60 Days Plan: UPSC IAS Prelims 2019 – Economics and Current Affairs (Day 22)

Statement A is wrong: SEBI as a statutory body was established in 1992 through SEBI Act.

Statement B is wrong as 4 spot exchanges exist in India. National Spot Exchange Ltd. (NSEL), NCDEX Spot Exchange Ltd, Reliance Spot Exchange Ltd. Indian Bullion Spot Exchange Ltd.

Spot Exchanges refer to electronic trading platforms which facilitate purchase and sale of specified commodities, including agricultural
commodities, metals and bullion by providing spot delivery contracts in these commodities.

Statement C is correct.

Statement D is wrong; A share given to the employees of a company without any charge is called Sweat share while that given to existing shareholders is called Bonus or scrip share.

Derivatives are debt instruments not equity instruments. They derive their value from underlying assets which could be equity, forex, commodity or any other asset. They can be traded on stock exchanges.

Statement A is wrong as Through Indian Depository Receipts,

Investors in India to invest in listed foreign companies, including
multinational companies, in Indian rupees.

Statement B is correct as Participatory Notes (PNs) are issued by SEBI registered FIIs in foreign jurisdictions against Indian securities.

All the above are reasons for less developed corporate bond market in India.

ETFs are securities which pool a basket of assets and are tradable on a stock exchange.

Example: Bharat 22 ETF- Assets of 22 public and private companies, CPSE ETF, etc.

Statement B refers to Credit Default Swap.

Statement C is the definition of External Commercial Borrowings.

The given statements are correct definitions of options.

Devaluation occurs in pegged exchange rate system while Depreciation occurs in a floating exchange rate system.

Both Depreciation and devaluation favour exports as the value of domestic currency is lowered against foreign currency and exports become competitive.

Nidhi companies are Unregulated Non Banking Financial Intermediaries. Their operations include borrowing and lending only among their members. They are governed by the rules under Companies Act 2013 and hence are regulated by Ministry of Corporate Affairs and not Ministry of Finance.

Explanation:

Statement A is the definition of Hedging:  It is an investment to reduce the risk of adverse price movements in an asset.

Statement B is Demutualisation: It is a process through which any member-owned organisation becomes a shareholder-owned company.

Statement C is Underwriting: Merchant Banks, Investment Banks manage and underwrite public issues.

Real Estate Investment Trusts (REITs) are like mutual funds. They pool in money from the investors and issue units in exchange. They are regulated by SEBI. One can invest in REITs in both primary and secondary markets.

The minimum investment subscription for REITs is Rs 2 lakh. Also minimum offer size of an REIT is ₹250 crore.

Hedge funds are like mutual funds but use strategies far more complex than mutual funds to minimize the risk. They are regulated by SEBI under Alternative Investment Funds (AIFs)

Explanation:

Angel investors invest their own money while venture capitalists invest public money.

Angel investors are individuals while venture capitalists are firms and not individuals.

According to SEBI, investment by angel investors is restricted to Rs 50lakh and Rs 5 crore. They can invest in a company not older than 3 years. Funds need to be invested in a company for atleast 3 years.

Statement 1 is wrong.

Chit funds form part of the Concurrent list of Schedule 7 of the Indian Constitution and hence are regulated by both Central and State laws. There is “Registrar of Chit funds” in every state for regulation.

Statement 2 is correct as Chit Funds Act 1982 was amended in the light of Saradha and Rose valley scams.

Only Statement B is correct.

Statement A is wrong as some NBFCs are regulated by RBI and some by SEBI.

Statement C is wrong: NBFCs are similar to banks but have few differences like they cannot accept demand deposits, cannot issue self drawn cheques, and are not part of the payment and settlement system.

Statement D is wrong: They can function in chit business, leasing etc but not in agricultural or industrial activity.

Futures and options are two types of derivatives and derive their value from an underlying asset. Futures can be traded on exchange while forwards is merely a signed contract between two parties.

Options are a class of futures where buyer or seller has the right but not the obligation to buy/sell.

A currency is said to be international currency when other countries banks and other financial institutions, citizens can hold it for financial security.

It has three prerequisites:

• Issuing country should have sufficient scale: There must be so much currency which should be available for international transactions.
• It should be hard currency: i.e its value should not be volatile.
• It should be liquid: Significant quantities of assets should be bought and sold without noticeably affecting its price.

Statement B is wrong as Gilt edged securities are issued by Central Bank (RBI) on behalf of the government of India for raising money.

All the given statements about Masala bonds are correct.

A bank that is set up for the purpose of buying the bad loans of other banks along with other NPAs at market prices is known as “Bad Bank”. By transferring the bad loans to the bad bank, a bank will be able to clear its balance sheet from bad loans. Thus it solves NPAs and Twin Balance Sheet problem (option 2 is right)

Economic Survey 2017-18 proposed PARA – Public Sector Asset Rehabilitation Agency to function as a Bad bank. It will function similar to Asset Reconstruction Companies that buy stressed assets and auction them off for cash.

However, India is not the first country to propose the idea of Bad bank. First done in USA in 1988.

If a bad bank is established it will function in parallel to the Insolvency and Bankruptcy code to solve the problem of NPAs.

Floating rate bonds are with variable interest rate with a fixed percentage over the benchmark rate.

Capital Indexed bonds are Bonds for which interest rate changes according to inflation.

Nanjanagud banana – Karnataka

Kachai Lemon – Manipur

Vengurla Cashew – Maharashtra

The Global Investment Trends Monitor provides the international community with up-to-date data and analysis on trends and emerging issues relating to FDI and the activities of multinational enterprises.

Advantages of burning

• Cheap
• Quick and easy
• Can assist weed, insect and disease control
• Reduced nitrogen tie-up

Disadvantages of burning

• Loss of nutrients
• Loss of carbon
• Impact on soil microbes and fauna
• Reduction in soil structure (soil aggregate stability)
• Increase in erosion (wind and water)
• Can increase acidity over time

Brucellosis is a highly contagious zoonosis caused by ingestion of unpasteurized milk or undercooked meat from infected animals, or close contact with their secretions. It is also known as undulant fever, Malta fever, and Mediterranean fever.

Brucella species are small, Gram-negative, nonmotile, non-spore-forming, rod-shaped (coccobacilli) bacteria.

Can Electoral Bonds be purchased multiple times by same Applicant?

• Yes. Every application will be treated as fresh request for Electoral Bonds purchase and every time fresh KYC documents will be given.

The Electoral Bonds under this Scheme may be purchased by a Person, who is a Citizen of India or Incorporated or Established in India.

The definition of “Person” includes-

• an Individual;
• a Hindu Undivided Family;
• a Company;
• a Firm;
• an Association of Persons or a Body of Individuals, whether incorporated or not;
• every Artificial Juridical Person, not falling within any of the preceding subclauses; and
• any Agency, Office or Branch owned or controlled by such person

Read More – https://www.onlinesbi.com/documents/27022018_2032_FAQ_Final.pdf

Commercial borrowings continued to be the largest component of external debt with a share of 37.1 per cent, followed by NRI deposits (23.9 per cent) and short-term trade credits (19.9 per cent). 

https://economictimes.indiatimes.com/news/economy/finance/indias-external-debt-declines-2-8-per-cent-514-4-billion-at-end-june-rbi/articleshow/65997118.cms

All are correctly matched.

https://www.downtoearth.org.in/news/climate-change/climate-change-in-india-mountains-play-hocus-focus-in-himachal-pradesh-61874

In news: “Desierto florido”, or flowering desert, returned to the Atacama Desert in Chile, the earth’s driest place, some four years before the usual time.

A desert bloom is a climatic phenomenon that occurs when unusually high rainfall awakens seeds, bulbs and rhizomes that have been dormant in deserts for years, sometimes even decades. This results in a stunning blossoming of flowers that create a burst of color all over the land.

Desert blooms have been seen in several parts of the world, albeit rather infrequently. The places where it’s most common are Australia, Arizona in the U.S., and the Atacama Desert in northern Chile.

https://www.downtoearth.org.in/news/climate-change/the-21st-century-lore-of-atacama-61800

Thousands of migrants have arrived at the US-Mexico border after travelling more than 4,000km (2,500 miles) from Central America.

• They say they are fleeing persecution, poverty and violence in their home countries of Honduras, Guatemala, and El Salvador.
• Many of them say their goal is to settle in the US despite warnings by US officials that anyone found entering the country illegally will face arrest, prosecution and deportation.

https://www.bbc.com/news/world-latin-america-45951782