5 April 2024

• Banking: RBI completes 90 years of regulatory stewardship. The anniversary is an occasion to examine India's banking transformation since liberalisation.
• Economy: RBI gross NPAs at a 10-year low of 3.9 per cent; UPI processes over 13 billion transactions monthly.
• Governance: RBI's successive reform committees mapped the path from nationalised-bank dominance to a diversified financial system.
• Technology: India's digital payments market projected to triple to 10 trillion dollars by 2026.
• Defence: India delivered its first tranche of BrahMos cruise missiles to an allied nation (Philippines deal, signed January 2022).

GS area: Economy (banking sector, monetary policy)

The Reserve Bank of India was established on 1 April 1935 under the Reserve Bank of India Act, 1934. Its 90th year is an occasion to assess the institution's journey from colonial currency board to modern central bank.

Key facts:

• Original mandate: Issued currency, maintained exchange rate, and acted as banker to the government.
• Nationalisation (1949): The RBI moved from private ownership to state control under the Reserve Bank of India (Transfer to Public Ownership) Act.
• Acts RBI administers: RBI Act 1934, Banking Regulation Act 1949, FEMA 1999, Payment and Settlement Systems Act 2007, SARFAESI Act 2002, and Credit Information Companies Regulation Act 2005.
• Flexible Inflation Targeting (FIT): Adopted in 2016. The government sets the CPI target in consultation with RBI every five years. Current target: 4 per cent with a tolerance band of plus or minus 2 percentage points.
• Gross NPAs: Reduced to a 10-year low of 3.9 per cent of advances (March 2023) through the Prompt Corrective Action (PCA) framework and the Insolvency and Bankruptcy Code.
• Payment infrastructure: RBI established RTGS, NEFT, and UPI. UPI is now India's primary retail payment channel.
• Recent stress points: YES Bank bailout, IL&FS crisis, and Paytm Payments Bank restrictions each revealed gaps in RBI's supervisory reach.

Key reform committees:

• Raghuram Rajan Committee (2008): Proposed the Financial Stability and Development Council (FSDC) as an apex body for coordinating regulation.
• Nachiket Mor Committee (2014): Recommended universal financial inclusion through differentiated banking licences.
• P.J. Nayak Committee (2014): Recommended governance reforms in public sector banks.
• Damodaran Committee (2011): Reviewed customer service standards in banks.

Static linkage: monetary policy, financial sector regulation, banking history.

GS area: International Relations, Internal Security

India delivered the first batch of BrahMos supersonic cruise missiles to the Philippines, completing the initial tranche of a contract signed in January 2022.

Key facts:

• BrahMos specifications: Supersonic (Mach 2 to 3), range of 290 km, uses "fire and forget" guidance requiring no mid-flight correction.
• Contract value: 375 million dollars.
• BrahMos is a joint venture between India's DRDO and Russia's NPO Mashinostroyeniya. The name combines Brahmaputra and Moskva (Moscow).
• Strategic significance for Philippines: The Philippines faces contested waters in the South China Sea. BrahMos gives it a land-based anti-ship deterrent.
• India's export reach: India exports military hardware to approximately 85 countries.
• FY 2023-24 record exports: Rs 21,083 crore, with the BrahMos deal contributing to the pipeline.

Static linkage: India-Philippines relations, South China Sea, defence exports.

GS area: Economy (banking)

India's bank credit-deposit ratio reached approximately 80 per cent in early 2024, its highest level in two decades.

Key facts:

• Definition: Credit-deposit (CD) ratio is total loans divided by total deposits. A high ratio means banks are lending aggressively relative to the deposits they hold.
• FY 2023-24 figures: Deposits grew 13.5 per cent to Rs 204.8 trillion. Non-food credit grew 20.2 per cent to Rs 164.1 trillion.
• The concern: Banks with very high CD ratios have less liquidity buffer. If deposit growth does not keep pace with credit growth, banks must compete harder for deposits by raising interest rates.
• Root cause: Customers are moving savings from bank deposits to equity-linked mutual funds, insurance products, and stock market investments rather than keeping money in low-yield savings accounts.
• RBI guidance: The RBI has urged banks to mobilise deposits more actively and cautioned against over-reliance on short-term wholesale funding.

Static linkage: banking sector, monetary policy, financial stability.

GS area: International Relations, Polity (international organisations)

The UN Security Council referred the Palestinian Authority's application for full UN membership to the Committee on New Member Admissions.

Key facts:

• Full UN membership process: Requires an affirmative vote from 9 of 15 UNSC members with no vetoes from any of the five permanent members (P5). The application then goes to the General Assembly, which must approve by a two-thirds majority.
• Current status: Palestine holds non-member observer state status at the UN, granted by the General Assembly in 2012.
• P5 veto risk: The United States has indicated it would veto Palestinian full membership at this stage.
• Significance of 2024 application: It follows the October 2023 Hamas attack and Israel's military operations in Gaza, which intensified international debate about Palestinian statehood.

Static linkage: international organisations, Middle East, India's foreign policy.

GS area: Science and Technology

Physicist Peter Higgs died at the age of 94. His theoretical work in the 1960s predicted the existence of the Higgs boson, confirmed at CERN's Large Hadron Collider in 2012.

Key facts:

• The Higgs mechanism: Explains why elementary particles acquire mass. Particles interact with the Higgs field (which permeates all of space) to varying degrees. A particle that interacts strongly appears heavy; one that barely interacts appears almost massless.
• Nobel Prize: Higgs and François Englert shared the Nobel Prize in Physics in 2013.
• CERN discovery: The Higgs boson was confirmed at the Large Hadron Collider in Geneva in 2012 using data from the ATLAS and CMS experiments.
• Everyday significance: Understanding the Higgs field is fundamental to the Standard Model of particle physics, which describes all known elementary particles and three of the four fundamental forces.

Static linkage: science and technology, important discoveries.

• Zaporizhzhia Nuclear Power Plant: A drone attack caused three structural hits on the plant's containment. The IAEA confirmed nuclear safety was maintained. The plant (Europe's largest, in southeast Ukraine) is Russian- controlled. It uses VVER-1000 reactors.
• India's solar ranking: India ranked third globally in solar electricity generation in 2023, surpassing Japan, behind only China and the USA. Renewables reached 30 per cent of global electricity for the first time.
• Air-breathing fuel cell: University of Kerala researchers developed a magnesium-copper fuel cell using air and seawater, producing electricity and heat with water as the only emission.