Parliament has passed the Bilateral Netting of Qualified Financial Contracts Bill, 2020 with the Rajya Sabha approving it.
Key takeaways
The bill provides a legal framework for bilateral netting of qualified financial contracts.
Applicable to: Qualified Financial Contracts between two qualified financial market participants where at least one party is an entity regulated by the specified authorities RBI, SEBI, IRDAI, PFRDA or the IFSCA.
Significance
Without bilateral netting, Indian banks have had to set aside higher capital against their trades in the over-the-counter market, which impacts their ability to participate in the market. Moreover, it also increases the systemic risk during defaults.
Bilateral netting would also help reduce hedging costs and liquidity needs for banks, primary dealers and other market-makers, thereby encouraging participation in the over-the-counter derivatives market.
It would also help develop the corporate default swaps market, which, in turn, would provide support to the development of the corporate bond market.
It would also improve investor confidence and to expand the scope of credit default swaps.
Do you know?
Bilateral netting is a legally enforceable arrangement between a bank and a counterparty that creates a single legal obligation covering all included individual contracts.
This means that a bank’s obligation, in the event of the default or insolvency of one of the parties, would be the net sum of all positive and negative fair values of contracts included in the bilateral netting arrangement.
Netting refers to offsetting of all claims arising from dealings between two parties to determine a net amount payable or receivable from one party to another.
Part of: GS Prelims and GS-III – Disaster Management
In news
Recently, the limit of using the State Disaster Response Fund for COVID-19 specific infrastructure has been increased from 35% to 50%.
The decision will help States have more finances at their disposal to fight the virus.
Important value additions
The State Disaster Response Fund (SDRF)
It was constituted under Section 48 (1) (a) of the Disaster Management Act, 2005.
It is the primary fund available with State Governments for responses to notified disasters.
The Central Government contributes 75% of SDRF allocation for general category States/UTs and 90% for special category States/UTs (NE States, Sikkim, Uttarakhand, Himachal Pradesh, Jammu and Kashmir).
Laser Guided Anti-Tank Guided Missile (ATGM) was successfully test fired from MBT Arjun Tank at KK Ranges, Ahmednagar recently.
Developed by: Armament Research & Development Establishment (ARDE), Pune in association with High Energy Materials Research Laboratory (HEMRL) Pune, and Instruments Research & Development Establishment (IRDE) Dehradun
Important value additions
Lasers guided ATGMs lock and track the targets with the help of laser designation to ensure precision hit accuracy.
The missile employs a tandem HEAT warhead to defeat Explosive Reactive Armour (ERA) protected armoured vehicles.
It has been developed with multiple-platform launch capability.
It is currently undergoing technical evaluation trials from gun of MBT Arjun.
Recently, successful flight-tests of the indigenously-designed Abhyas High-speed Expendable Aerial Target (HEAT) in Balasore (Odisha) were conducted.
Conducted by: Defence Research and Development Organisation (DRDO)
Designed and developed by: Aeronautical Development Establishment (ADE) of DRDO
Key takeaways
Two demonstrator vehicles of Abhyas cleared all the evaluation parameters like 5 km flying altitude, vehicle speed of 0.5 mach (half the speed of sound), endurance of 30 minutes etc.
Important value additions
Abhyas High-speed Expendable Aerial Target (HEAT)
It is a drone (UAV) that will be used as a target for various missile systems.
It is powered by a small gas turbine engine.
Navigation by: Micro-electromechanical (MEMS) systems based Inertial Navigation System (INS).
It is lightweight and reliable, consumes less power and is cost-effective.
It is programmed for fully autonomous flight.
Do you know?
MEMS is a process technology used to create tiny integrated devices or systems that combine mechanical and electrical components.
A hackathon named “KRITAGYA” has been planned by the Indian Council of Agricultural Research (ICAR) under National Agricultural Higher Education Project (NAHEP).
Objective: To promote potential technology solutions for enhancing farm mechanization with special emphasis on women friendly equipment.
Key takeaways
Eligibiliy: Students, faculties and innovators/entrepreneurs from any university / technical institution across the country can apply and participate in the form of a group.
Participating students can collaborate with local start-ups, students from technology institutes.
Cash prizes are included.
Important value additions
National Agricultural Higher Education Project (NAHEP)
The ICAR commenced NAHEP in 2017.
It is a Government of India and World Bank project.
Objective: To support the National Agricultural Research and Education System providing more relevant and better quality education to the students.
It is a multi-stakeholder platform to make young people career ready.
Launched by: The Ministry of Youth Affairs & Sports and United Nations Children’s Fund (UNICEF)
A ‘Statement of Intent’ has also been signed to establish Generation Unlimited in India (YuWaah).
Objectives of YuWaah
Providing career guidance support to young people through career portal.
Job-readiness and self-exploration sessions to make young people career-ready.
Supporting young people by providing entrepreneurship classes with successful entrepreneurs and experts.
Creating linkages with aspirational economic opportunities to connect young people with jobs or self-employment. For this, innovative solutions and technology platforms will be engaged to maximize the scale and reach.
Upskilling young people on 21st century skills, life skills, digital skills and supporting them through self-learning, for their productive lives and the future of work.
Important value additions
Generation Unlimited in India (GenU – YuWaah)
It was founded in September 2018.
Aim: To transform education, employment and entrepreneurial outcomes for young people around the world at a global and local level
It was launched by UNICEF at the 73rd session of the UN General Assembly.
Miscellaneous
PASSEX
The Indian and the Australian navies are undertaking Passage Exercise or PASSEX exercises on September 23-24 in the Indian Ocean.
From the Indian side, Indian Naval Ships Sahyadri and Karmuk will be present and Australia will be represented by HMAS Hobart.
PASSEXs are regularly conducted by the Indian Navy with units of friendly foreign navies.
Australia is the third country, since June, with which India has conducted conduct the exercises.
The first was with US Navy’s USS Nimitz and the second was the Russian Navy.
(MAINS FOCUS)
GOVERNANCE/ JUDICIARY / ECONOMY
Topic: General Studies 2:
Government policies and interventions for development in various sectors and issues arising out of their design and implementation
Context: Government has filed an affidavit in Sudarshan TV case stating that the regulation of web-based digital media is the need of the hour.
What is Sudarshan TV Case?
Sudarshan TV’s ‘Bindas Bol’ programme had accused Muslims of “infiltrating” the civil services with the help of funding from terror-linked organisations abroad.
Petitions were filed in Supreme Court where it was maintained that the episode is an example of vilifying a community and the content amounts to hate speech.
The court had orally observed it would set up a committee of five citizens who can come up with standards for electronic media
A three-judge Bench had asked the government for suggestions to improve the self-regulatory mechanism for electronic media.
What was government’s response?
Central government submitted that while regulations already exist for the print and television media, there was a need to regulate digital media as it has faster reach, and its content has the potential to go viral.
The centre termed digital media as ‘parallel media’ which is ‘completely uncontrolled’, and uses spectrum or radio airwaves and the internet, which is public property
The Centre also cautioned that regulating television content could have the undesired impact of media organisations pushing similar content on digital platforms, which are unregulated
Regulatory policies for television and print media would also have to apply to digital media, and vice versa, to curb the spread of fake news and misinformation
Governments View on Self-regulation of electronic media
The central government has opposed the apex court’s idea of setting up a panel to suggest standards for electronic media.
The government has argued that the self-regulatory mechanisms currently in place are effective, ensure impartiality and may only require a little fine tuning to remove the lacunae.
Self-regulatory bodies at present can only govern those who voluntary choose to be its members. And for television channels which aren’t members of the self-regulating bodies, the matter is taken up directly by the ministry
There is, however, a need to regulate the digital media space
What are the issues involved in this case of regulating digital media?
Constitutional Rights involved: The content of the episodes in question goes against and demeans the constitutional right of access to equality of employment
Balancing contending interests: The court has to balance the right to freedom of speech versus right of dignity of a community and hate speech
Public interest issue: Since the case deals on issues of “foreign funding” and “reservation”, there has to consultation with government before any order
Role of Courts: Constitutional values, human dignity are needed to be protected but the court cannot “become the enforcers of programme code” (which falls under the domain of Executive)
Extent of Courts Power: There is debate on whether the court could order a blanket injunction of a programme or should restrict itself to only those portions which hurt a community.
Complex Nature of Hate Speech: Hate speech comes dressed as small nuggets of facts, and a lot depends on the tenor, tone and manner of their presentation. Thus any regulation of speech has to be on case-to-case basis.
Sophisticated Nature of Media Space: The lines between the different platforms for media and journalism today are increasingly blurring. For example, Sudarshan TV also has a dedicated YouTube channel, where all of its programs are uploaded.
Ineffective implementation of existing rules: The laws to tackle incendiary content and hate speech that fuels violence is already in place. What is seen lacking is a will to uniformly apply these rules, irrespective of political affiliations.
Ability to survive legal scrutiny: Earlier attempts at imposing a high degree of liability on intermediaries (like Google & Facebook) for content posted on their platforms have not survived legal scrutiny, with Section 79(1) of the IT Act, 2000, giving them some immunity in this regard.
Conclusion
An intervention that is light and well considered is what will work.
Connecting the dots:
Net Neutrality
Shreya Singhal Case
GOVERNANCE / POLITY
Topic: General Studies 2:
Government policies and interventions for development in various sectors and issues arising out of their design and implementation
Important aspects of governance, transparency and accountability
They allowed anonymous donations to political parties and, therefore, protected the privacy of the donors.
The Election Commission of India (ECI) criticised the opacity of this financial mechanism and described it as “a retrograde step”.
ECI held that Electoral Bonds would prevent the state from ascertaining whether a political party has taken any donation in violation of provisions under Section 29B of the Representation of the People Act, which prohibits the political parties from taking donations from government companies and foreign sources
Electoral bonds also made it impossible to check whether a company was giving to parties more than what the Companies Act (2013) permitted, that is 7.5 per cent of the net average profit of the three preceding financial years.
Sealed Envelope Procedures
Sealed envelope has become modus operandi in several Indian institutions, including the Supreme Court (SC)
In the case of political funding (by electoral bonds or otherwise), SC in 2019 directed political parties to submit the details of donations received to the ECI in sealed cover.
The Assam administration had to show the progress it was making in the implementation of the National Register of Citizens by submitting reports in sealed covers
When Justice Gogoi was accused of sexual harassment, the panel formed by the SC found “no substance in the allegations” on the basis of a report it had received in a sealed cover that was not disclosed even to the complainant.
RTI Act diluted
Vacant Posts: Government did not fill vacant information commissioner posts in the Central Information Commission (CIC) between 2016 and 2018
After the SC intervened, some appointments were made in January 2019, but four posts remained vacant, a clear indication of the government’s lack of interest.
Huge Backlogs: The backlog of pending appeals had reached 30,000 cases in late 2019 as the CIC has become a rather dysfunctional body.
Restriction on RTI: Queries about phone tapping are not responded to anymore by CIC.
High Rejection of RTI requests: In 2016-17, the home and finance ministries rejected close to 15 per cent of the applications they received while the RBI and public sector banks rejected 33 per cent.
The RBI, for instance, refused to give any information about the decision-making process that led to demonetisation.
Government amended the RTI Act to limit the power of the CIC.
The five-year fixed tenure for the Chief Information Commissioner and information commissioners was abolished.
Their salaries were not fixed any more — as with Election Commissioners — but notified separately by the government.
Whistleblower’s Protection Act diluted
Whistleblowers can now be prosecuted for possessing the documents on which the complaint has been made.
Issues flagged by them have to be in “public interest” and should not be “affecting the sovereignty and integrity of India”, related to “commercial confidence” or “information received in confidence from a foreign government”.
Data Phobia
Data phobia has resulted in the non-publication or alteration of some statistical information by government organisations.
108 social scientists wrote an open letter in 2019 inviting the government to “re-establish institutional independence and integrity to the statistical organisations”.
The National Crime Records Bureau has been affected by delays (its 2017 report was released in October 2019) and deletions.
Conclusion
Transparency is not only necessary for maintaining a democratic polity, it is also necessary for making the economy work
Connecting the dots:
Critically assess the efficacy of the Right to Information (RTI) as a tool of accountability and transparency in governance.
(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 Which of the following is true regarding Bilateral Netting?
It is a legally enforceable arrangement between a bank and a counterparty that covers all included individual contracts.
It is a legally enforceable arrangement between two individuals that covers all included individual contracts.
It is a legally enforceable arrangement between India and USA that covers all included individual contracts.
It is a legally enforceable arrangement between Ministry of Agriculture and Ministry if Finance that covers all included individual contracts.
Q.2 Consider the following statements regarding The State Disaster Response Fund (SDRF):
The Central Government contributes 50% of SDRF allocation for general category States/UTs and
It also contributes 75% for special category States/UTs.
Which of the above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Q.3 Consider the following statements regarding Abhyas High-speed Expendable Aerial Target (HEAT):
It is a satellite that will be used as a target for various missile systems.
It consumes less power.
It is highly expensive.
Which of the above is/are correct?
1 and 2 only
2 only
1 and 3 only
1, 2 and 3
ANSWERS FOR 23nd September 2020 TEST YOUR KNOWLEDGE (TYK)
