Current Affairs 26 February, 2025

Daily Current Affairs Quiz
26 February, 2025

International Affairs

1. India EU Free Trade Agreement

Context:

The European Union (EU) wants to obtain more firm commitments from India concerning tariff reductions on imports of cars, wines, and spirits as part of the ongoing Free Trade Agreement (FTA) negotiations. The joint meeting between PM Narendra Modi and URSULA VON DER LEYEN, President of the European Commission, is now taking place later this week in this connection.

Key Highlights:

• 10th round of FTA negotiations is scheduled from 10-14 March in Brussels and will resume after a gap of six months.
• Besides, Von der Leyen’s visitation (Feb 27-28) brings along with it EU commissioners from 21 countries, underscoring the strategic focus of the EU on India.
• The bilateral talks will pave the path towards the proposed India-EU summit in the second half of 2025.

Discussion Major Topics

Trade & Market Access

• Lower import duties on automobiles, wines, and spirits are demanded by the EU.
• India is insisting on better market access for pharmaceuticals, IT services, textiles, and agricultural products.
• The critical FTA would boost India EU bilateral trade from 120 billion dollars in 2023.

Geopolitical Context & Strategic Shifts

• The timing of the meeting tops all that considering the escalating trade tensions between the US and the EU and reciprocal tariff threats from Donald Trump.
• Europe wants to understand India as an alternative supplier through which it wants to manage its dependence on China and diversify accordingly.

India’s Position on the Russia Ukraine Conflict

• EU officials are likely to raise alarms about India’s trade issues with Russia, especially with regard to energy and defense.
• The country’s potential role in peace talks in Ukraine might also be on the table.

India Middle East Europe Economic Corridor (IMEC)

• The discussion will revolve largely on the progress of IMEC, which is a strategic infrastructure project.
• The EU considers IMEC as a counterbalance to China’s Belt and Road Initiative (BRI).

Critical Importance

• Strengthening India EU Trade Ties
  • India is the 10th largest trading partner for the EU, an FTA could boost investments and exports.
• Reducing China Dependence
  • The EU is looking at India as a reliable alternative in key sectors such as manufacturing, semiconductors, and green energy.
• Balancing Global Trade Alliances
  • The stakes for trade between India and Europe have risen to unprecedented heights with US-EU tensions and Chinese trade hegemony.

This will set the stage for even deeper economic and geopolitical cooperation with the Modi von der Leyen meeting. Although tariff negotiations remain a challenge, shared strategic interests could accelerate an India-EU trade agreement.

National Affairs

1. India’s Internet Shutdowns

Context:

The number of Internet shutdowns in India was slightly lower in 2024 than in 2023, according to the Software Freedom Law Center (SLFC), India’s annual report.

Report Highlights

• Numbers Decline
  • Slightly lower are the Internet shutdowns in India by SFLC India for the year 2024 as compared to 2023.
• Top Shutdown Globally
  • India is the world’s top country for government ordered Internet shutdowns, according to Access Now.
• Government Justification
  • The Union government sees mobile Internet service being shut down as an indispensable tool in the regulation of law and order.

Shutdowns Due to Communal Violence: India Leads the World

• All 88 Internet shutdowns due to communal violence in 2023 & 2024 are in India.
• From 2018, 95% of all global shutdowns related to communal violence originated from India.
• Most affected States (2023-24)
  • Manipur: 54
  • Haryana: 7
  • Bihar: 9 shutdowns
• Internet Shutdowns Reason Over the Years
  • 2024: More than 50% for protests.
  • 2023: Over 50% for communal violence.
  • Political instability was the primary reason for the years 2021 & 2022.

Breakdown of 2024 Shutdowns

• Total shutdowns: 84.
• Reasons for shutdowns
  • Demonstration Season
  • Communal Clashes
  • Examination cheating
• Shut down usage beyond an emergency raises serious questions of proportionality and necessity.

Legal & Human Rights Dimensions

• Supreme Court Judgment
  • The SC held in Anuradha Bhasin vs Union of India that shut downs need to pass the necessity and proportionality tests.
• Harm to Citizens
  • Livelihoods and Businesses are Damaged.
  • Reach to health and education has been disrupted.
  • Time is lost in violence due to the absence of real time information.

Opacity of Shutdowns

• Reports show that the many orders of shutdowns were not accompanied with an appropriate documentation, as required by the Telecommunication (Temporary Suspension of Services) Rules, 2024.
• Impact Assessment
  • The Economic and social impact of shutdowns should be assessed by the government but in no clear advance.

Authorities may try to argue that the Internet shutdowns contribute to controlling a crisis; however, the frequency and opacity of their implementation raise serious concerns. India must find ways to ensure a great reduction of shutdowns and to avoid using them in less serious cases, resulting in even possible accountability.

Source: The Hindu

2. Balancing AI Innovation with Environmental Sustainability

AI’s Expanding Influence

• AI is redefining industries, with a with present day valuation of $200 billion, it is expected to contribute $15.7 trillion to the global economy by 2030.
• Some major investments
  • Stargate Project in the USA classic, which has an established $500 billion worth AI infrastructure investment.
  • Reliance Nvidia alliance, where world’s largest data center is being set up in India.
  • An LLM project in India rivals ChatGPT and DeepSeek.
  • But with advancement in AI also comes significant environmental cost to AI.

Environmental Impact of AI

• Data Centers & Energy Consumption
  • AI requires energy hungry infrastructure.
  • It has been said that data centers emit 1% of the total global CO₂ emissions, and the numbers are expected to double by 2026 (International Energy Agency).
  • Generative AI needs100x more computing power, meaning greater carbon footprints.
• AI Training & E Waste
  • Training for GPT-3 emits 552 tonnes of CO₂, which is equivalent to the annual emission of dozens of cars.
  • The demand for high performance chips (GPUs, TPUs) is also raising e waste concerns.

Global Response & Gap in Policy

• Urgency of sustainable AI practice has been emphasized by ITU & COP29.
• Over 190 countries have adopted non binding AI ethics for sustainability.
• Regulatory measures concerning AI in the EU and the U.S., on the whole, are lacking in accordance with sustainable AI principles.
• National AI strategies tend to neglect sustainability, particularly regarding private sector roles.

Sustainable AI: The Way Forward

• Transition to Clean Energy
  • Switching data centers to renewable sources of energy.
  • Google’s DeepMind’s use of AI to enhance the forecasting of wind energy.
• Energy Efficient AI Infrastructure
  • Deploying optimized hardware with regular maintenance to cut emissions.
  • Domain specific models require much less power, yet perform comparably.
  • Pre shot AI models have a lower demand for computing resources than building one from scratch.
• Transparency & Accountability
  • The AI industry should measure and announce emissions.
  • Industry wide accountability is supported by standardized carbon tracking frameworks.

In order to remain sustainable into the future, AI should be developed in an environmentally sustainable way. By ensuring that green requirements are incorporated into the design of an AI, the government and private sectors are able to reconcile innovation with environmental protection so that the benefits offered by AI do not come with a price on the planet.

3. Time Use Survey 2024

Context:

Though India is steadily changing in the landscape of work and home, with women’s increasing stake in the workforce and evolving gender roles in caregiving, the most recent Time Use Survey 2024 conducted by the National Statistics Office (NSO) emphasizes on these.

Key Findings

• Participation in Employment (Ages 15-59)
  • Men: surged from 70.9% (2019) to 75% (2024)
  • Women: increased from 21.8% (2019) to current 25% (2024)
• Average hours spent on employment-related activities: 440 minutes/day
  • Men: 473 minutes
  • Women: 341 minutes
• Change from Unpaid to Paid Work
  • Women’s unpaid domestic work decreased from 315 minutes in 2019 to 305 minutes in 2024
  • Indicates greater economic participation of women
• Gender Disparities in Domestic & Caregiving Activities
  • Unpaid Domestic Work
    • Men: 88 minutes
    • Women: 137 minutes
• Caregiving of Members of Household
  • 41% of women in the age group 15-59 participated against 21.4% men
  • Women spent 140 minutes a day, while men spent just 74 minutes per day
• Recreation and Cultural Activities
  • Mean overall: 171 minutes/day
  • Men: 177 minutes
  • Women: 164 minutes
• Learning and Self-care
  • For children 6-14 years: 413 minutes of learning activities per day
  • Self-care and maintenance activities for 6 years and older: 708 minutes a day
• Production for Own Use
  • 16.8 percent of the populace engaged in activities such as farming and handicrafts for self-use.
  • Time Spent: 116 minutes/day
• Survey methodology
  • Total households surveyed: 1,39,487
    • Rural: 83,247
    • Urban: 56,240
  • Individuals surveyed (6+ years): 4,54,192
    • Rural: 2,85,389
    • Urban: 1,68,803

Analysis of the Report

• Increasing Workforce Participation
  • More men and, especially among women, in the 15-59 age group, are engaged in paid employment, and this indicates shifting towards greater economic involvement.
  • It is a decline in unpaid domestic work among women that markers the transition into paid work, but the total participation is still drastically lower compared to men.
• Ongoing Sexual Edges of Domestic Responsibility
  • In spite of changes, women spend much more time doing household chores and care roles than men.
  • The data very clearly shows the repercussions of the profoundly rooted societal norms that weigh the most in case of unpaid care on women even as they enter formal employment in large numbers.
• Developing Social and Economic Structures
  • The slight decrease of women’s unpaid household work is attributed to factors like urbanization, becoming economically independent and changing family structure.
  • But most of them never come out of the paid double burden, which means they cannot completely engage in professional advancement and recreational activities.
• Changing Tendencies in Leisure and Learning
  • The survey has shown how, as far as leisure time is concerned, men and women allocate differences in spending time on the same. This goes along with cultural expectations and gendered access to free time.
  • They also appear to be in the most potent position to fulfil their task of forming the future generation that takes part in the workforce most largely in terms of time spent learning.
• Policy and Society Implications
  • Promoting a healthy balance between both work and life at the policy level is primarily including expanded needs for childcare support, flexible working arrangements, and careful sharing of domestic chores.
  • Gender sensitive economic reforms should help narrow the participatory gap in labor force for ensuring just parity between men and women.
  • Further, encouraging men to take greater responsibility for household chores and caring for others will be an important step in breaking down traditional gendered roles and creating gender equity in society.

Though the new Time Use Survey 2024 indicates advancements toward better participation in employment and an even slight decrease in gender differences, structural barriers and societal norms remain strong inhibitions to the full economic integration of women into the economy. This will require focus on integrated policy measures, cultural shifts, and systemic support to produce a more equitable future.

4. Ultra Conserved Elements (UCEs)

Context:

For decades, ultra conserved elements have puzzled scientists. DNA pieces having remained essentially unchanged for 80 million years across organisms seem to have a biological constraint so strong that any slight modification would be lethal. But now, with fresh evidence, here is a compelling reason why they are so highly conserved.

What Are Ultra Conserved Elements (UCEs)?

• UCEs are long stretches of identical DNA (>200 bp) in humans, rats, and mice from a common ancestral mammal.
• They have remained remarkably conserved among other species, such as chickens, dogs, and even fishes, implying that there is something vital concerning their biological roles.
• Most UCEs do, in contrast to the majority of genes, not code for proteins; and from that point, their function has mostly remained unknown.

Key Discovery: UCEs Are “Poison Exons”

A functional UCE of the mouse Tra2b gene was shown to actually be a gene serving primarily in RNA splicing by David J. Elliott, at Newcastle.

Working of This UCE

Regulation of Protein Production

• The Splices Tra2 protein is produced by the Tra2b gene and is involved in RNA splicing.
  • The present UCE, which functions as a “poison exon,” is found within the first intron of this gene and, when included into the mature mRNA, will otherwise interrupt normal protein production.
  • This incorporation is triggered by high abundance of Tra2 protein, with the recognition, and inclusion as an exon, of the UCE.
  • The production is then prematurely stopped due to triggering premature stop codons, halting subsequent synthesis of the protein and leading to loss of mRNA.

• Sperm Production Implications
  • The mutation in the UCE was deleted in the sperm-producing cells of mice.
  • With the absence of the poison exon, a Tra2 protein excess was achieved, causing cell death and infertility.
  • Mutations affecting the function of UCEs would then result in those sperm being incapable of forming, and those mutations would not get passed on, thus, UCEs have remained constant throughout evolutionary time.

What Would Keep UCEs Basically Unchanged for 80 Million Years?

• This study supports the idea that UCEs need to remain complete since mutations that knock them out would be strongly selected against.
• Mutations formed in UCEs could meddle with the regulation of proteins and may cause disastrous derangements to cell functions, such as infertility, familiar from Tra2b.
• Hence, the justification why no changes in UCEs were allowed: any mutation would just kill itself before it could be inherited by the next generation.
• Certainly not all UCEs work as poison exons, however, this should provide a useful context for studying their biological relevance in other settings.

Zooming Out: Evolution, Genetics, and Future Exploration

• This research redefines the role of junk DNA by showing that important regulatory functions are often present in non coding regions.
• It demonstrates the precision of control mechanisms, in that a minor regulatory change can translate into major biological changes.
• Beyond that, future exploration might also determine whether other UCEs share in this research, perhaps identifying new regions of function in genetic control.

This represents another major step toward resolving the biggest riddles of evolutionary biology, namely why some DNA sequences are frozen in a time when everything else in the genome is changing.

Source: The Hindu

5. Devolution Index (DI) For Panchayati Raj

Context:

According to a recent report of the Ministry of Panchayati Raj and Indian Institute of Public administration, India has a state level devolution index (DI) measure of the decentralized actions across the country.

Key Highlights

• It measures institutional frameworks, financial strength, capacity building, and accountability of Panchayati Raj Institutions (PRIs).
• Devolution to rural local bodies, which improved from 39.9% in 2013-14 to 43.9% in 2021-22, ranked Karnataka highest at 72.23 indices.
• Southern states (Karnataka, Kerala, Tamil Nadu) performed well, while Manipur, Arunachal Pradesh, Jharkhand, and Punjab lagged.
• Uttar Pradesh and Bihar have made the largest changes over the past decade.

Key Challenges Faced by Panchayati Raj Institutions

• Financial Constraints
  • GPs’ own revenue remains minimal, making them highly dependent on state and central funding.
  • This was Kerala’s GP revenue share in 2021-22, highest GP revenue share, with only 2.84% of the state’s own revenues.
  • Direct constitutions of State Finance Commissions (SFCs) mean worsened financial autonomy, while only 10 states have constituted their sixth SFC.
  • The study by the Reserve Bank of India found that PRI revenue expenditure is less than 0.6% of Gross State Domestic Product (GSDP) in all states.
• Administrative and Infrastructure Gaps
  • Severe staff shortages limit governance capacity at the grassroots level.
  • Inadequate physical, digital, or any other infrastructure, with special emphasis in case of northeastern and hilly states.
• Representation and Accountability Issues
  • Some states do not fulfill women reservations, e.g., Punjab, Madhya Pradesh, Karnataka, and Jammu & Kashmir.
  • In contrast, other states such as Jharkhand, Tamil Nadu, and Chhattisgarh exceed the quotas.
  • Lack of an accountability mechanism for local governments hampers transparency.

Recommendations for Strengthening PRIs

• Rotate terms of reservation from every election round to those in two or three tenures to reflect stability.
• Unify electoral rolls for Lok Sabha, Assembly, municipal, and GP elections to coordinate better.
• An on schedule constituting SFCs for regular funding to PRIs will be ensured.
• Grant GPs the right to levy property tax on all residential and commercial properties.
• Regularly recruit and train support staff to improve efficiency in administration.
• Improve transparency and accountability through a local government ombudsman.

While Panchayati Raj Institutions have improved themselves through the years, financial autonomy, administrative capacity, and accountability remain major concerns. To do that, India has to learn from successful decentralized governance models like Switzerland and Scandinavian countries to strengthen local authorities by increasing financial devolution, streamlining governance structures, and ensuring representation.

Banking/Finance

1. Government’s Plan to Reduce Stake in PSBs

Context:

The Indian government is planning for a roadmap to disinvest up to 20% of ownership in five public sector banks (PSBs) over a period of the next four years fulfilling the minimum public shareholding (MPS) norms of SEBI. The disinvestment will proceed in consultation with:

• Department of Investment and Public Asset Management (DIPAM)
• Department of Financial Services (DFS)
• State run lenders

Objective: Meeting SEBI’s MPS Norms

• SEBI asks that all listed companies should maintain 25% public shareholding.
• State banks were given a waiver until August 2026 to comply with this norm.
• The Government holds more than 75% in these banks and, therefore, needs to dilute stakes.

Banks Identified for Stake Reduction

Bank	Govt. Holding (%)	Stake to be Sold (%)
UCO Bank	95.39%	20.39%
Indian Overseas Bank	96.38%	21.38%
Central Bank of India	93.08%	18.08%
Punjab & Sind Bank	98.25%	23.25%
Bank of Maharashtra	86.46%	11.46%

Implementation Strategy through OFS & QIP Routes

The government plans to follow two methods to reduce stake:

1. Offer for Sale (OFS): The government sells its existing shares, raising funds directly. (Preferred method according to officials)
2. Qualified Institutional Placement (QIP): The bank issues new shares to institutional investors, raising funds for itself.

Rationale for the Preferred Route TOFS

• PSBs are already well capitalized, they do not require immediate fresh equity.
• The OFS method helps the government in raising funds for fiscal priorities.

Market Conditions & Timing

• The dilution plan will take into account market conditions to achieve fine valuation.
• It will be staggered over four years to avoid disruption.

Consequences of Stake Dilution

• Public Shareholding Improvement: Enhance the liquidity and trading volumes in the PSB stocks.
• Government Revenue Generation: OFS routing allows direct raising of funds.
• Regulatory Compliance: SEBI norms will be complied with by August 2026.

Such a strategic action is a part of the essential banking sector reforms and capital market deepening but with due control over the PSBs.

2. RBI Reverses Higher Risk Weights on NBFC Loans

Context:

The Reserve Bank of India (RBI) has reversed its previous decision to increase risk weights on bank loans to Non Banking Financial Companies (NBFCs), starting from April 1, 2025. This move should boost credit flow to NBFCs and release sizable capital for banks.

Background: The Initial Risk Weight Increase

• November 16, 2023
  • RBI increased the risk weights on NBFC loans by 25 percentage points, where those risk weights already existing (based on external ratings) were below 100%.
  • This affected AAA , AA , and A rated NBFCs, thereby rendering banks’ loans against these entities more capital intensive.

Why the Reversal?

• Slower growth in bank lending
  • Bank loan to NBFCs: growth of 6.7% (YoY) by December 2024, down from 15% a year ago;
  • Overall bank credit growth that halved, from 20% to 11.2% during the same period.
  • The higher risk weights discouraged banks to lend to NBFCs, which exacerbated liquidity conditions of the NBFC sector.

New Risk Weight Structure

• Risk weights for loans to Non Banking Financial Companies will continue as before aligned to external ratings.
• Regulatory Authority of India termed Risk Weight of 75-100% for Microloans instead of 125%.

Implications and Benefits

• Differentializing Bank Funding to NBFCs Eases External Credit Flow to Shadow Banks for Liquidity Support.
• Relief in Capital for Banks Loss of Lower Allocation Requirement Improves Capital Adequacy.
• Found Benefit for Growth Support of NBFCs Easier Availability of Funds in Lending and Business Operations.
• A Possible Rebounding Overall Credit Growth that would Alleviate the Recent Slowdown in Lending by Banks.

3. RBI Clarifies Risk Weights On Microloans

Context:

Risk weights on microfinance loans were clarified by the Reserve Bank of India (RBI), thus decreasing the capital requirements on banks. 75% Risk weights have now been imposed on loans considered under the regulatory retail portfolio or business loans. Earlier, this slab was confusing and was considered under 125%. Consumer credit microloans, which do not fall under regulatory retail, will now carry a 100% risk weight instead of 125%.

Bank Funding Impact On NBFCs

• The move is well accepted for the NBFC sector, as it frees bank capital for lending, states Ajit Velonie, Senior Director, Crisil Ratings.
• The borrowings of NBFCs from banks have already gone down from 47% in the pre November 2023 to 45% as they moved towards capital markets and ECBs.
• With rising hedging costs for ECB due to dollar volatility, the space for alternate funding was becoming even more constricted.

Clarification to Resolve: Bank’s Uncertain Stand

• The confusion set in by the November 2023 RBI guideline left the banks agitated under the misunderstanding of being made to increase risk weights while the NBFCs had been spared of any alteration on the microloan risk weights.
• Some banks were being forced by the RBI supervisors to raise risk weights leading to conflictive treatment among institutions.
• “That ambiguity has now been removed,” said a risk officer at a mid sized commercial bank.

The RBI’s May announcement concerning microloan risk weights is a helpful relief to banks and NBFCs, which would allow an increased lending capacity while clinching regulatory certainty. Banks, with lesser capital constraints, would now be able to set aside a fair portion of their portfolio for lending microfinance, hence improving credit for small borrowers. This will stabilize the conditions under which NBFCs are funded and also support efforts towards financial inclusion in sectors that have remained underserved.

Source: Business Standard

4. Irregularities Persist in UCBs despite RBI Interventions

Context:

Urban cooperative banks in India have been subjected to scrutiny for a long time, with stronger preventive measures required.

Regulatory Interventions and Persistent Irregularities

• Financial irregularities continue to emerge despite the RBI’s efforts to establish governance in Urban Cooperative Banks (UCBs).
• Most recent case
  • New India Cooperative Bank (Mumbai) was restricted from issuing fresh loans, deposit withdrawal was capped at ₹25,000 due to alleged embezzlement of ₹122 crore.
• Past instances include
  • PMC Bank Crisis (2019) Over 73% of its advances were tied to fraudulent loans to HDIL.
  • Abhyudaya Cooperative Bank (2023) RBI superseded the board owing to poor governance.
  • Sarvodaya Cooperative Bank & National Cooperative Bank (2024) Restrictions were imposed upon due to financial deterioration.

Challenges to Regulate UCBs

• No Checks and Balances
  • Most UCBs are run under dynastic style with weak internal oversight.
  • Creative accounting often hides financial stress.
• Difficulties in Supervision
  • Too many UCBs (1,472) have precluded on site audits.
  • The lack of technological upgrades is another limiting factor working against the RBI monitoring remotely.
• Declining Mergers as a Useful Strategy
  • Previously, the merger of the sick UCBs with sound ones would work.
    • But with liberal branch licensing, banks tend to open new branches rather than absorb the weak UCBs.
• Political Influence and Resistance from Across the Sector
  • Such cooperative banks having political backing makes the process of reforms much more difficult.
  • There are some UCBs which are not willing to convert into Small Finance Banks, even when encouraged by the RBI.

Regulatory Reforms and Protection of Deposits

• The regulatory developments following the PMC Bank crisis include
  • Along with regulatory powers of oversight, RBI’s own powers were increased.
  • The coverage of deposits under insurance was earlier ₹1 lakh limit which has now been raised to ₹5 lakh (first revision in 27 years).
  • More flexible to raise capital for cooperative banks.
• Some ongoing considerations now
  • A government review is being conducted on whether deposit insurance coverage is to be lifted even higher.
  • RBI may strengthen its exercise by augmenting annual audits with surprise inspections and by creating trackable cash flow patterns.

A Few Bad Banks or a Systemic Problem?

What is a Bad Bank?

A bad bank is an Asset Reconstruction Company (ARC) or an Asset Management Company (AMC) that takes over the bad loans of commercial banks, manages them and finally recovers the money over a period of time.

• The Trend and Progress Report by the RBI for 2023-24 points out that capital buffers and asset quality are improving in the UCB sector.
• Main question: Are the failures of a few banks reason enough to put the entire sector in the dock?
  • Some officers claim that most UCBs are functioning properly.
  • Others are of the opinion that systemic governance issues continue to prevail in the sector, warranting regulatory scrutiny.

While most UCBs might be working well, the repeated emergence of irregularities calls for stricter oversight. Therefore, the RBI should tighten governance parameters, improve auditing mechanisms and promote technological innovations in these banks. Because of political pressures and impediments to reform, it will remain a tough but necessary task to ensure financial health of the UCB sector.

Source: Business Standard

5. SEBI: Stricter Rules for Equity and Index Derivatives

Context:

Reduction in stock derivative position limits and index derivatives rule tightening in order to curb market risk. Follows the measures of October 2024, which increased entry barrier and trading costs in derivative securities to protect retail investors.
There are also concerns regarding the high volatility of the futures and options (F&O) market, which appears to be spilling over into the broader stock market, which has declined after record highs in September.

Proposed Amendments to Stock Derivatives

• Single stock derivatives shall have market wide position limits (MWPL) as per their linkage to cash markets.
• The position limits shall be determined as the lower of the following:
  • 15% of the stock’s free float market capitalization, or
  • 60 times the average daily delivery value.
• Objective: Reduce potential market manipulation and align derivatives risk with cash market liquidity.

Proposed Changes in Index Derivatives

• Derivative contracts shall be available only on indices which meet the required liquidity and diversification conditions.
• New contracts would be allowed only when an index has at least 14 constituents.
• Formation of Weightage limits
  • The top three stocks combined must not represent more than 45% of the index.
  • The single largest stock must not represent more than 20% of the index.
• Reason: To prevent market manipulation through concentrated positions in a few stocks.

Introduction of Pre Open Session in Futures Market

• Introduce pre open sessions by SEBI for current month futures contracts on both single stocks and indices.
• Improve the price discovery and thereby soften the extreme volatility at market opening.

SEBI is actually soliciting feedback until 17 March 2025 from market participants.
If implemented, it would reduce the exposure to risk, limit the excessive speculation, and tie in derivatives trading with the fundamentals underlying stock trading.

6. Tata Capital Plans IPO, Worth $1.7Bn Listing

Context:

Tata Capital’s board approved the IPO to consist of 23 crores shares for a fresh issue and stake sales from existing shareholders.

Key Highlights:

• Expected IPO size: $1.7 billion, among the largest IPOs in the year 2025.
• Full compliance with the RBI mandate: Listing of upper layer NBFCs is a must by September 2025.
• The second Tata Group IPO within two years is Tata Technologies, which was listed in December 2023.
• Other big IPOs in the pipeline include LG India ($1.5B), JSW Cement, and Ather Energy.

Regulatory Issues & Listing Aspects

• Based on the RBI mandate, Tata Sons’ ought to be listed by September 2025, however, they have since got deregistration from the mandate.
• In January, RBI responded that the request is under “examination.”

Tata Capital’s impending IPO constitutes a vital market event conforming to the financial strategy of the Tata Group. Currently under huge interest and scrutiny, this IPO would provide weight to Tata Capital’s capital base and change the way Tata Sons think in the future.

Source: TOI

Economy

1. Rupee Depreciates Again

Context:

Rupee fell 50 paise (0.57%) to ₹87.21/USD, its biggest fall in three and more weeks. Year to date in FY25, the rupee has depreciated 4.31%; in 2025 alone, it has declined 1.81% against the dollar.

Key Highlights:

• The Reserve Bank of India settled offshore forward contracts worth $5-6 billion, thus exerting pressure on the currency.
• Breakdown Futures expiry: $2.6 billion; rest in the NDF market.
  • According to market experts, a sharper decline was triggered by stop loss orders because of RBI’s reluctance to roll over such contracts.

Limited RBI Intervention Exerts Further Pressure

• For past weeks, INR remained stable owing to RBI’s intervention on February 10-11 during which it sold $12-$14 billion in the spot market.
• Moreover, the central bank refrained from intervening, which contributed to the rupee’s further weakening.

Animation of RBI Forward Book

• RBI net short position in the forward market was $67.9 billion as of December 2024.
• The forward book saw a massive surge in a couple of months
  • Exports in September $15 billion.
  • Exports in October $49 billion.
  • Exports in November $59 billion.
  • $80-85 billion was the estimate towards the end of January.

Importers and Hedging Activity Drive Increased Dollar Demand

• Increased dollar demand from importers weakened the rupee further.
• Such increased hedging activity is only expected to build pressure as conjecture around the RBI rolling these contracts increases.

Movement of Other Currencies in the Region

• The rupee was the worst performing currency among Asian peers on Tuesday with the Thai baht down by 0.60% against the dollar.
• The February depreciation of the rupee at 0.68% exhibits consistent depreciation pressure.

With the expiry of offshore contracts and dollar demand from imports remaining, the rupee’s near term movement is expected to depend on the RBI’s intervention strategy and global market sentiments.

Facts To Remember

1 Russia and Indonesia hold talks to develop ties on defence, security

Top Russian security official Sergei Shoigu held talks in Indonesia with President Prabowo Subianto and his Defence Minister, as Moscow and Jakarta seek to boost defence ties.

2. Banu Mushtaq on Booker Prize longlist

Karnataka-based writer, activist and lawyer Banu Mushtaq’s short story collection Heart Lamp, translated from Kannada to English by Deepa Bhasthi, was longlisted for the International Booker Prize 2025 in London.

3. Operative Kisan Credit Card amount crosses ₹ 10 trillion

The finance ministry on Tuesday said the amount under operative Kisan Credit Card (KCC) accounts has crossed ₹ 10 trillion, benefiting 77.2 million farmers as of December 31, 2024.

4. Indian Army signs ₹80 crore deal with L&T for 223 automatic chemical agent detection systems

The Indian Army has signed a contract for procurement of 223 Automatic Chemical Agent Detection and Alarm (ACADA) systems at a cost of over 80 crore rupees. 

5. India is Africa’s 4th-largest trading partner, bilateral trade nears 100 billion dollar: EAM Jaishankar

External Affairs Minister Dr S Jaishankar has said that India is Africa’s fourth-largest trading partner, with bilateral trade reaching nearly 100 billion dollars. 

6. DPIIT signs MoU with Paytm to boost innovation, support fintech & manufacturing startups

The Department for Promotion of Industry and Internal Trade (DPIIT) has signed an MoU with Paytm to foster innovation and accelerate the growth of manufacturing and fintech startups in the country. 

7. Telangana secures ₹11,000 crore investment in life sciences at BioAsia 2025

Telangana has secured investment commitments of about 11 thousand crore rupees in the life sciences sector, with the potential to create over 22 thousand jobs.

8. EPFO adds over 16 lakh net members in Dec 2024

Employees’ Provident Fund Organization (EPFO) added over 16 lakh net members during December last year. This represents an increase of 9.69 per cent in comparison to the members added in November 2024. According to the Ministry of Labour and Employment, four lakh 85 thousand new subscribers were added in the 18 to 25 age group.