Daily Current Affairs for UPSC CSE
Topics Covered
- EQUIP Project
- Restructuring of statistical systems
- New RBI Framework for struggling NBFC
- HR Khan Report
- Facts for Prelims : Voluntary Retention Route
1 . EQUIP Project
Context : In what could be one of the first new initiatives of the second act of the NDA government, the Ministry of Human Resource Development plans to launch an ambitious Rs. 1.5 lakh crore action plan to improve the quality and accessibility of higher education over the next five years.
About EQUIP Project
- EQUIP stands for the Education Quality Upgradation and Inclusion Programme and was crafted by ten committees led by experts to bring transformational change in the higher education system.
- The ten committees have drafted strategy to improve access to higher education, especially for underserved communities; improve the gross enrolment ration; improve teaching and learning processes; build educational infrastructure; improve the quality of research and innovation; use technology and online learning tools; and work on accreditation systems, governance structures and financing.
- EQUIP is also being described as the implementation plan for the National Education Policy which is likely to be released soon, after five years of repeated delays and extensions. The last NEP was released in 1986, with a revision in 1992.
2 . Restructuring of Statistical Systems
Context : Govt decided to merge the National Sample Survey Office (NSSO) with the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation (MoSPI).
About the Restructuring
- A new overarching body National Statistical Office will be created by merging NSSO and CSO
- Proposed NSO would be headed by Secretary (Statistics and Programme Implementation), but skips any mention of National Statistical Commission (NSC), which has been the overseeing body for all the statistical work done in the country.
- The order for restructuring the Indian official statistics system has been issued “in order to streamline and strengthen the present nodal functions” of the ministry and “to bring in more synergy by integrating its administrative functions within the ministry.”
3 . New RBI Framework for Struggling NBFC
Context : In a bid to strengthen and raise the standard of asset-liability management (ALM) framework of struggling non-banking financial companies (NBFCs), the Reserve Bank of India has proposed stringent norms,
What is Asset Liability Management
- Asset liability management (ALM) can be defined as the comprehensive and dynamic framework for measuring, monitoring and managing the financial risks associated with changing interest rates, foreign exchange rates and other factors that can affect the liquidity.
- ALM relates to management of structure of balance sheet (liabilities and assets) in such a way that the net earning from interest is maximised within the overall risk-preference (present and future) of the institutions.
- Thus the ALM functions includes the tools adopted to mitigating liquidly risk, management of interest rate risk / market risk and trading risk management.
- Through ALM banks try to match the assets and liabilities in terms of Maturities and Interest Rates Sensitivities so as to minimize the interest rate risk and liquidity risk.
About the New Norms
- It is to be adopted by all deposit-taking and non-deposit taking NBFCs with an asset size of Rs 100 crore and above and all Core Investment Companies registered with the RBI.
- The new norms include introduction of liquidity coverage ratio (LCR), granular maturity buckets in the liquidity statements and tolerance limits, liquidity risk monitoring tool and adoption of the “stock” approach to liquidity.
- RBI draft proposes to introduce liquidity coverage ratio for all deposit taking NBFCs and non-deposit taking NBFCs with an asset size of Rs 5,000 crore and above
- NBFCs will have to maintain minimum high quality liquid assets of 100 per cent of total net cash outflows over the following 30 calendar days.
- Liquidity buffer in terms of an LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient high quality liquid asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days.
- RBI has also decided to extend relevant principles covering other aspects of monitoring and measurement of liquidity risk like off-balance sheet and contingent liabilities, stress testing, intra-group fund transfers, diversification of funding, collateral position management and contingency funding plan.
Importance & Issues faced by NBFC
- NBFCs play an important role in the financial system of the country, particularly in delivering credit to the last mile, including the retail as well as MSME sectors.
- Issues faced by NBFC Sector : Credit squeeze, overleveraging, excessive concentration, massive mismatch between assets and liabilities and misadventures by some large entities like the IL&FS group.
- NBFCs’ ability to perform their role effectively and efficiently requires them to be financially resilient, well-regulated and properly governed so that they retain the confidence of all their stakeholders including their lenders and borrowers
4 . HR Khan Report
Context : A SEBI-constituted panel headed by HR Khan has proposed significant changes to norms governing foreign portfolio investors, including simplified registration requirements for certain categories and barring entities that fail to furnish beneficial ownership details.
Details of the Report
- The group, headed by former RBI deputy governor H R Khan, has also pitched for liberalised investment cap, review of prohibited sectors for foreign investment for FPIs, permitting FPIs for off-market transactions and review of restriction on sovereign wealth funds for investment in corporate debt securities.
- Among others, it has suggested liberalisation of norms as well as simplified registration requirement for those FPIs coming under category III.
- Further, the group has called for removal of ‘opaque structure’ definition for FPIs.
- The panel noted that FPIs could be allowed to invest up to applicable sectoral limit on an aggregate basis after adjusting for investments made directly or indirectly under the FDI route.
- Panel has also recommended pension funds to be considered for Category I FPIs
- The committee has also proposed alignment of regulations for FPIs and Alternate Investment Funds (AIFs) and the harmonisation between investment restrictions in FPI regulations and Foreign Exchange Management Act (FEMA).
5 . Facts for Prelims
Voluntary Retention Route
- Voluntary Retention Route (VRR) is a special route to encourage FPIs willing to make long-term investments in debt.
- According to VRR foreign portfolio investors will be exempt from regulatory provisions, but will have to voluntarily commit to retain in India a minimum required percentage of their investments for a period of their choice.
- Any entity registered as a foreign portfolio investor with Sebi is eligible to participate through VRR.
- The total amount that may be invested through the route will be stipulated by RBI from time to time.
- The minimum retention period shall be three years. During this period, FPIs shall maintain a minimum of 75 percent of the allocated amount in India.
- Voluntary retention route (VRR), which allows parking funds in both government securities as well as corporate debt.