Prelims Booster

7th March – Prelims Booster

Yes Bank placed under moratorium

Private sector lender Yes Bank has been placed under moratorium for a month by the government after severe deterioration of its financial position.

Details –

  • The Reserve Bank of India has superseded the board of the bank and has appointed a new administrator.
  • Deposit withdrawals have been capped at ₹50,000, but exceptions will be made for depositors who need money for treatment, education, marriage or other ceremonies and any other unavoidable emergency.

About Prompt Corrective Action –

Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.

How is it applied?

The PCA framework deems banks as risky if they slip below certain norms on three parameters — capital ratios, asset quality and profitability.

It has three risk threshold levels (1 being the lowest and 3 the highest) based on where a bank stands on these ratios.

  1. Banks with a capital to risk-weighted assets ratio (CRAR) of less than 10.25 per cent but more than 7.75 per cent fall under threshold 1.
  2. Those with CRAR of more than 6.25 per cent but less than 7.75 per cent fall in the second threshold.
  3. In case a bank’s common equity Tier 1 (the bare minimum capital under CRAR) falls below 3.625 per cent, it gets categorised under the third threshold level.

Other criteria – Banks that have a net NPA of 6 per cent or more but less than 9 per cent fall under threshold 1, and those with 12 per cent or more fall under the third threshold level. On profitability, banks with negative return on assets for two, three and four consecutive years fall under threshold 1, threshold 2 and threshold 3, respectively.

What happens when PCA is invoked?

Depending on the threshold levels, the RBI can place restrictions on dividend distribution, branch expansion, and management compensation. Only in an extreme situation, breach of the third threshold, would identify a bank as a likely candidate for resolution through amalgamation, reconstruction or winding up.

What is ‘Capital Adequacy Ratio’?

  • The capital adequacy ratio (CAR) norm has been the last provision to emerge in the area of regulating the banks in such a way that they can sustain the probable risks and uncertainties of lending.
  • The capital adequacy ratio is the percentage of total capital to the total risk—weighted assets.
  • CAR, a measure of a bank’s capital, is expressed as a percentage of a bank’s risk weighted credit exposures.
  • Also known as ‘Capital to Risk Weighted Assets Ratio (CRAR)’ this ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.

India among least-free democracies, says study

India has become one of the world’s least free democracies, according to a global survey.

What does the study say?

  • The Freedom in the World 2020 report ranks India at the 83rd position, along with Timor-Leste and Senegal.
  • India’s score fell by four points to 71, the worst decline among the world’s 25 largest democracies this year.
  • The annulment of autonomy and the subsequent shutdown of Kashmir, the National Register of Citizens and the Citizenship (Amendment) Act, as well as the crackdown on mass protests have been listed as the main signs of declining freedom in the report, released by Freedom House, a US-based watchdog.

International Conference on Nano Science and Nano Technology (ICONSAT)

The International Conference on Nano Science and Nano Technology (ICONSAT) under the aegis of Nano Mission, Department of Science and Technology (DST) is being held at Kolkata focusing on the recent advances in this frontier research field.

Mission on Nano Science and Technology (Nano Mission) –

  • It was launched in the year 2007 as an “umbrella capacity-building programme”.
  • The Mission’s programmes target all scientists, institutions and industry in the country.
  • It seeks to strengthen activities in nano science and technology by promoting basic research, human resource development, research infrastructure development, international collaborations, among others.
  • It is anchored in the Department of Science and Technology and steered by a Nano Mission Council chaired by an eminent scientist.

Afghan war crimes probe to go on : ICC

International war crimes judges ruled that a probe into wartime abuses in Afghanistan must go ahead, including looking into possible atrocities committed by U.S. forces, as they overturned a previous court ruling.

Background –

The prosecutors alleged in a 2017 report they have enough information to prove U.S. forces “committed acts of torture, cruel treatment, outrages upon personal dignity, rape and sexual violence against conflict-related detainees in Afghanistan and other locations, principally in the 2003-2004 period.”

About ICC –

  • The International Criminal Court (ICC), located in The Hague, is the court of last resort for prosecution of genocide, war crimes, and crimes against humanity.
  • It is the first permanent, treaty based, international criminal court established to help end impunity for the perpetrators of the most serious crimes of concern to the international community.
  • Its founding treaty, the Rome Statute, entered into force on July 1, 2002.
  • The ICC has the jurisdiction to prosecute individuals for the international crimes of genocide, crimes against humanity, and war crimes.
  • The ICC is intended to complement existing national judicial systems and it may therefore only exercise its jurisdiction when certain conditions are met, such as when national courts are unwilling or unable to prosecute criminals or when the United Nations Security Council or individual states refer situations to the Court.
  • NOTE – India is not a party to the Rome Statute, hence, ICC has no jurisdiction over India or its citizens. Similarly, the US and China are not party to it too.

Daily MCQs

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