TABLE OF CONTENT
A. GS1 Related B. GS2 Related Polity 1. Regulator turns up heat on erring CAs 2. Will decide in a month-and-a-half on commercial release of GM mustard crop, Centre tells SC International Relations 1. Uncertainty ahead: On Pakistan political crisis C. GS3 Related Economics 1. New gold bond scheme may draw more investors 2. Reserve Bank may cut rate at policy review meet 3. RBI changes norms for appointment of auditors D. GS4 Related E. Concepts-in-News: Related Concepts to Revise/Learn F. Bills/Acts/Schemes/Orgs in News G. UPSC Prelims Practice Questions H. UPSC Mains Practice Questions
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1. Regulator turns up heat on erring CAs
- The Institute of Chartered Accountants of India (ICAI) has said 4,445 complaints have been registered against CAs as on June 30 this year, and punishment has been awarded in 402 cases until March 2017.
- The CA regulator, however, said it was pushing for amendments to the norms to help expedite action against wrongdoers in the profession.
Context
- This development comes within a few weeks of Prime Minister Narendra Modi indicating stringent measures against those involved in money laundering — including through shell companies — following demonetisation, and asking the ICAI to hasten action against CAs “helping tax evaders.”
- The ICAI had awarded punishment in 402 cases (under the old and new disciplinary mechanisms) to the erring members.
- The action ranged from issuing letter of caution to permanent removal from the ‘Register of Members’ with or without fine, depending upon the gravity of the charges established against the members.
- The ICAI is under the Corporate Affairs Ministry’s administrative control.
- There is a need for amending the concerned rules/regulations to expedite disciplinary action against the wrongdoers.
- The ICAI (Council) had submitted interim recommendations to a High Level Committee formed by the Corporate Affairs Ministry for strengthening the disciplinary mechanism.
- Amendments to the CA Act would require parliamentary nod, adding that the Centre had the power to amend the Rules including the Disciplinary Rules (framed under the CA Act).
2. Will decide in a month-and-a-half on commercial release of GM mustard crop, Centre tells SC
In news
- The Union government on Monday told the Supreme Court that it would take a decision in a month-and-a-half on allowing the commercial rollout of genetically modified (GM) mustard crop in the country.
- Mustard is one of India’s most important winter crops, which is sown between mid-October and late November.
GM mustard (DMH-11) What proponents are saying? Arguments of opponents of the commercial release Way forward
Category: INTERNATIONAL RELATIONS
1. Uncertainty ahead: On Pakistan political crisis
- The disqualification of Prime Minister Nawaz Sharif from holding public office, by the Pakistan Supreme Court in the Panama Papers case, leaves a huge political vacuum in the country.
- The Supreme Court invoked a controversial Article of the Constitution that requires politicians to be “honest” and “righteous”.
- The court ruled that Mr. Sharif was dishonest in failing to disclose in his 2013 election nomination papers his association with a UAE-based company and therefore was unfit to continue in office.
- The court also referred money-laundering allegations against Mr. Sharif and his children to the National Accountability Bureau, the anti-corruption regulator.
- All this is happening at a time when Pakistan is coming under increased pressure from the United States to act against militants, and while border tensions with India and Afghanistan continue to remain high.
1. New gold bond scheme may draw more investors
In news
- The Government announced a few changes in its Sovereign Gold Bond (SGB) Scheme recently.
- The primary change was the increase in the limit to 4 kg (from 0.5kg) for individuals, HUF and 20 kg for Trusts.
- This was probably done to encourage high net-worth individuals, rich farmers as well as trusts to invest in these bonds.
Background
- The basic premise is that most Indians believe in gold as a time-tested and safe asset class and prefer it over other forms of investment.
- The sovereign gold bond initially introduced by the Government in 2015 has achieved only limited success mostly because of its unrealistic pricing pattern vis-a-vis the international price of bullion.
- While the Government introduced these bonds to help reduce India’s over dependence on gold imports, the move was also aimed at changing the habits of Indians from saving in physical form of gold to a paper form with Sovereign backing.
Annual consumption of gold in India
- Annual consumption of gold in India is in the range of 700-800 tonnes, almost all of which is imported. Of this, approximately 500-600 tonnes is bought by consumers as jewellery for cultural reasons (mainly for weddings).
- The balance is in the form of gold bars and coins for savings or investment purposes, which is what the Government hopes to convert to paper form so that both are served — investors are happy as long as they earn some returns and capital appreciation at the time of redemption, as well as it helps reduce an equivalent amount of physical gold imports.
Some suggestions to ensure the success of the scheme
- To ensure further success, the Government should allow mass channels such as gold loan Non-Banking Finance Companies (NBFCs) to also market it.
- Offering gold loan against Sovereign Gold Bonds would help popularise the product from a consumer angle.
2. Reserve Bank may cut rate at policy review meet
- The Reserve Bank of India (RBI) is expected to reduce the key policy rate or the repo rate by 25 basis points (bps) to 6% in at its monetary policy review meeting scheduled for August 2 while maintaining neutral stance on interest rates.
- If the RBI does cut repo rate, this could only be the second such instance by the monetary policy committee (MPC) since it was established in October 2016.
- The expectation of a rate cut is mainly due to decreasing retail inflation,which eased to 1.54% in June — a record low, after reading 2.18% in May.
- The benign consumer inflation reading for successive months has made economists to believe that inflation may have fallen to 4% on a durable basis.
Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, government approved securities before providing credit to the customers. Statutory Liquidity Ratio is determined by Reserve Bank of India maintained by banks in order to control the expansion of bank credit. The SLR is determined by a percentage of total demand and time liabilities. Time Liabilities refer to the liabilities which the commercial banks are liable to pay to the customers after a certain period mutually agreed upon, and demand liabilities are such deposits of the customers which are payable on demand. An example of time liability is a six month fixed deposit which is not payable on demand but only after six months. An example of demand liability is a deposit maintained in saving account or current account that is payable on demand through a withdrawal form such as a cheque. Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation. The central bank takes the contrary position in the event of a fall in inflationary pressures. Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country. Repo and reverse repo rates form a part of the liquidity adjustment facility. Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely. Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL). Bank rate is the rate charged by the central bank for lending funds to commercial banks. Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa. Market Stabilization scheme (MSS) is a monetary policy intervention by the RBI to withdraw excess liquidity (or money supply) by selling government securities in the economy. The MSS was introduced in April 2004. Main thing about MSS is that it is used to withdraw excess liquidity or money from the system by selling government bonds. Open market operations (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system, facilitated by the RBI.
3. RBI changes norms for appointment of auditors
In news
- An audit firm will not be eligible for appointment as statutory central auditor (SCA) of a bank for six years after completing its four-year tenure in that particular private or foreign bank.
- This follows the decision of the Reserve Bank of India (RBI) to modify the rest period in the appointment of SCAs by banks.
Earlier position
- Hitherto, an audit firm, subject to its fulfilling the prescribed eligibility norms, was allowed to continue as the SCA for a particular bank for a period of four years, and, thereafter, it was compulsorily rested for a period of two years.
It will help improve corporate governance
- The rest and rotation policy in appointment of SCAs for banks had been mandated to ensure that the audit functions were looked at afresh.
- The policy also aims to deter the auditors and auditee from establishing a comfortable relationship that may lead to compromise, in strict adherence to audit principles.
- The modification of rest period was done to ensure that the ‘rest and rotation policy’ was followed in letter and spirit. The new guidelines are also applicable to foreign banks.
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Nothing here for Today!!!
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G. Practice Questions for UPSC Prelims Exam
Question 1. The rate at which the central bank of a country (Reserve Bank of India in case
of India) lends money to commercial banks in the short term in the event of any shortfall of
funds is called _________.
- Repo rate
- Reverse repo rate
- Marginal standing facility
- Bank rate
Question 2. Monetary policy intervention by the RBI to withdraw excess liquidity (or money
supply) by selling government securities in the economy is called ________.
- Open market operations
- Liquidity Adjustment Facility
- Market Stabilization scheme
- Marginal standing facility
See
Question 3. Mustard is a _______.
- Kharif crop
- Rabi crop
- Zaid crop
- Both Kharif and rabi crop
See
Question 4. Consider the statements about Sovereign Gold Bond scheme:
- Bonds can be used as collateral for loans.
- The capital gains tax arising on redemption of SGB to an individual has been exempted.
- The Bonds will be eligible for Statutory Liquidity Ratio purposes.
Which of the above statements is/are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
See
Question 5. The statutory Genetic Engineering Appraisal Committee (GEAC) is constituted
under _______.
- Air (Prevention and Control of Pollution) Act, 1981
- The Water (Prevention and Control of Pollution) Act, 1974
- Environment Protection Act, 1986
- None
See
- Craze for gold in Indian has led to surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Bond scheme.
- Discuss the various issues involved in commercial release of GM mustard crop.
Also, check previous Daily News Analysis
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