system.
  • Economic fundamentals, political instability, or risk aversion can cause currency depreciation.
  • Currency depreciation encourages a country’s export activity as its products and services become cheaper to buy.
• Cause of Currency Depreciation:
  • Trade Imbalance: A country experiencing a trade deficit, where imports exceed exports, may see its currency depreciate as demand for foreign currencies increases to pay for the excess imports.
  • Inflation: Higher inflation rates compared to other countries can lead to currency depreciation. Inflation erodes the purchasing power of a currency, reducing its value relative to other currencies.
  • Interest Rates: Lower interest rates in a country can make its currency less attractive to foreign investors, leading to a decrease in demand and depreciation.
  • Political and Economic Stability: Political instability, economic uncertainty, or unfavourable government policies can undermine investor confidence and cause currency depreciation.
  • Speculation: Speculators anticipating currency depreciation may sell off the currency, leading to its devaluation in the foreign exchange market.
  • Capital Outflows: When investors move their capital out of a country due to perceived risks or better investment opportunities elsewhere, it can result in a depreciation of the country’s currency.
• Impacts of Depreciation of Currency: 
  • Export Competitiveness: A depreciated currency can make a country’s exports more affordable and competitive in international markets, potentially boosting export volumes and improving the trade balance.
  • Import Cost Increase: Depreciation leads to increased costs for imported goods, as the country’s currency now has less purchasing power. This can contribute to higher inflation and impact the affordability of imported products.
  • Current Account Balance: A currency depreciation can help improve a country’s current account balance by reducing imports and increasing exports, potentially leading to a positive impact on the overall balance of payments.
  • Foreign Debt Burden: If a country has significant foreign debt denominated in foreign currencies, currency depreciation can increase the burden of servicing that debt, as it now requires more domestic currency to make the same payments.
  • Inflationary Pressure: Currency depreciation can contribute to inflationary pressures by increasing the cost of imported goods and raw materials. This, in turn, can impact consumer purchasing power and overall price levels within the economy.
  • Tourism and Foreign Investment: Currency depreciation can make a country a more attractive destination for tourists and foreign investors, as their spending power increases in relation to the depreciated currency.

Q. The Global Competitiveness Report is published by the

(a) International Monetary Fund

(b) United Nations Conference on Trade and Development

(c) World Economic Forum

(d) World Bank

Answer: (c) World Economic Forum

Notes:

• The Global Competitiveness Report (GCR) was a yearly report published by the World Economic Forum.
• The report “assesses the ability of countries to provide high levels of prosperity to their citizens”. This in turn depends on how productively a country uses available resources.
• Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.”
• The report has twelve pillars of competitiveness. These are:
  1. Institutions
  2. Appropriate infrastructure
  3. Stable macroeconomic framework
  4. Good health and primary education
  5. Higher education and training
  6. Efficient goods markets
  7. Efficient labor markets
  8. Developed financial markets
  9. Ability to harness existing technology
  10. Market size—both domestic and international
  11. Production of new and different goods using the most sophisticated production processes
  12. Innovation
• The Global Competitiveness Rankings have been paused in the wake of the COVID-19 pandemic and challenges brought by it to the countries.
  • The most recent global competitiveness ranking was released in 2019 in the Global Competitiveness Index 4.0.
  • First Edition: Global Competitiveness Report 1979.
• India ranked 68th in Global Competitiveness Index 2019 out of 141 countries.

World Economic Forum (WEF)

• WEF is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business, cultural and other leaders of society to shape global, regional and industry agendas.
  • It is headquartered in Geneva, Switzerland.
• Foundation: Klaus Schwab, a German professor with a background in mechanical engineering and a Master of Public Administration from Harvard, founded WEFin1971, originally known as the European Management Forum.
  • He introduced the concept of “stakeholder capitalism.”
  • According to Schwab, “It is a form of capitalism in which companies do not only optimize short-term profits for shareholders, but seek long term value creation, by taking into account the needs of all their stakeholders, and society at large.”
• Major Reports: WEF regularly publishes globally recognized reports, including the 
  • Global Competitiveness Report
  • Global Gender Gap Report,
  • Energy Transition Index,
  • Global Risk Report,
  • Global Travel and Tourism Report,
  • Global IT Report
    • WEF along with INSEAD, and Cornell University publish this report.

International Monetary Fund (IMF)

• The International Monetary Fund (IMF) is an organization of 190 member countries, each of which has representation on the IMF’s executive board in proportion to its financial importance, so that the most powerful countries in the global economy have the most voting power.
• Objectives of IMF:
  • Foster global monetary cooperation
  • Secure financial stability
  • Facilitate international trade
  • Promote high employment and sustainable economic growth
  • And reduce poverty around the world
  • Macro-economic growth
  • Policy advise & financing for developing countries,
  • Promotion of exchange rate stability, and an international payment system
• It has three critical missions:
  • Furthering international monetary cooperation, encouraging the expansion of trade and economic growth,
  • Discouraging policies that would harm prosperity.
  • To fulfill these missions, IMF member countries work collaboratively with each other and with other international bodies.
• Functions of IMF:
  • Provides Financial Assistance: To provide financial assistance to member countries with balance of payments problems, the IMF lends money to replenish international reserves, stabilize currencies and strengthen conditions for economic growth. Countries must embark on structural adjustment policies monitored by the IMF.
  • IMF Surveillance: It oversees the international monetary system and monitors the economic and financial policies of its 190 member countries.
    • As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments.
  • Capacity Development: It provides technical assistance and training to central banks, finance ministries, tax authorities, and other economic institutions.
    • This helps countries raise public revenues, modernize banking systems, develop strong legal frameworks, improve governance, and enhance the reporting of macroeconomic and financial data. It also helps countries to make progress towards the Sustainable Development Goals (SDGs).

Q. Which one of the following groups of plants was domesticated in the ‘New World’ and introduced into the ‘Old World’?

(a) Tobacco, cocoa and rubber

(b) Tobacco, cotton and rubber

(c) Cotton, coffee and sugarcane

(d) Rubber, coffee and wheat

Answer: (a) Tobacco, cocoa and rubber

Notes:

• Tobacco, cocoa, and rubber came to India through Europeans in the late medieval or early modern era and so these are the groups of plants that were domesticated in the ‘New World’ and introduced into the ‘Old World’.
  • All of them originated in South America. 
  • This process is called a Columbian exchange (named for Christopher Columbus).
  • It was the widespread transfer of plants, animals, culture, human populations, technology, diseases, and ideas between the Americas, West Africa, and the Old World during the 15th and 16th centuries.
• Sugar cane is also the oldest crop and is introduced to India by Austronesian traders. 
• Rubber was native to Brazil.
• Cotton and Wheat were cultivated in India since the ancient era. Even there was evidence of Cotton and wheat since the Harappan era.

Old World vs New World

• The terms Old World and New World are used in reference to the Age of Exploration.
• Old World refers to Europe, Africa, and Asia, while New World refers to North America, South America, and the Caribbean.
  • This system of naming these two different “worlds” is largely Eurocentric. Because there were already people living in the Americas when they were first discovered by Europeans, the indigenous inhabitants of the New World didn’t consider their homes to be newly-discovered parts of the world.
• The Old World consists of those parts of Earth known to Europeans before the voyages of Christopher Columbus: Europe, Asia, and Africa.
  • Although the interior regions of Asia and Africa were not well known to Europeans at the time, their existence was known, at least as far as Japan and South Africa, so they are considered Old World.
  • Australia and Antarctica are neither definitely Old World nor definitely New World, since the terms “Old World” and “New World” were used before their discovery by Europeans.
• The New World is one of the names used for the American continents, in use since the 16th century. The Americas were at that time new to the Europeans, to whom the “Old World” consisted of only Europe, Asia, and Africa.
• Today the terms “New World” and “Old World” are generally used in a historical context when talking about the European discovery of the Americas, as in discussions of Spanish exploration, Christopher Columbus, et cetera. The term is also used to refer to evidence of biological organisms: organisms of the Americas are considered “New World,” and organisms of Europe, Asia, and Australasia are considered to be “Old World.”
• Notice that while the Americas are always described as “New World,” Australasia can be described as either “Old World” or “New World,” depending on the topic of discussion.

Q. In a given year in India, official poverty lines are higher in some States than in others because

(a) poverty rates vary from State to State

(b) price levels vary from State to State

(c) Gross State Product varies from State to State

(d) quality of public distribution varies from State to State

Answer: (b) price levels vary from State to State

Notes:

• Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can’t be met.
• According to World Bank, Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.
• In India, 21.9% of the population lives below the national poverty line in 2011.
• Global MPI 2022: India has the largest number of poor worldwide at 22.8 crore. Also, the incidence of poverty has fallen from 55% in 2005/06 to 16.4% in 2019/21 in India.
• MPI report by NITI Aayog, 2021: National MPI score of India is 0.118. In India, 25.01% of the population was multidimensionally poor.
• Poverty lines would vary from State to State because of inter-state price differentials.
• According to the Planning Commission, in 2011-12 for rural areas, the national poverty line by using the Tendulkar methodology is estimated at Rs 816 per capita per month in villages and Rs 1,000 per capita per month in cities.
  • Thus, for a family of five, the all India poverty line in terms of consumption expenditure would amount to about Rs. 4,080 per month in rural areas and Rs. 5,000 per month in urban areas.
• The poverty line depends on the income profile of the population and on the basis of consumer expenditure.
• The poverty line is a function of the cost of consumption basket which varies from state to state.

Q. The money multiplier in an economy increases with which one of the following?

(a) Increase in the cash reserve ratio

(b) Increase in the banking habit of the population

(c) Increase in the statutory liquidity ratio

(d) Increase in the population of the country

Answer: (b) Increase in the banking habit of the population

Notes:

• The multiplier effect is an economic term, referring to the proportional amount of increase, or decrease, in final income that results from an injection, or withdrawal, of capital in effect. It measures the impact that a change in economic activity—like investment or spending—will have on the total economic output of something. 
• Increase in Banking habits of the people can lead to increase in money multiplier in an economy.
  • When a customer makes a deposit into a short-term deposit account, the banking institution can lend one minus the reserve requirement to someone else. While the original depositor maintains ownership of their initial deposit, the funds created through lending are generated based on those funds. If a second borrower subsequently deposits funds received from the lending institution, this raises the value of the money supply even though no additional physical currency actually exists to support the new amount.  
• An increase in banking activity will lead to more money in the bank’s hands in the form of Time Deposits  (FD, RD), Demand Deposits (Savings Bank Account), Cash, etc, thus increase in banking habits of the people will increase the money multiplier.
  • Banks create money by making loans. A bank loans or invests its excess reserves to earn more interest. When people start depositing more into banks. The banks can lend even more.
• Increase in the Cash Reserve Ratio in the banks, increase in the Statutory Liquidity Ratio in the banks and increase in the population of the country will not increase money multiplier. 

Q. Among the following, which one is the largest exporter of rice in the world in the last five years?

(a) China

(b) India

(c) Myanmar

(d) Vietnam

Answer: (b) India

Notes:

• India’s share in world exports of rice in recent years (2014-18) has stayed at 25-26% and it emerged the world’s largest rice exporter in 2011-12, displacing Thailand from its leadership position.
• There were two factors which played a role in this.
  • Indian government’s decision in February 2011 to lift a four-year ban on exports of non-basmati varieties of rice paved the way for a rise in exports of those varieties.
  • Thailand government under Prime Minister Yingluck Shinawatra, in the same year favoured farmers by strengthening a Rice Pledging Scheme under which it promised to procure unlimited stocks at an enhanced price that reflected a 50 per cent increase over 2010.

Rice

• Rice is a staple food for most of the population in India.
• It is a kharif crop which requires high temperature (above 25°C) and high humidity with annual rainfall above 100 cm.
  • In the areas of less rainfall, it is grown with the help of irrigation.
• In southern states and West Bengal, the climatic conditions allow the cultivation of two or three crops of rice in an agricultural year.
  • In West Bengal farmers grow three crops of rice called ‘aus’, ‘aman’ and ‘boro’.
• About one-fourth of the total cropped area in India is under rice cultivation.
  • Leading Producer States: West Bengal, Uttar Pradesh, and Punjab.
  • High Yielding States: Punjab, Tamil Nadu, Haryana, Andhra Pradesh, Telangana, West Bengal and Kerala.
• India is the second-largest producer of rice after China.
• India is the biggest exporter of rice in the world. As per the United States Department of Agriculture (USDA), India accounted for about 40% of the total rice exports (56 million tonnes) in the world during 2022.
• India’s rice exports are broadly categorised into Basmati and Non-basmati rice.
  • Basmati Rice: In 2022-23, India exported 45.61 lakh metric tonnes of basmati rice.
    • Top destinations for Indian basmati rice included Iran, Saudi Arabia, Iraq, UAE, and Yemen.
  • Non-Basmati Rice: In the 2022-23 fiscal year, India exported 177.91 lakh metric tonnes of non-basmati rice.
    • The non-basmati rice includes varieties like Sona Masuri and Jeera rice.
• Top Destination of Non-basmati White Rice: Benin, Madagascar, Kenya, Cote D’ Ivoire, Mozambique, Vietnam.
  • The non-basmati rice category includes 6 sub-categories— rice in husk of seed quality; other rice in husk; husked (brown) rice; rice parboiled; non-basmati white rice; and broken rice.

Q. Consider the following statements:

1. Coal sector was nationalized by the Government of India under Indira Gandhi.
2. Now, coal blocks are allocated on lottery basis
3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self-sufficient in coal production.

Which of the statements given above is/are correct?

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

Answer: (a) 1 only

Notes:

• The coal sector was nationalized in two phases under Indira Gandhi Government in 1972. The Coal Mines (Nationalisation) Act, 1973 was enacted during the Prime Ministership of Indira Gandhi.
• Presently, coal blocks are allocated through auctions and not on a lottery basis.
• The coal sector is the monopolistic sector in India. India holds 5th biggest coal reserves in the world but due to incapacity of coal production by monopolistic firms, it imports coals to meet the shortages of domestic supply. But still the country is not self-sufficient in coal production.

Coal

• It is a type of fossil fuel found in the form of sedimentary rocks and is often known as ‘Black Gold’.
• It is a conventional source of energy and is widely available. It is used as a domestic fuel, in industries such as iron and steel, steam engines and to generate electricity. Electricity from coal is called thermal power.
• The leading coal producers of the world include China, US, Australia, Indonesia, India.
• Distribution of Coal in India:
  • Gondwana Coal Fields (250 million years old):
    • Gondwana coal makes up to 98 % of the total reserves and 99 % of the production of coal in India.
    • Gondwana coal forms India’s metallurgical grade as well as superior quality coal.
    • It is found in Damodar (Jharkhand-West Bengal), Mahanadi (Chhattisgarh-Odisha), Godavari (Maharashtra), and Narmada valleys.
  • Tertiary Coal Fields (15 – 60 million years old):
    • Carbon content is very low but is rich in moisture and Sulphur.
    • Tertiary coalfields are mainly confined to extra-peninsular regions
    • Important areas include Assam, Meghalaya, Nagaland, Arunachal Pradesh, Jammu and Kashmir, Himalayan foothills of Darjeeling in West Bengal, Rajasthan, Uttar Pradesh, and Kerala.

Q. Consider the following statements:

1. The United Nations Convention against Corruption (UNCAC) has a ‘Protocol against the Smuggling of Migrants by Land, Sea, and Air’.
2. The UNCAC is the ever-first legally binding global anti-corruption instrument.
3. A highlight of the United Nations Convention against Transnational Organized Crime (UNTOC) is the inclusion of a specific chapter aimed at returning assets to their rightful owners from whom they had been taken illicitly.
4. The United Nations Office on Drugs and Crime (UNODC) is mandated by its member States to assist in the implementation of both UNCAC and UNTOC.

Which of the statements given above are correct?

(a) 1 and 3 only
(b) 2, 3 and 4 only
(c) 2 and 4 only
(d) 1, 2, 3 and 4

Answer: (c) 2 and 4 only

Notes:

• The protocol against the smuggling of Migrants by land, sea and air comes under the the United Nations Convention against Transnational Organized Crime (UNTOC) and not UNCAC.
• The United Nations Convention Against Corruption (UNCAC) is the only legally binding universal anti-corruption instrument.
• The Convention covers many different forms of corruption, such as bribery, trading in influence, abuse of functions, and various acts of corruption in the private sector.
• United Nations Convention Against Corruption (UNCAC) includes “Returning Assets to their rightful owners from whom they they have been taken illicitly”.
• The United Nations Office on Drugs and Crime (UNODC) is mandated by its Member States to assist in the implementation of both Conventions,such as UNCAC and UNTOC, along with the UN Drug Conventions of 1961, 1971 and 1988 underpin all the operational work of UNODC.

United Nations Convention against Transnational Organised Crime (UNTOC):

• UNTOC is a multinational treaty against transnational organized crime that was established by the United Nations in 2000. 
• It is often known as the Palermo Convention.
• The UNTOC has a total of 147 signatories and 190 parties to the convention. 
• The Convention is further supplemented by three Protocols
  • The Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children;
  • The Protocol against the Smuggling of Migrants by Land, Sea and Air; and
  • The Protocol against the Illicit Manufacturing of and Trafficking in Firearms, their Parts and Components and Ammunition. 
• The United Nations Office on Drugs and Crime (UNODC) is the custodian of the UNTOC.
• India signed the UN Convention against Transnational Organized Crime (UNTOC) and its three Protocols on December 12, 2002.
  • India ratified the UNTOC in 2011 becoming the fourth South Asian country to do so.
• The Central Bureau of Investigation (CBI) is the nodal agency for all dealings with UNTOC.

United Nations Office on Drugs and Crime (UNODC):

• UNODC is a global leader in the fight against illicit drugs and international crime, in addition to being responsible for implementing the United Nations lead programme on terrorism.
• It was established in 1997 through a merger between the United Nations Drug Control Programme and the Centre for International Crime Prevention.
• Headquarters: Vienna, Austria 
• Functions:
  • UNODC works to educate people throughout the world about the dangers of drug abuse.
  • Strengthen international action against illicit drug production and trafficking and drug-related crime. 
  • It also works to improve crime prevention and assist with criminal justice reform in order to strengthen the rule of law, promote stable and viable criminal justice systems and combat the growing threats of transnational organized crime and corruption. 
  • In 2002, the UN General Assembly approved an expanded programme of activities for the Terrorism Prevention Branch of UNODC. The activities focus on providing assistance to States, on request, in ratifying and implementing the eighteen universal legal instruments against terrorism.
• Working:
  • UNODC has 20 field offices covering over 150 countries.
  • By working directly with Governments and non-governmental organizations, UNODC field staff develop and implement drug control and crime prevention programmes tailored to countries’ particular needs.
• Funding: UNODC relies on voluntary contributions, mainly from governments, to carry out the majority of our work.

Q. Consider the following statements: As per the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018

1. If rules for fixed-term employment are implemented, it becomes easier for the firms/companies to lay off workers
2. No notice of termination of employment shall be necessary in the case of temporary workman.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (c) Both 1 and 2

Notes:

• The government has notified fixed-term employment for all sectors through an amendment to the Industrial Employment (Standing Orders) Central Rules, 1946.
• Fixed-term employment for all sectors will make it easier for companies to hire-and-fire workers along with reducing the role of middlemen.
• As per the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, a “fixed-term employment workman is a workman who has been engaged on the basis of a written contract of employment for a fixed period”.
• No notice of termination of employment shall be necessary in the case of a temporary workman whether monthly rated, weekly rated or piece rated and probationers or badli workmen.

Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018

• The Ministry of Labour and Employment recently notified fixed term employment for all sectors.
• It was through an amendment to the Industrial Employment (Standing Orders) Central Rules, 1946.
• Highlights of the rules:
  • A fixed term employment workman is engaged on the basis of a written contract of employment for a fixed period.
  • The existing permanent workmen as on March 16, 2018 cannot be converted as fixed term employment thereafter.
  • March 16 is the date of commencement of the amended rules.
  • The notified rules provide for equal work hours, wages, allowances and other benefits as that of a permanent workman.
  • These are along with all statutory benefits available to a permanent workman proportionately according to the period of service.
  • This will be available even if the period of employment does not extend to the qualifying period of employment required in the statute.
  • Fixed-term employees whose services are terminated on non-renewal of contract or on its expiry is not entitled to any notice or pay in lieu.
  • No notice of termination of employment shall be necessary in the case of temporary workman.
  • This is whether it is monthly rated, weekly rated or piece rated and probationers or badli workmen (appointed in the position of permanent workmen or temporarily absent probationers).
• Expected benefits:
  • The Cabinet had earlier approved fixed-term employment for specific sectors.
  • Fixed-term employment for all sectors now will make it easier for companies to hire-and-fire workers.
  • It will also reduce the role of middlemen and allow companies to hire workers based on seasonal trends.
  • The industries will be empowered to employ people for a fixed duration for which they have orders or assignments.
  • There will be no burden of carrying extra labour force during the lean season.
  • The move is further expected to promote ‘ease of doing business’.
• Concerns:
  • Job creation – The move towards fixed-term employment will make it easier for companies to layoff workers.
    • This could have a bearing upon job creation in the country.
    • Notably, India’s unemployment rate is estimated to rise to 3.5% for 2018 from 3.4% estimated earlier.
  • Labour laws – The consolidation exercise of 44 central labour laws into four major codes is still pending by the government.
  • Trade Unions – Trade unions across the country have opposed the extension of fixed-term employment to all sectors.
  • This is because the move could lead to a situation where only fixed-term jobs are created.
  • There is a possibility that permanent employment would vanish from the industrial sector.

Q. The Service Area Approach was implemented under the purview of

(a) Integrated Rural Development Programme

(b) Lead Bank Scheme

(c) Mahatma Gandhi National Rural Employment Guarantee Scheme

(d) National Skill Development Mission

Answer: (b) Lead Bank Scheme

Notes:

• Service area approach (SAA) is a developed version of the ‘area approach’ structure of the Lead Bank Scheme.
• Under SAA plan each commercial bank / RRB branch in a rural and semi-urban area is designated to serve 15 to 25 villages for the planned and orderly development of the areas.
• Under the Lead bank Scheme, the service area approach was introduced in 1989 for the planned and orderly development of rural and semi-urban areas.

Lead Bank Scheme

• The Lead Bank Scheme is a scheme which aims at providing adequate banking and credit in rural areas through an ‘service area approach’, with one bank assigned for one area. It was introduced in 1969.
• On the recommendation of the Gadgil Study Group and Banker’s Committee, the Scheme was introduced by RBI. The committees found that the rural areas were not able to enjoy the benefits of banking.  Also, that the commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation which was hindering the growth of rural areas.
• To address this issue it was decided that some areas or sector will be given to the banks whether private or public in which that bank had to play a lead role in providing financial services to the people.
• D.R.Gadgil study group recommended the adoption of an ‘AREA APPROACH’ to evolve plans and programs for the development of adequate banking and credit structure in rural areas.
• Prof. D R Gadgil committee recommended the following points:
  • Banks should provide integrated banking facilities in unbanked areas.
  • Adoption of ‘Area Approach’ – in unbanked areas –each bank should adopt an area.
  • Help Agriculture & Supplemental Security Income (SSI).
  • ‘District’ identified as the smallest geographical unit for the scheme.
• NARIMAN  committee appointed by RBI endorsed the ideas of area approach in its report recommended that each bank should concentrate on certain districts where it can act as ‘LEAD BANK’.
• Pursuant to the above recommendations, the lead bank scheme was introduced by RBI in December 1969.
• The lead bank scheme assigned lead role to individual banks in the public sector and private sector for the districts allotted to them.
• A bank having a relatively large network of branches in rural areas of given districts and having adequate financial and manpower was generally been entrusted with the lead responsibility for that district.
• The lead bank act as a leader for coordinating the efforts of all credit institutions to increase the flow of credit to agriculture, small scale industries, and other areas.
• Objectives of the Lead Bank Scheme:
  • Identify those regions which are unbanked and underbanked in districts and also evaluate their physiographic, agro climatic end Socio-economic conditions through economic survey.
  • Help in removing regional imbalances through appropriate credit deployment.
  • Extend banking facilities to unbanked areas
  • Identify economically viable and technically feasible schemes.
  • Bring structural and procedural changes in banking sector.
  • Develop co-operation amongst financial and non-financial institutions.

Q. Consider the following statements:

1. Most of India’s external debt is owed by governmental entities.
2. All of India’s external debt is denominated in US dollars.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (d) Neither 1 nor 2

Notes:

• Commercial borrowings continued to be the largest component of external debt with a share of 37.4%, followed by NRI deposits (24.1%) and short term trade credit (19.9%).
• US dollar-denominated debt continued to be the largest component of India’s external debt with a share of 45.9% at end December 2018, followed by the Indian rupee (24.8%), SDR (5.1%), yen (4.9%) and euro (3.1%).

External debt of India

• The external debt of India is the debt the country owes to foreign creditors. The debtors can be the Union government, state governments, corporations or citizens of India.
  • The debt includes money owed to private commercial banks, foreign governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.
• India’s external debt data is published quarterly, with a lag of one quarter. Statistics for the first two quarters of the calendar year are compiled and published by the Reserve Bank of India. Data for the last two quarters is compiled and published by the Ministry of Finance.
  • The Government of India also publishes an annual status report on the debt which contains detailed statistical analysis of the country’s external debt position.
• At end-March 2022, India’s external debt was placed at US$620.7 billion, recording an increase of US$47.1 billion over its level at end-March 2021.
  • India’s external debt was US$570 billion at the end of March 2021. It recorded an increase of US$11.6 billion over its level at end of March 2020.
  • The external debt to GDP ratio declined to 19.9 per cent at end-March 2022 from 21.2 per cent at end-March 2021.
• The foreign currency reserves is at US$573 billion as on 5 August 2022. It was US$619 billion as on 25 March 2022 compared to US$579 billion at the end of March 2021 & compared to over US$474 billion at the end of March 2020. Hence the foreign currency reserves as a ratio to external debt is at 100.3% at end of Mar2022 when compared to 101.1% at end of March 2021 from 84.9% at end of March 2020.

Q. Which of the following is not included in the assets of a commercial bank in India?

(a) Advances

(b) Deposits

(c) Investments

(d) Money at call and short notice

Answer: (b) Deposits

Notes:

• Deposits are not included in the assets of a commercial bank in India. Deposits are liabilities of the bank, as they represent the funds that the bank owes to its customers.
• The key business of the banks is to accept different types of deposits from the public and then lend these funds to the borrowers. This is called Financial intermediation.
• In terms of the banks, the deposits represent the “liabilities” of the banks while loans advanced and investments made by banks represent their “assets”.
  • The deposit itself is a liability owed by the bank to the depositor.

Q. In the context of India, which of the following factors is/are contributor/ contributors to reducing the risk of a currency crisis?

1. The foreign currency earnings of India’s IT sector
2. Increasing the government expenditure
3. Remittances from Indians abroad

Select the correct answer using the code given below:

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

Answer: (b) 1 and 3 only

Notes:

• A currency crisis involves the sudden and steep decline in the value of a nation’s currency, which causes negative ripple effects throughout the economy.
• Central banks and governments can intervene to help stabilize a currency by selling off reserves of foreign currency or gold, or by intervening in the forex markets.
• This decline in value negatively affects an economy by creating instabilities in exchange rates, meaning that one unit of a certain currency no longer buys as much as it used to in another currency.
• Foreign currency earnings and Remittances contribute to the strengthening of the rupee.
  • Foreign currency earnings of India’s IT sector will lead to an increase in the supply of foreign currencies, and this further increases the forex reserves. Therefore, more supply and less demand for foreign currency relative to the Indian rupee helps in reducing the risk of currency crisis.
  • Remittance is the sum of money (in foreign currency), sent from abroad or overseas to the home country. Remittance is the major source of cash inflow into any country. With the inflow of foreign currency, forex reserves again increased which further reduced currency crisis. India is the largest remittance-receiving country in the world.
• Increasing government Expenditure will have no effect on the value of the currency. Currency crisis can be reduced by manipulating the demand and supply of currency in the foreign exchange market.

Causes of Currency Crisis

• Heavy fluctuations in the stock market and foreign exchange market.
• Rise in inflation and unemployment.
• The adverse affecting changes in monetary policy.
• The downturn of the economy.
• Heavy reliance on foreign investment.
• Clashes between the two countries can cause war situations.

Q. Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?

(a) Certificate of Deposit

(b) Commercial Paper

(c) Promissory Note

(d) Participatory Note

Answer: (c) Promissory Note

Notes:

• A Participatory Note or P-note is an instrument issued by a registered Foreign Institutional Investor (FII) to an overseas investor who wishes to invest in Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (SEBI).
  • The increase in P-notes investment is in line with the higher net inflows of Foreign Portfolio Investors (FPIs) in the cash segment.
• A Certificate of Deposit is a savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements.
• Commercial Paper is an unsecured money market instrument issued in the form of a Promissory Note. It was introduced in India in 1990 with a view to enable highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors.
• A Promissory Note is a financial instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date.

Foreign Portfolio Investment

• Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors.
  • It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
  • Foreign portfolio investment is part of a country’s capital account and is shown on its Balance of Payments (BOP).
  • The BOP measures the amount of money flowing from one country to other countries over one monetary year.
• The investor does not actively manage the investments through FPIs, he does not have control over the securities or the business. However, since the investor’s goal is to create a quick return on his money, FPI is more liquid and less risky than Foreign Direct Investment (FDI).
• In contrast, FDI lets an investor purchase a direct business interest in a foreign country. The investor’s goal is to create a long-term income stream while helping the company increase its profits.
• The investor controls his monetary investments and actively manages the company into which he puts money. However, because the investor’s money is tied up in a company, he faces less liquidity and more risk when trying to sell his interest.

Q. With reference to India’s Five-Year Plans, which of the following statements is/are correct?

1. From the Second Five-Year Plan, there was a determined thrust towards substitution of basic and capital good industries.
2. The Fourth Five-Year Plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power.
3. In the Fifth Five-Year Plan, for the first time, the financial sector was included as an integral part of the Plan.

Select the correct answer using the code given below:

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

Answer: (a) 1 and 2 only

Notes:

• The stated objective of the Second five-year plan was rapid industrialisation with particular emphasis on the development of basic and heavy industries – aimed at establishing the Socialistic Pattern of Society.
• The fourth five-year plan emphasised the reduction of the concentration of incomes, wealth and economic power to achieve social equality and justice.
• The fifth five-year plan aims at the removal of poverty and the achievement of self-reliance.

Fifth Five Year Plan:

• Its duration was 1974 to 1978.
• This plan focused on Garibi Hatao, employment, justice, agricultural production and defence.
• The Electricity Supply Act was amended in 1975, the Twenty-point programme was launched in 1975, the Minimum Needs Programme (MNP) and the Indian National Highway System was introduced. 
• Overall this plan was successful which achieved a growth of 4.8% against the target of 4.4%.
• This plan was terminated in 1978 by the newly elected Morarji Desai government. 

Read here: List of all Five Year Plans in India

Q. With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements:

1. AIIB has more than 80 member nations.
2. India is the largest shareholder in AIIB.
3. AIIB does not have any members from outside Asia.

Which of the statements given above is/are correct?

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

Answer: (a) 1 only

AIIB

• It is a multilateral development bank with a mission to improve social and economic outcomes in Asia.
• It aims to connect people, services and markets that over time will impact the lives of billions and build a better future by investing in sustainable infrastructure and other productive sectors.
• It is established by the AIIB Articles of Agreement (entered into force December 2015) which is a multilateral treaty.
• It is headquartered in Beijing (China) and began its operations in January 2016.
• By the end of 2020, AIIB had 103 approved Members representing approximately 79% of the global population and 65% of global GDP.
• By investing in sustainable infrastructure and other productive sectors in Asia and beyond, it will better connect people, services and markets that over time will impact the lives of billions and build a better future.

Financial Resources of AIIB

• The AIIB’s initial total capital is USD 100 billion divided into 1 million shares of 100 000 dollars each, with 20% paid-in and 80% callable.
  • Paid-Up Share Capital: It is the amount of money that has already been paid by investors in exchange for shares of stock.
  • Called-Up Share Capital: Some companies may issue shares to investors with the understanding they will be paid at a later date.
    • This allows for more flexible investment terms and may entice investors to contribute more share capital than if they had to provide funds up front.
• China is the largest contributor to the Bank, contributing USD 50 billion, half of the initial subscribed capital.
• India is the second-largest shareholder, contributing USD 8.4 billion.

Voting Rights in AIIB

• China is the largest shareholder with 26.61 % voting shares in the bank followed by India (7.6%), Russia (6.01%) and Germany (4.2 %).
• The regional members hold 75% of the total voting power in the Bank.
• The AIIB has a governance structure similar to other MDBs (multilateral development bank), with two key differences:
  • it does not have a resident board of executive directors that represents member countries’ interests on a day-to-day basis, and
  • the AIIB gives more decision making authority to regional countries and the largest shareholder, China.

Q. Consider the following statements:

The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that

1. They shall ensure that entire data relating to payment systems operated by them are stored in a system only in India
2. They shall ensure that the systems are owned and operated by public sector enterprises
3. They shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year

Which of the statements given above is/are correct?

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

Answer: (a) 1 only

Notes:

• All system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India.
  • This data should include the full end-to-end transaction details/ information collected/ carried/ processed as part of the message/ payment instruction.
  • For the foreign leg of the transaction, if any, the data can also be stored in a foreign country, if required.
• System providers shall ensure compliance of above rule within a period of six months and report compliance of the same to the Reserve Bank latest by October 15, 2018.
• System providers shall submit the System Audit Report (SAR) on completion of the requirement.
  • The audit should be conducted by CERT-IN empanelled auditors certifying completion of the activity.
  • The SAR duly approved by the Board of the system providers should be submitted to the Reserve Bank not later than December 31, 2018.
  • CAG is not involved here.

Q. Consider the following statements

1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
2. In terms of PPP dollars, India is the sixth-largest economy in the world.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (a) 1 only

Notes:

• Purchasing Power Parity (PPP) is an economic theory that compares currencies of different countries through a similar “basket of goods and services”.
• The PPP between two countries measures the amount of one country’s currency required to purchase a basket of goods and services in the country that as compared to the amount of other country’s currency in order to purchase a similar basket of goods and services in the other country.
• In terms of PPP dollars, China is the world’s largest economy in 2018, followed by the United States and India at second and third positions respectively.

Q. The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus

(a) transportation cost only

(b) interest cost only

(c) procurement incidentals and distribution cost

(d) procurement incidentals and charges for godowns

Answer: (c) procurement incidentals and distribution cost

Notes:

• The economic cost of food grains procured by the Food Corporation of India (FCI) is a total of Minimum Support Price and bonus (if any) paid to the farmers plus the procurement incidentals and distribution cost.
• FCI’s economic cost has three main components – procurement cost, procurement price, and distribution cost.
• The procurement incidentals are the initial costs incurred during the procurement of foodgrains.
• The distribution costs include freight, handling charges, storage charges, losses during transit and establishment cost.

Q. The Chairman of public sector banks are selected by the

(a) Banks Board Bureau

(b) Reserve Bank of India

(c) Union Ministry of Finance

(d) Management of concerned bank

Answer: (a) Banks Board Bureau

Notes:

• The Banks Board Bureau (BBB) is an autonomous body established by the Central Government with the aim of enhancing the management and governance of public sector banks (PSBs).
• Bank Board Bureau is responsible for the selection and appointment of the Board of Directors in Public Sector Banks and Financial Institutions.
• The Banks Board Bureau (BBB) has its genesis in the recommendations of ‘The Committee to Review Governance of Boards of Banks in India, May 2014 (Chairman – P. J. Nayak)’.
• It is an autonomous recommendatory body.
• The Ministry of Finance takes the final decision on the appointments in consultation with the Prime Minister’s Office.
• Apart from recommending personnel for the PSBs, the Bureau has also been assigned with the task of recommending personnel for appointment as directors in government-owned insurance companies.
• It engages with the board of directors of all the public sector banks to formulate appropriate strategies for their growth and development.
• It is tasked with improving corporate governance at public sector banks, building capacities, etc.

Agenda/Functions Of BBB

• The Banks Board Bureau (BBB) in India is entrusted with several important agendas and functions aimed at improving the governance and performance of public sector banks (PSBs).
• Some of its key functions include:
  • Appointments and Recommendations: One of the primary functions of BBB is to assist in the selection and appointment of top management positions in PSBs, such as Chairpersons, Managing Directors, and Chief Executive Officers. It recommends suitable candidates based on merit and expertise.
  • Leadership Development: BBB focuses on leadership development and capacity building within PSBs. It works to identify and nurture potential leaders within the banking sector, contributing to a talent pipeline for the future.
  • Performance Evaluation: The Bureau evaluates the performance of PSBs’ top management based on various parameters, including financial performance, asset quality, and customer service. This evaluation aids in promoting accountability and efficient management practices.
  • Governance Reforms: BBB suggests governance reforms and strategies to enhance transparency, efficiency, and accountability within PSBs. These recommendations are designed to align the banks with best practices in corporate governance.
  • Human Resource Management: The Bureau provides guidance on human resource management practices, including talent acquisition, training, and succession planning. This ensures the availability of skilled professionals to lead the banks effectively.
  • Advisory Role: BBB serves as an advisory body to the government on matters related to PSBs. It offers insights and recommendations to improve the overall functioning and health of the banking sector.
  • Strategic Planning: BBB contributes to strategic planning and policy formulation for PSBs. It helps in aligning the banks’ strategies with the broader economic goals and development priorities of the country.
  • Autonomy and Independence: The Bureau aims to provide PSBs with a level of autonomy in their operations, while ensuring adherence to regulatory guidelines and accountability.

Q. What was the purpose of the Inter Creditor Agreement signed by Indian banks and financial institutions recently?

(a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit

(b) To support the infrastructure projects of Central and State Governments

(c) To act as independent regulator in case of applications for loans of Rs. 50 crore or more

(d) To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending

Answer: (d) To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending.

Notes:

• An Inter-Creditor Agreement (ICA) is an agreement between one or more creditors (lenders), who have shared interests in a particular borrower.
• The inter-creditor agreement is aimed at the resolution of loan accounts with a size of ₹50 crore and above that are under the control of a group of lenders. It is part of the “Sashakt” plan approved by the government to address the problem of resolving bad loans.
• The Intercreditor Agreement, a recommendation of the Sunil Mehta committee, aims to deal with bad loans as an attempt to speed up the Resolution of stressed Assets.