MOST PROBABLE TOPICS- PART 14

1.Credit Rating Agencies

SEBI came up with set of wider disclosure norms for the Credit Rating Agencies (CRA).
It introduced a “probability of default” mechanism under which rating agencies have to disclose the probability of default for the issuers they rate by December 2019.
It also provides for formulation of Uniform Standard Operating Procedure for tracking and timely recognition of default.
The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 empowers SEBI to regulate CRAs operating in India.
SEBI (Credit Rating Agencies) Regulations, 1999
provide for a disclosure-based regulatory regime.
There are 7 Credit Rating Agencies registered with SEBI, viz. CRISIL, ICRA, CARE, India Ratings and Research, SMERA, Infomerics and Brickworks.

2. Alternative Investment Fund-AIF

The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of ₹25,000 crore to revive stalled affordable and middle-income housing projects across the country.
The fund will be set up as Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India (SEBI).
It will be managed by SBICAP Ventures Limited (SVL). It is a wholly owned subsidiary of SBI Capital Markets Ltd.

Eligible Projects

All affordable and middle-income housing projects that are
- - Net worth positive
  - Registered with the Real Estate Regulatory Authority (RERA) and
  - That have not been deemed liquidation-worthy.
Stuck projects classified as Non Performing Assets and those undergoing resolution under the National Company Law Tribunal will also be eligible for funding .

AIF means any fund established in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

Regulated by SEBI.

3. National Investment and Manufacturing Zones

NIMZ can be proposed with a land area of at least 5000 hectares.
Land will be selected by state governments and preference would be given to uncultivable land.
NIMZ will be managed by a Special Purpose Vehicle, headed by. Govt. officials and experts, including those of the environment.
To enable NIMZs to function as self-governing autonomous bodies, they will be declared by the state government as industrial townships under Article 243 Q (c) of the constitution.
NIMZs will be notified by the central government.

4. Payments Infrastructure Development Fund- PIDF

The 500 crores PIDF seeks to encourage acquirers to deploy Points of Sale (PoS) infrastructure for both physical and digital modes. (Especially in tier-3 to tier-6 centres and north eastern states.)
RBI will make an initial contribution of ₹250 crore to the PIDF, covering half of the fund.
The remaining contribution will be from card issuing banks and card networks operating in the country.
The PIDF will be governed through an Advisory Council and managed and administered by RBI.
The setting up of this fund is in line with the recommendations of the report of the committee on deepening of digital payments, chaired by Nandan Nilekani.
In 2019, RBI announced setting up of Acceptance Development Fund (ADF) to improve the last- mile payments network in rural India to transact digitally.
ADF aims to increase acceptance of debit and credit cards in tier III and VI cities.

5. Waterfall mechanism under Insolvency and Bankruptcy Code (IBC)

This mechanism under IBC gives priority to secured financial creditors over unsecured financial creditors.
It says that if a company is being liquidated, these secured financial creditors must be first paid the full extent of their admitted claim, before any sale proceedings are distributed to any other unsecured creditor.

6. Bad Bank

Bad bank is an Asset Reconstruction Company (ARC) that buys bad loans (NPAs) and other risky liabilities from banks which clears their balance sheet.
ARCs are specialised entities to facilitate securitisation and asset reconstruction of NPAs for earliest resolution and bringing the liquidity in the system.
Bad bank or PARA (Public Sector Asset Rehabilitation Agency).

7. API (Active Pharmaceutical Ingredient)

API or bulk drug is biologically active component of a drug product which is required to make medicines.
Presently, Pharmaceutical industry in India is third largest in the world by volume and exports to more than 200 countries in world.
However, domestic pharmaceutical companies are heavily dependent on imports for APIs.
Imports from China account for 68% of total imports of API.

8. Foreign Trade and Investment

India posted a trade surplus of $790 million in June, its first in over 18 years. India continues to import more from 9 out of top 10 major trade partners than it exports. (The exception being US.)
US remains India’s top trading partner for 2nd consecutive year in 2019-20, with a trade surplus of $17.42 billion. Goods dominate the bilateral trade-approximately 62% while 38% in services .
Top exports from India: precious metal and stone, pharmaceuticals, machinery, mineral fuels, and vehicles.-USA
Top imports to India: precious metal and stone, mineral fuels, aircraft, machinery, and organic chemicals.-USA
Country’s foreign exchange (Forex) reserves crossed the $500 billion mark for the first time.
Forex reserves include gold, SDRs (special drawing rights of the IMF) and foreign currency assets (capital inflows to the capital markets, FDI and external commercial borrowings).

9. Rules of Origin- ROO

They are criteria needed to determine national origin of a product.
They are used to implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures and determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential treatment.

10. WTO Disputes

WTO set up dispute panel at the request of Japan and Taiwan targeting the import duties imposed by India on mobile phones and some other ICT products.
India increased its import duties to 20%, which countries consider violative of WTO’s Information Technology Agreement (ITA) signed by India.
India has stated that these ICT products are part of WTO’s Information Technology Products (ITA-2) agreement, and India is not part of this pact.

11. World Investment Report- UNCTAD

The World Investment Report focuses on trends in foreign direct investment (FDI) worldwide, at the regional and country levels and emerging measures to improve its contribution to development.
India jumped from 12th position in 2018 to 9th in 2019 on the list of the World’s top FDI recipients.
Most of the investments were in the information and communication technology (ICT) and the construction industry.
Singapore was the largest source of FDI in India during the last fiscal followed by Mauritius, the Netherlands, the US, Cayman Islands, Japan and France.
US has the largest inflow of FDI followed by China and Singapore.

12. Directorate of Revenue Intelligence- DRI

The DRI is the apex anti-smuggling agency of India, working under the Central Board of Indirect Taxes & Customs, Ministry of Finance, Government of India.
It is tasked with detecting and curbing smuggling of contraband, including drug trafficking and illicit international trade in wildlife and environmentally sensitive items, as well as combating commercial frauds related to international trade and evasion of Customs duty.
The DRI has also been designated as the lead agency for Anti-Smuggling National Coordination Centre (SCord).
It was constituted on 4^th December, 1957.

13. Enforcement Directorate

It is a Multi Disciplinary Organization mandated with the task of enforcing the provisions of two special fiscal laws – Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA).
The origin of this Directorate goes back to 1st May, 1956, when an ‘Enforcement Unit’ was formed, in Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA ’47).
In the year 1957, this Unit was renamed as ‘Enforcement Directorate’.

14. Changes in the Prevention of Money Laundering Act

Union government has issued a notification on certain changes in the Prevention of Money Laundering Act (PMLA).
The amendment seeks to treat money laundering as a stand-alone crime.
Till now Money Laundering was not an independent crime; rather depended on another crime, known as the ‘predicate offence’ or ‘scheduled offence’, the proceeds of which are made the subject matter of crime of money laundering.
It also expands the ambit of “proceeds of crime” to those properties which “may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence.
The most crucial amendments are the deletion of provisions in sub-sections (1) of Section 17 (Search and Seizure) and Section 18 (Search of Persons) which required the pre-requisite of an FIR or charge sheet by other agencies that are authorised to probe the offences listed in the PMLA schedule.
An explanation is added to Section 45 that clarifies that all PMLA offences will be cognisable and non-bailable.Therefore, ED will be empowered to arrest an accused without a warrant, subject to certain conditions.

PMLA-2002

Prevention of Money-Laundering Act, 2002 (PMLA)
- It forms the core of the legal framework put in place by India to combat Money Laundering.
- The provisions of this act are applicable to all financial institutions, banks(Including RBI), mutual funds, insurance companies, and their financial intermediaries.
- PMLA (Amendment) Act, 2012
  - Adds the concept of ‘reporting entity’ which would include a banking company, financial institution, intermediary etc.
Financial Intelligence Unit-IND: It is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

15. FPOs

It is a Producer Organisation (PO) where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for the promotion of FPOs.
FPOs help in the collectivization of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues.
Members of the FPO will manage their activities together in the organization to get better access to technology, input, finance and market for faster enhancement of their income.

16. Escrow Account

An escrow account is a third party account where funds are kept before they are transferred to the ultimate party. It provides security against scams and frauds especially with high asset value and dispute-prone sectors like Real Estate.
Escrow accounts are a financial instrument in which an asset or escrow money is held by a third party on behalf of 2 other parties that are in the process of completing a transaction. Escrow accounts can hold money, securities, funds, and other assets.

17. RBI expands priority sector lending categories; includes start-ups

The Priority Sector Lending (PSL) guidelines have been comprehensively reviewed and revised to align it with emerging national priorities and bring sharper focus on inclusive development.
The Reserve Bank has expanded the scope of priority sector lending to include start-ups funding up to Rs 50 crore, and loans to farmers for installation of solar plants and compressed biogas plants.
According to the release, loans to farmers for installation of solar power plants for solarisation of grid-connected agriculture pumps and loans for setting up Compressed Bio Gas (CBG) plants have been included as fresh categories eligible for finance under priority sector.
The revised guidelines, the RBI said, also seeks to address the issues concerning regional disparities in the flow of priority sector credit.
Central bank said that higher weightage have been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.

18. Indian Depository Receipt (IDR)

An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (DD) against the underlying equity of issuing company.
DD is a custodian of securities registered with the Securities and Exchange Board of India.
It enables foreign companies to raise funds from the Indian securities Markets.
First IDR was introduced in 2010.

19. Qualified Institutional Placements- QIPs

Recently, SEBI has allowed companies to raise funds at shorter intervals, by changing qualified institutional placements (QIPs) rules.
QIP is a capital raising tool wherein a listed company can issue equity shares, fully and partly convertible debentures, or any security other than warrants that are convertible into equity shares.
Unlike in an Initial public offering (IPO) or an Follow on Public Offer (FPO), only institutions or qualified institutional buyers (QIBs) can participate in a QIP.

20. Animal Husbandry Infrastructure Development Fund- AHIDF

Cabinet Committee on Economic Affairs has recently approved the establishment of Animal Husbandry infrastructure Development Fund worth Rs. 15000 crores.
AHIDF would facilitate investments in establishment of infrastructure for dairy and meat processing and establishment of animal feed plant in the private sector.
Implementing agency: Department of Animal husbandry, dairy and fisheries.
Minimum 10% margin money to be contributed by beneficiary. The balance 90% would be the loan component to be made available by scheduled banks.

21. PM Formalization of Micro Food Processing Enterprises Scheme

It aims to provide financial, technical and business support for upgradation of existing micro food processing enterprises.
It is a centrally sponsored scheme to be implemented over a period of five years from 2020-21 to 2024-25 with an outlay of Rs 10,000 crore.
60:40 ratios between Central and State Governments, in 90:10 ratios with NE and the Himalayan States, 60:40 ratio with UTs with the legislature and 100% by Centre for other UTs.
The Scheme adopts One District One Product (ODODP) approach to reap the benefit of scale in terms of procurement of inputs, availing common services and marketing of products.

Why need such a scheme?

The unorganized food processing sector comprising nearly 25 lakh units contribute to 74% of employment in the food processing sector.
Nearly 66% of these units are located in rural areas and about 80% of them are family-based enterprises supporting livelihood rural household and minimizing their migration to urban areas.

22. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 – New Guidelines on Contract Farming

to provide a national framework on farming agreements that protects and empowers farmers to engage with wholesalers, exporters or large retailers etc.
It aims at facilitating contract farming, where a private buyer contracts to purchase a crop at a certain price at the beginning of a season, transferring risk of market unpredictability from farmer to corporate sponsor.

Guidelines

Agreements should be written in local language.
Farming agreement should be for a minimum of one cropping season to a maximum of five years.
Agreement should clearly indicate the nature of farming, size of land area, address of the farmer etc.
Agreement can be with farmers (having land title), farmer producer organisation and also sharecropper.
Sponsor would be responsible for any loss or damage due to inputs supplied to farmers.
Farmers cannot use the inputs provided by the sponsor for anything other than growing the produce agreed upon.
Sponsor is not permitted to gain or enjoy ownership rights.

23. Fish Cryobanks

Ministry for Fisheries, Animal Husbandry and Dairying has announced setting up of fish cryobanks.
This would be the first time in the world when “Fish Cryobank” will be established.
It will facilitate all time availability of fish sperms of desired species to fish farmers.
National Fisheries Development Board in collaboration with National Bureau of Fish Genetic Resources will take up the work to establish Fish Cryobanks.

24. Agreement for Emergency Response Programme- between India and World Bank

Under this, WB aims to address the immediate liquidity and credit needs of some 1.5 million viable MSMEs impacted by COVID-19.
It will help MSME sector by unlocking liquidity, strengthening non-banking financial companies and small finance banks and enable inclusive access to financing.
The loan has a maturity of 19 years, including a 5-year grace period.

25. Gramyodyog Vikas Yojana

The Khadi and Village Industries Commission (KVIC), a statutory organisation under the Ministry of Micro Small and Medium Enterprises (MSME), will provide training, and assist artisans working in this area, with Agarbatti manufacturing machines- PPP mode.

Share this post: