[DAY 22] 60 DAY RAPID REVISION (RaRe) SERIES for UPSC Prelims 2024 – ECONOMY, CURRENT AFFAIRS & CSAT TEST SERIES!

Solution (b)

• The Currency Deposit Ratio (CDR) is the ratio of money held by the public in currency to that they hold in the bank deposits.
• It reflects the people’s preference for liquidity.
• For example, the Currency Deposit Ratio (CDR) increases during the festive season, as the people convert the deposits to cash balance for meeting extra expenditure during such periods.
• If the CDR increases, that means that the public is holding more of its money out of the banks, rather than depositing it.
• Hence, the Money Multiplier will go down.

Solution (c)

Fiduciary Money:

• Fiduciary Money is the money which is accepted on the basis of the trust it commands.
• Unlike Fiat Money, it is not declared as a legal tender by the government.
• It means that the people are not required by law to accept it as a means of payment.
• Examples of Fiduciary Money include cheques, bank notes or drafts.

Note:

Bank Deposits:

• Bank deposits consist of money placed into banking institutions for safekeeping.
• These deposits are made to deposit accounts such as savings accounts, checking accounts, and money market accounts.
• The account holder has the right to withdraw deposited funds, as set forth in the terms and conditions governing the account agreement.

Legal Tender:

• Legal Tender Money is anything recognised by law as a means to settle a public or private debt or meet a financial obligation, including tax payments, contracts, and legal fines or damages, is considered legal tender.
• In almost every country, the national currency is legal tender.
• A creditor is required by law to accept legal tender as payment for a debt.

Fiat Money:

• Fiat Money doesn’t have intrinsic value—through an objective calculation—its value is set by the government that issues the currency.
• Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.
• The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it.
• Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies.

Solution (c)

• The Reserve Bank of India (RBI) had initiated an ‘Asset Quality Review’ (AQR) in 2015 to clean up the Balance Sheets of the banks.
• As a result of the AQR and subsequent transparent recognition by the banks, stressed accounts were reclassified as NPAs (Non-Performing Assets) and expected losses on stressed loans, not provided for earlier under the flexibility given to the restructured loans, were provided for.
• The steps taken to expedite and enable the resolution of the NPAs of the PSBs (Public Sector Banks) include:

• The Insolvency and Bankruptcy Code (IBC), 2016
• Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and
• Stressed Asset Management Verticals.

• The NPAs declined as a result of the government’s ‘4Rs’ strategy of-

1. Recognition
2. Resolution
3. Recapitalization and
4. Reforms

Solution (c)

Money Multiplier:

• The Money Multiplier refers to how an initial deposit can lead to a bigger final increase in the total money supply. For example, if the commercial banks gain deposits of Re. 1, this may lead to a final money supply of Rs. 6. The Money Multiplier is 6.
• It is calculated as (1/R), where R denotes the Reserve Ratio.
• The money multiplier indicates how quickly the money supply will grow as a result of bank lending. The higher the reserve ratio, the fewer deposits available for lending, resulting in a lower money multiplier.
• An increase in the Cash Reserve Ratio and Statutory Liquidity Ratio prevents the banks from lending more money and reduces the money multiplier. As the CRR (Cash Reserve Ratio) and the SLR (Statutory Liquidity Ratio) reduce, the Money Multiplier increases.
• Similarly, an increase in the financial inclusion also leads to an increase in the Money Multiplier. An increase in the banking habit of the population will increase the lending, thereby will lead to more deposits in the banking system, hence increasing the money multiplier.
• Decrease in the rate of interest on loans can lead to more borrowings by the people. This more lending by the banks would further lead to an increase in the Money Multiplier within the Indian economy.

Solution (a)

Note:

Scheduled Banks:

The list includes the State Bank of India and its subsidiaries (like State Bank of Travancore), all nationalized banks (Bank of Baroda, Bank of India etc.), Regional Rural Banks (RRBs), foreign banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks.

Regional Rural Banks:

• Regional Rural Banks were established in accordance with the provisions of an Ordinance promulgated on September 26, 1975, and the RRB Act, 1976, with the goal of ensuring adequate institutional credit for agriculture and other rural sectors.
• The Regional Rural Banks were created with the intention of combining the strengths of cooperative and commercial banks.
• It was hoped that these would provide cheap and adequate credit while also being operationally efficient and easy to access.
• The primary goal of Regional Rural Banks was to end the rural debt culture and close the credit gap that existed between geographical regions.
• RRBs are operationally sponsored by scheduled banks, which are typically public sector commercial banks.
• Instead of burdening commercial banks by extending their operations over large areas and spreading resources thin, RRBs were thought to be able to function intensively and confine their operations to a single region consisting of one or two contiguous districts.
• Thus, RRBs operate similarly to commercial banks, albeit with a smaller geographical reach for each of them.
• The Central Government, State Governments, the Reserve Bank of India (RBI), and smaller banks all work together to establish new RRBs and assist them in their operations.
• Since 1978, the RBI has primarily carried out promotional functions, while state governments carry out statutory functions.
• RRBs are jointly owned by Gol, the relevant State Government, and Sponsor Banks; the issued capital of an RRB is divided among the owners in the proportions of 50%, 15%, and 35%, respectively.

Solution (b)

Solution (a)

Solution (b)

Note:

Legal Tender:

• ‘Legal tender’ is the money that is recognised by the law of the land as valid for payment of the debt. It must be accepted for discharge of the debt.
• Both currency notes and coins are considered to be the legal tender. However, cheques and demand drafts are not considered to be the legal tender.
• Legal tender can be limited or unlimited in character. In India, coins function as limited legal tender. Therefore, 50 paise coins can be offered as the legal tender for dues up to Rs. 10. Coins of Re. 1 and above can be offered as the legal tender for dues up to Rs. 1,000. Currency notes are unlimited legal tender and can be offered as payment for dues of any size.

Solution (a)

Solution (b)

Statutory Liquidity Ratio (SLR):

• Under the Statutory Liquidity Ratio (SLR), the banks are required to maintain certain percentage of Net Demand and Time Liabilities (NDTL) in the form of cash, gold and eligible G-Secs.
• These financial instruments include-

1. Treasury Bills
2. Dated Securities of the Government
3. State Development Loans and
4. Any other instrument as may be notified by the Reserve Bank of India.

• However, Recapitalization Bonds are not eligible instruments to fulfill the SLR requirements.

Recapitalisation Bonds:

• Recapitalisation bonds are dedicated bonds to be issued at the behest of the government for recapitalizing the trouble hit Public Sector Banks (PSBs).
• The government issues bonds which are subscribed by banks. The money collected by the government goes to banks in the form of equity capital as the government increases its share of equity holding, thereby shoring up banks’ capital reserves.
• The money invested by banks in recapitalisation bonds is classified as an investment which earns them an interest.
• This helps the government in maintaining its fiscal deficit target as no money directly goes out from its coffers.
• The term recapitalisation means giving equity money to cover debt of an entity. In the case of PSBs, their NPAs (debts) will be replaced by equity capital from recapitalisation by the government.

Solution (a)

Note:

Cash Reserve Ratio (CRR):

• The Cash Reserve Ratio (CRR) is the percentage of the depositors’ money which the banks are required to maintain with the RBI in the form of cash.
• However, it may be noted that the RBI does not pay any interest to the banks on the CRR deposits.

During Inflation: Increase in the CRR

The banks are required to keep higher percentage of depositors’ money with the RBIàLess money available with the banks for giving loansàDecrease in the money supply.

During Slowdown: Decrease in the CRR

The banks are required to keep less percentage of depositors’ money with the RBIàMore money available for giving loansàIncrease in the money supply.

• All the banks are required to maintain 100% of the CRR requirement on an average basis during the fortnight.
• This means that it is not necessary for the banks to maintain 100% of the CRR requirement on all the days during the fortnight.
• However, the average CRR with the RBI for the entire fortnight has to be 100% of the CRR requirement.
• Further, the RBI stipulates the daily minimum CRR balances for the banks.
• Earlier, it was 90% of the CRR requirement on a daily basis.
• In 2019, the RBI decided to reduce the requirement of minimum daily CRR balance maintenance from 90% to 80%.

Solution (b)

Note:

Standing Deposit Facility (SDF):

• The Standing Deposit Facility (SDF) works similar to the Reverse Repo. However, the SDF is different from the Reverse Repo in the following ways:
• Under the SDF route, the RBI would not be required to provide the G-Secs as collateral to the banks. Hence, it would enable the RBI to absorb huge amount of liquidity from the economy, without the G-Secs acting as collateral.
• The SDF would be lower than the Reverse Repo.
• Reverse Repo exercise is carried out as per the discretion of the RBI, depending upon the market conditions. However, the SDF would enable the banks to keep their surplus funds with the RBI at their own discretion.
• The Finance Act (2018), introduced as a part of the Budget, amended the RBI Act, 1934, to enable the RBI to use the new tool of the SDF.
• Subsequently, the liquidity management framework adopted by the RBI in February, 2020, has decided to use the SDF in India.

Solution (d)

Liquidity Adjustment Facility (LAF):

• It is a monetary policy tool used largely by the Reserve Bank of India (RBI) that controls the liquidity or money supply in the economy.
• It does it by either allowing banks to borrow money via repurchase agreements (repos) or lend loans to the RBI via reverse repo agreements.
• Liquidity Adjustment Facility was recommended by the Narasimhan Committee on Banking Reforms and was introduced by the RBI in 1998.
• There are two main components of Liquidity Adjustment Facility (LAF):

1. Repo Rate: It is the rate at which the Reserve Bank of India (RBI) lends to other banks.
2. Reverse Repo Rate: It is the rate at which the Reserve Bank of India (RBI) borrows from commercial banks.

• Earlier, the Liquidity Adjustment Facility (LAF) was applicable only to the Scheduled Commercial Banks and the Scheduled Cooperative Banks.
• Recently, the RBI has decided to extend the LAF and the Marginal Standing Facility (MSF) to the Regional Rural Banks (RRBs).
• It has also been decided to permit the RRBs to participate in the Call/Notice money market, both as the borrowers and the lenders.

Solution (a)

Note:

White Label ATMs (WLAs):

• The ATMs which are set up, owned and operated by non-banks are called the White Label ATMs (WLAs).
• The non-bank ATM operators are authorized under the Payment and Settlement Systems Act,2007, by the Reserve Bank of India (RBI).
• The rationale to allow the non-bank entities to set up the WLAs has been to increase the geographical spread of the ATMs for increased/enhanced customer service, especially in the semi-urban/rural areas.
• In addition to dispensing cash, the ATMs/WLAs may offer many other services/facilities to the customers. Some of such services include – Account Information; Cash Deposit; Regular Bill Payment; PIN Change; Request for Cheque Book etc.
• The customers can be charged for transactions at the ATMs over and above the mandated number of free transactions.

Solution (b)

Solution (c)

Solution (d)

• The total liability of the monetary authority of the RBI is called the monetary base or high-powered
• It consists of currency (notes and coins in circulation with the public and vault cash of commercial banks) and deposits held by the Government of India and commercial banks with
• It is also called as reserve money ‘or monetary base’ as it acts as a basis for credit It is denoted by M0.
• Different measures of the money supply can be categorized as follows:
  • M1 – It is also called narrow
  • It includes currency with public, demand deposit in all banks (e.g., current account, savings account) and Other deposits with RBI
  • M2 = M1 + Post office bank savings
  • M3 = M1 + Time deposits with commercial banks (Fixed deposits, Recurring deposits).
  • M4= M3 + total post office deposits

Solution (c)

Solution (d)

Solution (d)

• A ‘bank run’ occurs when a large number of customers of a bank or another financial institution withdraw their deposits simultaneously due to concerns about the bank’s
• As more people withdraw their funds, the probability of default increases, thereby prompting more people to withdraw their In extreme cases, the bank’s reserves may not be sufficient to cover the withdrawals.
• When a bank cannot satisfy customer demands for withdrawals—or if there’s a rumor that the bank will be unable to do so—the situation
• Customers fear being the “last one to the exit,” and they attempt to withdraw as much as possible. In a worst-case scenario, a bank may be unable to meet obligations, leading to complete

Solution (c)

• The Indian Ocean Rim Association (IORA)  was formerly known as the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC). Hence statement 1 is correct.
• Its objective is to ensure the sustainable development of the Indian Ocean region.
• Its Secretariat is located in Cyber City, Ebène, Mauritius.
• It comprises 23 member states and 11 dialogue partners hailing from regions surrounding the Indian Ocean.
• Its members include Australia, Bangladesh, Comoros, French Republic, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Seychelles, Singapore, Somalia, South Africa, Sri Lanka, Tanzania, Thailand, the United Arab Emirates, the Maldives, and Yemen. Hence statement 2 is correct.
• In 2014, India hosted the first Indian Ocean Dialogue in Kochi, Kerala.
• The Council of Foreign Ministers (COM) is the highest decision-making body of IORA. Hence statement 3 is correct.
• A committee of Senior Officials (CSO) meets twice a year to progress IORA’s agenda and consider recommendations by Working Groups and forums of officials, business and academics.

Solution (d)

The Chungthang Dam is located on Teesta River in Sikkim. The dam serves as a hydroelectric power generation facility, contributing to Sikkim’s renewable energy portfolio. It is an integral part of the 1200 MW mega Teesta Stage III Hydro Electric Project which is a major source of electricity for Sikkim and West Bengal. Hence option d is correct.

Solution (a)

• India introduced the CCTS under the Energy Conservation Act, 2001, to manage greenhouse gas emissions.
• The CCTS encourages a market-driven approach, helping India achieve its environmental commitments.
• It is administered by the Ministry of Power (MoP) and Ministry of Environment, Forests and Climate Change (MoEF&CC).
• India’s CCTS is a program designed to allow companies to trade carbon credits. Hence statement 1 is correct.
• The carbon credit market’s regulation in CCTS falls under the regulation of the Central Electricity Regulatory Commission (CERC). Hence statement 2 is incorrect.

Solution (c)

• The National Cooperative Development Corporation (NCDC) was established by an Act of Parliament in 1963 as a statutory corporation. Hence statement 1 is correct.
• It works under the Ministry of Cooperation.
• It helps in planning, promoting and financing programmes for production, processing, marketing, storage, export and import of agricultural produce, food stuffs, certain other notified commodities e.g., fertilisers, insecticides, agricultural machinery, lac, soap, kerosene oil, textile, rubber etc.
• Sahakar Pragya is one of the initiative of the National Cooperative Development Corporation (NCDC). It is a capacity development initiative  through Laxman Rao Inamdar National Academy for Cooperative Research Development (LINAC). Hence statement 2 is correct.

Solution (a)

• Baltic-connector gas pipeline is a natural gas pipeline between Finland and Estonia. Hence statement 1 is incorrect.
• The gas pipeline was opened in 2020. It is used to send gas between Estonia and Finland, depending on which country is most in need at any point.
• The pipeline has been Finland’s only natural gas import channel since Russian imports were stopped in 2022.
• The Baltic Sea is a part of the Atlantic Ocean which is surrounded by Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Russia, Sweden, and the North and Central European Plain. Hence statement 2 is incorrect.

Image: World Atlas

• Baltic states is a geopolitical term typically used to refer to three countries – Estonia, Latvia, and Lithuania. Hence statement 3 is correct.
• All three countries are members of NATO, the European Union, the Eurozone, and the OECD.

Solution (c)

• P20 is a congregation of Parliamentary Speakers from the Parliaments of G20 nations. Hence statement 1 is correct.
• It is a meeting that pertains to Speakers and presiding officers of the Parliament from the G20 countries and invitee nations.
• The P20 Group was set up during the G20 Presidency of Canada in 2010.
• The P20 Group provides an opportunity to deepen the recognition of G20 member nations’ efforts and methods of international collaboration in related policies by deliberating upon emerging issues faced by the global community.
• The theme of the P20 Summit 2023 was “Parliaments for One Earth, One Family, One Future.” Hence statement 2 is correct.
• It also highlighted the “LiFE is Beautiful” initiative, promoting eco-friendly practices for a sustainable ecosystem.

Solution (b)

• Avian influenza is a highly contagious viral infection that primarily affects wild birds and domestic poultry. Hence statement 1 is incorrect.
• The Highly Pathogenic Avian Influenza Virus (HPAIV) causes serious illness in birds resulting in high death rates in different species of birds. Hence statement 2 is correct.
• HPAI was first detected in India in the state of Maharashtra in 2006. Since then, India has experienced annual outbreaks of HPAI in different regions, leading to substantial economic losses.
• India’s approach to controlling Highly Pathogenic Avian Influenza (HPAI) follows a “detect and cull” policy as outlined in the National Action Plan for Prevention, Control, and Containment of Avian Influenza (revised – 2021). The policy approach includes:
• The humane destruction of infected and exposed animals, eggs, feed, litter, and other contaminated materials.
• Restricting the movement of poultry and poultry products, disinfection, and clean-up of infected premises. Hence statement 3 is correct.

Solution (b)

Hence option b is correct.

Solution (c)

• The Hydrocarbon Exploration and Licensing Policy (HELP) is a policy framework. It provides guidelines for the exploration and production of hydrocarbons in India. It aims to make India a global hub for hydrocarbon exploration and production. It simplifies the licensing process. It provides fiscal incentives and promotes investment in the sector.
• The Hydrocarbon Exploration and Licensing Policy (HELP) is a paradigm shift from the Production Sharing Contract regime to the Revenue Sharing Contract regime based on ease of doing business. Hence statement 1 is correct.
• It provides for a revenue-sharing model, the government will receive a share of the gross revenue from the sale of oil and gas, etc., and will not be concerned with the cost incurred.
• It provides for a uniform licensing system that will cover all hydrocarbons such as oil, gas, and coal bed methane.
• It provides a single license for exploration and production of conventional as well as non-conventional hydrocarbon resources. Hence statement 2 is correct.

Solution (c)

• The World Health Assembly was founded in 2009 on the occasion of the 300th anniversary of Berlin’s Charité Hospital. Hence statement 1 is correct.
• The Berlin Charité was founded as a military hospital in 1710 under the Prussian King Friedrich-Wilhelm I.
• It is held annually in Berlin, Germany under the patronage of Germany, France, the European Commission, and the World Health Organization (WHO). Hence statement 2 is correct.
• It aims to set the agenda for a healthier future by inspiring innovative solutions for better health and well-being for all.
• The theme for the World Health Assembly 2023 was “A Defining Year for Global Health Action.” Hence statement 3 is correct.

Solution (b)

Only the corner cubes i.e. the 8 cubes at the corners of the original cube will have three faces painted. Hence the answer will be 8 only. Further, i) In a cube of size nxn (where n>=2) the number of cubes painted with 3 adjacent faces will always be 8 irrespective of the number of cubes

1. ii) Number of cubes painted with 2 adjacent faces = (n-2)x12 [here 12 represents 12 edges of the cube]

iii) Number of cubes painted on 1 face = [(n-2)^2 x6] [here 6 represents 6 faces of the cube] iv) Number of cubes having no faces painted = (n-2)^3

In the above question, the cube is of 4×4 size (64/16), hence 3 face painted cubes are 8, 2 face painted cubes are (4-2) x 12 = 24, 1 face painted cubes are (4-2)2 x 6 = 24 and no face painted cubes are (4-2)^3 = 8.

Solution (d)

We may have (3 men and 2 women) or (4 men and 1 woman) or (5 men only).

∴ Required number of ways =

(7C3 × 6C2 ) + ( 7C4 × 6C1 ) + ( 7C5 ) = (7×6×5/3×2×1)×(6×5/2×1) + ( 7C3 × 6C1 ) + ( 7C2 )

= 525 + (7×6×5/3×2×1 ×6) + (  7×6/2×1)

= ( 525 + 210 + 21 ) = 756

Solution (c)

Let incomes of A and B are 3x and 2x, and expenditures are 2y and y

3x-2y=3000 ..(i)

2x-y=3000 …(ii)

After solving equation (i) and (ii) we get x=3000

Thus their combined monthly income is 3x+2x = 5x = 5×3000 = 15000

Solution (c)

Let the ten’s digit be x. Then, unit’s digit = x + 2.

Number = 10x + (x + 2) = 11x + 2.

Sum of digits = x + (x + 2) = 2x + 2.

∴ (11x + 2)(2x + 2) = 144

⇒ 22×2 + 26x – 140 = 0

⇒ 11×2 + 13x – 70 = 0

⇒ (x – 2)(11x + 35) = 0 ⇒ x = 2.

Hence, required number = 11x + 2 = 24.

Solution (c)

Method 1:

Let the present ages of daughter and mother be x and (60 -x) years respectively. Six years ago, mother’s age was five times the age of the daughter then

(60 – x) – 6 = 5(x – 6)

54 – x = 5x – 30

6x = 84

x = 14.

Daughter‘s age after 6 years = (x+ 6) = (14+6) = 20 years.

Method 2:

Go by answer options: The sum of present age of mother and daughter = 60

Sum of age of mother and daughter six years ago = 60 – 6 – 6 = 48

In the answer options age of daughter is given which is six years ahead of present age hence the age of daughter six years ago from the present age was (answer option – 12) = let say d Sum of age of mother and daughter six years ago = 5d + d = 48

Six years ago, mother’s age was five times the age of the daughter

Option (d) gives value of d zero i.e. 12 – 12 hence ruled out.

From option (c), we get value of d = 20- 12 =8 which satisfy the equation 5d + d = 48. Hence the answer is option (c).