Daily Current Affairs : 25th July 2020

Daily Current Affairs for UPSC CSE

Topics Covered

1. Rajasthan Crisis
2. Currency Swap
3. Financial Stability Report
4. Facts for Prelims

1 . Rajasthan Crisis

Background

• On July 14, Rajasthan Legislative Assembly speaker, CP Joshi issued notices for disqualification to 19 MLAs on a plea filed by the Congress chief whip, citing the MLAs’ absence from successive Congress Legislature Party (CLP) meetings and a “conspiracy to bring down the government.”
• The  ‘rebel’ Congress leader and Deputy Chief Minister Sachin Pilot and 18 other MLAs thereafter approached the Rajasthan High Court, challenging the constitutional validity of para 2(1)(a) of the Tenth Schedule, which is the anti-defection law. According to this “voluntarily giving up membership of a political party” liable for disqualification.
• The MLAs contended that they cannot be made liable for disqualification, merely for disagreeing with the decisions and policies of some leaders outside the Assembly. It has also been contented that the provision infringes their right to free speech as a member of the legislative Assembly.

Rajasthan High Court’s stand

• The High Court has ordered status quo on the disqualification notices, which means that speaker C.P. Joshi will not be able to conduct disqualification proceedings against the rebel MLAs.
• The High Court’s order has gone against several Supreme Court verdict in Kihoto Hollohan V.  Zachillhu Case (1992).
• The Rajasthan High Court’s order borders on judicial indiscipline.
• The order does not give any reason for admitting the petition and overruling objections to its admissibility, except for saying legal questions have arisen, including one on the validity of a sub-clause in the Tenth Schedule.

Supreme Court’s verdict in the Kihoto Hollohan V.  Zachillhu Case (1992)

• The Constitutional courts cannot judicially review disqualification proceedings under the Tenth Schedule (anti-defection law) of the Constitution until the Speaker or Chairman makes a final decision on merits.
• The exception can be made in respect of cases where disqualification of suspension is imposed during the pendency of the proceedings and such disqualification or suspension is likely to have grave, immediate and irreversible repercussions and consequence.
• The scope of judicial review against an order of a Speaker or Chairman in anti-defection proceedings is restricted to jurisdictional errors like violation of constitutional mandate, mala fides, non-compliance with rules of natural justice and perversity.

Speaker’s stand

• A day after the Rajasthan High Court asked the Rajasthan Assembly Speaker C P Joshi  to defer action on the disqualification notices issued, he moved the Supreme Court
• The speaker sought stay on the High Court’s direction and stated that it was “illegal, perverse and in derogation of the powers of the Speaker under the Constitution”.
• The speaker maintained that the show cause notice issued to the MLAs were on a complaint filed by the Congress chief whip which is the standard practice.
• The speaker cited the 1992 SC verdict and argued that the decision was totally in the domain of the Speaker to decide on disqualification of members, and no court can intervene in between
• The proceedings under the Tenth Schedule before the Speaker are proceedings of the legislature and as such cannot interfered with as envisaged under Article 212 read with para 6(2) of the Tenth Schedule

Supreme Court’s stand

• The Supreme Court refused Rajasthan Assembly Speaker C.P. Joshi’s plea to stop the State’s High Court from deciding the validity of the anti-defection notices he issued to former Deputy Chief Minister Sachin Pilot and 18 dissident Congress MLAs.
• The Supreme Court questioned about the shutting down of legislator’s “voice of dissent” with the threat of disqualification.

Conclusion

• The High Court is now venturing to find out whether Para 2(1)(a), which deals with disqualifying lawmakers who “voluntarily give up membership” of their party, has been examined by the apex court from the point of view of “intra-party democracy”.

2 . Currency Swap

Context : The Reserve Bank of India has agreed to a $400 million currency swap facility for Sri Lanka till November 2022

About the News

• The RBI’s action follows a recent bilateral ‘technical discussion’ on rescheduling Colombo’s outstanding debt repayment to India.
• The meeting, in which officials from the Ministry of External Affairs, Ministry of Finance, and the EXIM Bank interacted with representatives of the Sri Lankan government, came five months after Sri Lankan Prime Minister Mahinda Rajapaksa had sought a loan moratorium, during his visit to New Delhi.
• Following the outbreak of COVID-19 in the region, India had proposed a virtual meeting to discuss the request. Sri Lanka owes $960 million to India.

About Currency Swap

• In the swap arrangement, a country provides dollars to a foreign central bank, which, at the same time, provides the equivalent funds in its currency to the former, based on the market exchange rate at the time of the transaction.
• The parties agree to swap back these quantities of their two currencies at a specified date in the future, which could be the next day or even two years later, using the same exchange rate as in the first transaction. In Sri Lanka’s case, it’s more than two years.
• The RBI also offers similar swap lines to central banks in the SAARC region within a total corpus of $2 billion. Under the framework for 2019-22, the RBI will continue to offer a swap arrangement within the overall corpus of $2 billion. Other countries can withdraw funds in the US dollar, the euro, or the Indian rupee. This facility originally came into operation on November 15, 2012 to provide a backstop line of funding for short-term foreign exchange liquidity requirements or balance of payment crises until longer term arrangements were made.
• India already has a $75 billion bilateral currency swap line with Japan, which has the second highest dollar reserves after China.

Benefits

• These swap operations carry no exchange rate or other market risks, as transaction terms are set in advance. The absence of an exchange rate risk is the major benefit of such a facility.
• This facility provides the country, which is getting the dollars, with the flexibility to use these reserves at any time in order to maintain an appropriate level of balance of payments or short-term liquidity.

3 . Financial Stability Report

Context : While the financial system “remains sound”, gross non-performing asset (NPA) ratio of all commercial banks is likely to increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021 under the baseline scenario in the wake of the disruption caused by the Covid-19 pandemic, the Reserve Bank of India (RBI)

About the Report

• Financial Stability Report (FSR) that “reflects the collective assessment of the sub-committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system in the context of contemporaneous issues relating to development and regulation of the financial sector.”
• It is released by RBI

Key highlights of the Report

• In response to COVID-19, a combination of fiscal, monetary and regulatory interventions on an unprecedented scale has ensured normal functioning of financial markets.
• The overleveraged non-financial sector, simmering global geopolitical tensions, and economic losses on account of the pandemic are major downside risks to global economic prospects.
• Actions undertaken by financial sector regulators and the Government to mitigate the impact of COVID-19 eased operational constraints and helped in maintaining market integrity and resilience in the face of severe risk aversion.
• Bank credit, which had considerably weakened during the first half of 2019-20, slid down further in the subsequent period with the moderation becoming broad-based across bank groups.
• The capital to risk-weighted assets ratio (CRAR) of Scheduled Commercial Banks (SCBs) edged down to 14.8% in March 2020 from 15.0% in September 2019 while their gross non-performing asset (GNPA) ratio declined to 8.5% from 9.3% and the provision coverage ratio (PCR) improved to 65.4 from 61.6% over this period.
• Macro stress tests for credit risk indicate that the GNPA ratio of all SCBs may increase from 8.5% in March 2020 to 12.5% by March 2021 under the baseline scenario; the ratio may escalate to 14.7% under a very severely stressed scenario.
• Network analysis reveals that total bilateral exposures among entities in the financial system declined marginally during 2019-20; with the inter-bank market continuing to shrink and with better capitalisation of public sector banks (PSBs), there would be reduction in contagion losses to the banking system under various scenarios in relation to a year ago.
• Going forward, the major challenges include pandemic-proofing large sections of society, especially those that tend to get excluded in formal financial intermediation

4 . Facts for Prelims

AuditOnline

• AuditOnline, an application developed by the Ministryf Panchayati Raj to conduct an online audit of 20 per cent of the estimated 2.5 lakh gram panchayats (GPs) across the country for the current financial year.

Indian Bioresource Information Network (IBIN)

• The Wildlife Institute of India (WII), along with the Indian Institute of Remote Sensing (IIRS) and the Government of India’s Department of Biotechnology, has begun a study of the migration of the pied cuckoo from Africa to India and back, by tagging two of the birds with satellite transmitters.
• This is the first study in the country that seeks to trace and observe the migratory routes of the pied cuckoo. Equally importantly, it will help gather data and information on climate change, scientists involved in the study say.
• The pied cuckoo migration study is part of a larger project called the Indian Bioresource Information Network (IBIN) funded by the Government of India’s Department of Biotechnology (DBT), which aims to put relevant Indian bioresources information online.
• Indian Bioresource Information Network (IBIN) is being developed as a distributed national infrastructure to serve relevant information on diverse range of issues of bioresources of the country to a range of end users.
• Its major goal is to network and promote an open ended, co-evolutionary growth among all the digital databases related to biological resources of the country and to add value to the databases by integration.
• Indian Bioresource Information Network (IBIN) is designed to serve relevant information on bioresources of the country to the professionals involved in bio-prospecting, marketing, protecting bio-piracy and the conservation of bioresources.
• IBIN is proposed to be uniquely placed as a single portal data provider on India’s bioresource – plant, animal, marine, spatial distribution and microbial resources.