Financial Services Centres Authority (IFSCA)

👉An IFSC enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance companies, etc.) to India.

👉It offers a business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.

👉IFSCs are intended to provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India.

👉The International Financial Services Centres Authority (IFSCA), headquartered at GIFT City, Gandhinagar Gujarat, has been established under the International Financial Services Centres Authority Act, 2019.

👉The SEZ Act 2005 allows setting up an IFSC in an SEZ or as an SEZ after approval from the central government.

❇️IFSC can provide:

✔️Fund-raising services for individuals, corporations and governments.

✔️Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds.

✔️Wealth management and Risk management operations such as insurance and reinsurance.

✔️Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.

✔️Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching.

✔️Merger and acquisition activities among trans-national corporations.

👉An IFSC caters to customers outside the jurisdiction of the domestic economy.


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Negative Bond Yield

👉A negative bond yield is when an investor receives less money at the bond's maturity than the original purchase price for the bond.

👉Even when factoring in the coupon rate or interest rate paid by the bond, a negative-yielding bond means the** investor lost money at maturity**.

👉Negative-yielding bonds are purchased as safe-haven assets in times of turmoil and by pension and hedge fund managers for asset allocation.

👉A negative bond yield is an unusual situation in which issuers of debt are paid to borrow.

Bond:

✔️It Is an instrument to borrow money. A bond could be floated/issued by a country’s government or by a company to raise funds.

Yield:

✔️The yield of a bond is the effective rate of return that it earns. But the rate of return is not fixed; it changes with the price of the bond.

👉Many hedge funds and investment firms that manage mutual funds invest in negative bonds in order to diversify their investment.

👉Bonds are often used to pledge as collateral for financing and as a result, need to be held regardless of their price or yield.

👉Foreign investors might believe the currency's exchange rate will rise, which would economy.

👉Domestically, investors might expect a period of deflation, or lower prices in the economy.

👉Today when the world is fighting the Covid-19 pandemic and interest rates related to bonds and other financial instruments in developed markets across Europe are much lower, investors are looking for relatively better-yielding debt instruments to safeguard their interests.offset the negative bond yield.


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ARC for Agricultural Sector

👉It is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions so that they can clean up their balance sheets.

👉This helps banks to concentrate on normal banking activities. Banks, rather than going after the defaulters by wasting their time and effort, can sell the bad assets to the ARCs at a mutually agreed value.

👉The SARFAESI Act, 2002 provides the legal basis for the setting up of ARCs in India.

👉The Act helps reconstruction of bad assets without the intervention of courts.

👉Since then, a large number of ARCs were formed and were registered with the Reserve Bank of India (RBI) which has got the power to regulate the ARCs.

👉To meet its funding requirements, an ARC can issue bonds, debentures and security receipts.

👉As per the latest Financial Stability Report, June 2021, banks’ gross NPA ratio for the agriculture sector was at 9.8%, whereas for industry and services it was at 11.3% and 7.5%, respectively, At March-end 2021.

👉To improve recovery of bad loans in the agriculture sector, leading banks have made a pitch for setting up an Asset Reconstruction Company (ARC) specifically to deal with collections and recovery of farm loans.

👉With a government-backed ARC having been recently set up to deal with bank NPAs to the industry, this idea has acceptability among banks.

👉Some member banks of the Indian Banks' Association suggested the need for the Central government to bring legislation on agriculture land somewhat like the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.



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Inflation targeting agreement

👉It is a central banking policy that revolves around adjusting monetary policy to achieve a specified annual rate of inflation.

👉Inflation targeting was first adopted by New Zeeland and subsequently, a large number of countries including India have been following Inflation Targeting as their core element of monetary policy.

👉In case of India, the Inflation targeting was introduced through the Monetary Policy Framework Agreement signed between the RBI and Government in 2015.

👉 As per terms of the agreement, RBI’s primary objective would be to maintain price stability, while keeping in mind the objective of growth.

👉The principle of inflation targeting is based on the belief that long-term economic growth is best achieved by maintaining price stability, and price stability is achieved by controlling inflation.

👉The Centre has decided to retain the inflation target of 4%, with a tolerance band of +/- 2 percentage points for the Monetary Policy Committee of the RBI for the coming five years.

👉As per the Monetary policy framework agreement, the RBI has been given complete autonomy in maintaining the rate of inflation within the mandated targets.

👉If the RBI fails to maintain the Inflation within the target, then it would be required to submit in writing, the reasons for its failure.

👉Such a provision enables the RBI to enjoy autonomy and at the same time, the enables the Government to have enhanced accountability over the actions of the RBI.



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GST

👉It is a destination based tax on consumption of goods and services.

👉 It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off.

👉 In a nutshell, only value addition will be taxed and the burden of tax is to be borne by the final consumer.

❇️As per the newly implemented tax system, there are 4 different types of GST:

✔️Integrated Goods and Services Tax (IGST)

✔️State Goods and Services Tax (SGST)

✔️Central Goods and Services Tax (CGST)

✔️Union Territory Goods and Services Tax (UTGST)

👉CGST, SGST & IGST are levied at rates to be mutually agreed upon by the Centre and the States. The rates are notified on the recommendation of the GST Council.

👉GST is levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under these multiple slabs are worked out by the GST council.

👉The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.

👉It is a constitutional body (Article 279A) for making recommendations to the Union and State Governmen**t on issues related to GST.

👉It is considered as a **federal body where both the centre and the states get due representation.

👉The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services. The set off tax is called input tax credit.

👉Introduction of GST is making Indian products more competitive in the domestic and international markets owing to the full neutralization of input taxes across the value chain of production.

👉 From the consumers’ point of view, the biggest advantage is in terms of reduction in the overall tax burden on goods.



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Privatisation of Banks

👉The government’s plan to privatise two public sector banks (PSBs) through the Banking Laws (Amendment) Bill, 2021.

👉The government had listed the Banking Laws (Amendment) Bill, 2021 as one of the agenda items for the Winter session before it began.

👉 The Bill aims to amend banking companies acquisition and transfer laws of 1970 and 1980 and the Banking Regulation Act, 1949 to achieve privatisation of two PSBs to meet disinvestment targets as stated by finance minister Nirmala Sitharaman in the Union Budget 2021-22.

👉Years of capital injections and governance reforms have not been able to improve the financial position of public sector banks significantly.

👉Many of them have higher levels of stressed assets than private banks, and also lag the latter on profitability, market capitalisation and dividend payment record.

👉The government is trying to strengthen the strong banks and also minimise their numbers through privatisation to reduce its burden of support.


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Global Risks Report 2022

👉The World Economic Forum recently released the Global Risks Report 2022. Cybersecurity, pandemic, climate change and space advancements are the emerging risks to global economy.

👉The global economy is to shrink by 2.3% by 2024. However, in developing countries this is to be 5.5%. In rich countries, it will be 0.9%.

👉The online platforms have increased tremendously during the pandemic. The COVID has brought in major work shift.

👉 People are now attending classes online. This has increased the security risks.

👉The cyber threats are growing at humanely uncontrollable rates. The criminals are using tougher tactics and therefore, the cyber threats are becoming more aggressive day by day.

👉 Cryptocurrencies are creating easy path of escape for the cyber criminals. Today 90% of the ransomware attacks are paid in cryptocurrencies.

👉The costs of rocket launching technologies are falling. This has led a new space race, not between countries, but between government and private companies.

👉While private launchers such as Elon Musk, Jeff Bezos are launching satellites and astronauts, governments are focusing on military satellites.

👉 This is creating friction in the orbit. The risks of debris collision, congestion are increasing.

👉The three top climate risks are loss of biodiversity, extreme weather and failure to act on climate change.

👉While economies are trying to move towards zero emissions, rapid actions are required. The report calls the climate actions by world countries as “Disorderly”.

👉 Faster shift from the intense carbon polluters is the need of the moment.

👉In the past two years, during the pandemic, the world top 20% (the richest) has recovered their losses. On the other hand, the bottom 20% have lost 5% more.

👉Less than 16% of the people (participated in the survey) were optimistic about the economic outlook of the world.


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K-Shaped Economic recovery

👉A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.

👉A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.

👉This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter "K."

👉According to the latest round of ICE360 Survey 2021, K-shaped recovery emerges from the economy hit by the coronavirus pandemic.

👉The survey was conducted by People’s Research on India’s Consumer Economy (PRICE), a Mumbai- based think-tank.

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Fair and Remunerative Price (FRP)

👉FRP is the price declared by the government, which mills are legally bound to pay to farmers for the cane procured from them.

👉Mills have the option of signing an agreement with farmers, which would allow them to pay the FRP in instalments.

👉Delays in payment can attract an interest up to 15% per annum, and the sugar commissioner can recover unpaid FRP as dues in revenue recovery by attaching properties of the mills.

👉The payment of FRP across the country is governed by the Sugarcane Control order, 1966 issued under the Essential Commodities Act (ECA), 1955 which mandates payment within 14 days of the date of delivery of the cane.

👉It has been determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and announced by the Cabinet Committee on Economic Affairs (CCEA).

👉The FRP is based on the Rangarajan Committee report on reorganising the sugarcane industry.


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