Source: The Hindu and Indian Express
Prepared and Presented by
Sahil Malhotra
Faculty of current Affairs, Chrome IAS Academy
Page 1: Marginal Cost of funds based Lending Rate (MCLR)
- It refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI.
- The MCLR methodology for fixing interest rates for advances was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the base rate system introduced in July 2010.
- Existing loans and credit limits linked to the Base Rate (internal benchmark rate used to determine interest rates until March 2016) or Benchmark Prime Lending Rate (BPLR or the internal benchmark rate used to determine the interest rates on advances/loans sanctioned up to June, 2010) would continue till repayment or renewal, as the case may be.
- However, existing borrowers will have the option to move to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms.
- The MCLR is a tenor linked internal benchmark (tenor means the amount of time left for the repayment of a loan).
- A base rate customer can shift to the MCLR only by paying a fee.
Reasons for introducing MCLR:
- RBI decided to shift from base rate to MCLR because the rates based on marginal cost of funds are more sensitive to changes in the policy rates. This is very essential for the effective implementation of monetary policy.
Thus, MCLR aims:
- To improve the transmission of policy rates into the lending rates of banks.
- To bring transparency in the methodology followed by banks for determining interest rates on advances.
- To ensure availability of bank credit at interest rates which are fair to borrowers as well as banks.
- To enable banks to become more competitive and enhance their long run value and contribution to economic growth.
Base Rate vs MCLR
- Base rate calculation is based on cost of funds, minimum rate of return, i.e margin or profit, operating expenses and cost of maintaining cash reserve ratio while the MCLR is based on marginal cost of funds, tenor premium, operating expenses and cost of maintaining cash reserve ratio.
- The main factor of difference is the calculation of marginal cost under MCLR. Marginal cost is charged on the basis of following factors- interest rate for various types of deposits, borrowings and return on net worth.
- Therefore MCLR is largely determined by marginal cost of funds and especially by deposit rates and repo rates.
Page 8: Red sanders is a rare kind of sandalwood.
- It is found in Southern Tropical Dry Deciduous Forests at altitudes of 150 – 900 m.
- It grows on dry, hilly, often rocky ground, and occasionally found on precipitous hill sides also.
- It prefers lateritic and gravelly soil and cannot tolerate water logging.
- Red Sanders has a highly restrictive distribution in the South Eastern portion of Indian peninsula to which it is endemic.
- It is mainly found in the Palakonda and Seshachalam hill ranges of Andhra Pradesh.
- Sporadic wild populations occur in the adjoining districts of the neighbouring states of Tamil Nadu & Karnataka.
- The species has negligible utilization within the country mainly in Ayurvedic medicines.
What is it used for?
- There is an unsubstantiated belief that red sanders can absorb nuclear radiation. Its primary use, however, is decorative and ornamental.
- Red Sanders is a non-fragrant variety of sandalwood that mostly grows in rocky, hilly regions.
- There is an unsubstantiated belief that red sanders can absorb nuclear radiation. Its primary use, however, is decorative and ornamental.
- Red Sanders is a protected species under the Convention on International Trade in Endangered Species (CITES) of Wild Fauna and Flora.
- It takes at least 20-25 years for the tree’s beautiful, deep red wood to be of use.
- In India it is found in very small areas spread over Andhra Pradesh, Tamil Nadu and Karnataka.
Page 9: Brow-antlered deer (Sangai)
- A medium-sized mammal, the brow-antlered deer gets its name from the fact that its antlers somewhat appear to emerge from its eyebrows.
- Marked by a small tail, the animal’s coat is a dark reddish brown during winter months and it becomes a much lighter shade in summer.
- In India, these animals are found only in Manipur’s famed Loktak lake (Bishnupur district), in a marshland located within the boundaries of Keibul Lamjao National Park.
- The Park is said to be the only floating national park in the world.
- It is believed that the dancing deer got its name due its delicate hopping while moving between the phumdis (floating marsh).
- It is the State animal of Manipur.
- IUCN Status: Endangered
Page 10: Payments Banks (PBs) vs Traditional Banks
Objectives:
- To enhance financial inclusion by providing
- small savings accounts and
- payments/remittance services to: migrant labour workforce, low income households, small businesses, unorganised sector entities and other users.
Activities:
- Acceptance of remittances and demand deposits, with a maximum balance of Rs 100000 per individual.
- Issuance of ATM/Debit cards; but can’t issue credit cards
- Payments and remittances through various channels
- Can act as Business Correspondents of another bank
- Can distribute non-risk sharing simple financial products like mutual funds and insurance products.
Fund deployment
- No lending
- Cash Reserve Ratio applicable
- Statutory Liquidity Ratio of 75% – comprising of up to one year maturity GSecs/T-bills and the remaining (25%) in deposits with other Scheduled Commercial Banks.
- Capital/Net Owned Fund: Rs 100 crores
- Capital Adequacy Ratio: 15 %
- KYC application: Electronic authentication and most of the KYC norms to banks are applicable to PBs.
- Participation in Call Money Market* and CBLO** Market: Permitted to participate in CMM and CBLO as lenders and borrowers.
- *The call money market (CMM) is the market where overnight (one day) loans can be availed by banks to meet liquidity.
- **A collateralized borrowing and lending obligation (CBLO) is a money market instrument that represents an obligation between a borrower and a lender as to the terms and conditions of a loan.
- Registration and regulation of business
- The payments bank will be registered as a public limited company under the Companies Act, 2013, and licensed under the Banking Regulation Act, 1949.
- Payments and Settlement Systems Act, 2007 will be a binding legislation for Payments Banks.
Page 13: #MeToo Movement
- It is a movement against sexual harassment.
Page 14: CRISPR/Cas9
- CRISPR/Cas9 is a simple but powerful gene-editing technology that can be harnessed to precisely modify, delete or correct disease-causing abnormalities at their genetic sources.
- CRISPR refers to Clustered Regularly Interspaced Short Palindromic Repeats of genetic information, which some bacterial species use as an antiviral mechanism in combination with the Cas9 enzyme.
- Cas9 – a CRISPR-Associated endonuclease – acts as “molecular scissors” to cut DNA at a specific location.
