DAILY CURRENT AFFAIRS IAS | UPSC Prelims and Mains Exam – 13th March 2021

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(PRELIMS + MAINS FOCUS)

India attends first QUAD Summit

Part of: GS Prelims and GS – II – International Relations

In news

• PM Modi recently attended the first Quad Summit. 

Key takeaways 

• Other countries that attended:  U.S.A’s President, Australian PM and Japanese PM 
• Access to COVID-19 vaccines, cooperation on technology, and climate change were discussed. 
• Quad vaccine initiative was announced in which India will manufacture American vaccines with Japanese funding and Australian logistical support for countries in the Indo-Pacific region.
• Three working groups were also launched — Quad vaccine experts group, Quad Critical and Emerging Technology Working Group, and Quad Climate Working Group.

Increase in arrests under UAPA Act

Part of: GS Prelims and GS – III – Terrorism

In news

• According to the Ministry of Home Affairs (MHA), number of persons arrested under the UAPA (Unlawful Activities [Prevention] Act) in 2019 has increased by over 72% as compared to year 2015. 

Key takeaways 

• In 2019, the highest number of arrests were made in Uttar Pradesh (498), Manipur (386), Tamil Nadu (308), J & K (227) and Jharkhand (202).
• Only 2.2 % of cases registered under the UAPA between 2016-2019 ended in convictions by court.
• Cases under the UAPA are investigated by the State police and the National Investigation Agency (NIA).
• Under the UAPA, getting bail is rare and the investigating agency has up to 180 days to file a charge sheet

ICAR receives King Bhumibol World Soil Day – 2020 Award 

Part of: GS Prelims and GS – III – Environment 

In news

• Indian Council of Agricultural Research (ICAR) has received King Bhumibol World Soil Day – 2020 Award of FAO.
• ICAR received the award for its excellent contributions in “Soil Health Awareness” on the theme “Stop soil erosion, save our future” during 2020.

Important value additions 

King Bhumibol World Soil Day Award

• Launched in: 2018 
• It acknowledges individuals or institutions that raise public awareness of soils 
• Sponsored by: Kingdom of Thailand
• It is named after King Bhumibol Adulyadej of Thailand 

Shramik Kalyan Portal 

Part of: GS Prelims and GS-II – Policies and interventions & GS – III – Employment 

In news

• Indian Railways ensures 100% compliance of payment of minimum wages to contract workers through e-application Shramik Kalyan Portal.

Important value additions 

Indian Railway Shramik Kalyan 

• Developed and launched: 1st October, 2018.
• It ensures the compliance of provisions of Minimum Wages Act. 
• The contractors are required to regularly upload wage payment data into e-application.
• It ensures that contractual workers of Indian Railways get their rightful dues

Licensing conditions for telecom companies amended

Part of: GS Prelims and GS – III – Infrastructure; Telecommunications 

In news

• The Department of Telecommunications (DoT) has amended the licensing conditions for telecom companies. 
• Now, these will include defence and national security as parameters when purchasing ‘trusted telecom products’ and sourcing equipment from ‘trusted telecom equipment sources’.

Key takeaways 

• This means that the designated authority can cite these two aspects (Defence and national security) and ask telecom companies not to use products which it has deemed unsafe at any time.
• The new norms will come in force from June 15, 2021. 
• After Enforcement, telecom companies will not be able to use any products that do not appear on the trusted telecom equipment source list or the trusted telecom product list.
• If a telecom company wishes to expand its network by using any equipment that does not come from a trusted source, it will have to take prior permission from the National Cyber Security Coordinator.

Do you know? 

• In December 2020, India’s Cabinet Committee on Security approved the setting up of” National Security Directive on telecommunication sector.
• Objective: To classify telecom products and their sources under the ‘trusted’ and ‘non-trusted’ categories.
• The list of products telecom companies will be allowed to use in their network would be approved by the National Cyber Security Coordinator (NCSC). 
• NCSC will make its decision based on the approval of a committee headed by the deputy National Security Advisor (NSA).

(Mains Focus)

SOCIETY/ GOVERNANCE

Topic:

• GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

AT1 bonds: SEBI New Norms

Context: The decision of the Securities and Exchange Board of India (Sebi) to slap restrictions on mutual fund (MF) investments in additional tier-1 (AT1) bonds has raised a storm in the MF and banking sectors.

The Finance Ministry has asked the regulator to withdraw the changes as it could lead to disruption in the investments of mutual funds and the fund-raising plans of banks.

What are AT1 bonds? What’s total outstanding in these bonds?

• AT1 Bonds stand for additional tier-1 bonds. 
• These are unsecured bonds which have perpetual tenure. In other words, the bonds have no maturity date. 
• They have call option, which can be used by the banks to buy these bonds back from investors. 
• These bonds are typically used by banks to bolster their core or tier-1 capital. 
• AT1 bonds are subordinate to all other debt and only senior to common equity. 
• Mutual funds (MFs) are among the largest investors in perpetual debt instruments, and hold over Rs 35,000 crore of the outstanding additional tier-I bond issuances of Rs 90,000 crore.

What action has been taken by the Sebi recently and why?

• 100-year Instrument: In a recent circular, the Sebi told mutual funds to value these perpetual bonds as a 100-year instrument. This essentially means MFs have to make the assumption that these bonds would be redeemed in 100 years. 
• Limit Ownership: The regulator also asked MFs to limit the ownership of the bonds at 10 per cent of the assets of a scheme. 
• Linkage with Yes Bank Crisis: According to the SEBI, these instruments could be riskier than other debt instruments. The SEBI has probably made this decision after the RBI allowed a write-off of Rs 8,400 crore on AT1 bonds issued by Yes Bank Ltd after it was rescued by SBI

What is the impact of this decision?

• Increased Risk: Typically, MFs have treated the date of the call option on AT1 bonds as maturity date. Now, if these bonds are treated as 100-year bonds, it raises the risk in these bonds as they become ultra long-term. 
• Increases Volatility in Bond Prices: This could also lead to volatility in the prices of these bonds as the risk increases the yields on these bonds rises. Bond yields and bond prices move in opposite directions and therefore, higher yield will drive down the price of bond, which in turn will lead to a decrease in the net asset value of MF schemes holding these bonds.
• Push MF to engage in Panic Selling: Moreover, these bonds are not liquid and it will be difficult for MFs to sell these to meet redemption pressure. Potential redemptions on account of this new rule would lead to mutual fund houses engaging in panic selling of the bonds in the secondary market leading to widening of yields
• Impacts Fund Raising Capability of Banks: AT1 bonds have emerged as the capital instrument of choice for state banks as they strive to shore up capital ratios. If there are restrictions on investments by mutual funds in such bonds, banks will find it tough to raise capital at a time when they need funds in the wake of the soaring bad assets.

Why has the Finance Ministry asked SEBI to review the decision?

• The Finance Ministry has sought withdrawal of valuation norms for AT1 bonds prescribed by the SEBI for mutual fund houses as it might lead to mutual funds making losses and exiting from these bonds, affecting capital raising plans of PSU banks.

• The government doesn’t want a disruption in the fund mobilisation exercise of banks at a time when two PSU banks are on the privatisation block. 
• Banks are yet to receive the proposed capital injection in FY21 although they will need more capital to face the asset-quality challenges in the foreseeable future. 

Connecting the dots:

• Laxmi Vilas Bank Crisis

(TEST YOUR KNOWLEDGE)

Model questions: (You can now post your answers in comment section)

Note:

• Correct answers of today’s questions will be provided in next day’s DNA section. Kindly refer to it and update your answers.
• Comments Up-voted by IASbaba are also the “correct answers”.

Q.1 Consider the following statements regarding recently amended licensing conditions for telecom companies:

1. Defence and national security are new parameters for purchasing trusted telecom products
2. The list of products telecom companies are allowed to use are approved by the National Cyber Security Coordinator (NCSC). 

Which of the above is or are correct? 

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2 

Q.2 Which of the following is not a member of QUAD 

1. Japan
2. USA 
3. India Both 1 and 2 
4. China 

ANSWERS FOR 12th March 2021 TEST YOUR KNOWLEDGE (TYK)

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