Daily Current Affairs (DCA) 14 May, 2025

Daily Current Affairs Quiz
14 May, 2025

International Affairs

1. IMF Disburses $1 Billion to Pakistan Under Extended Fund Facility (EFF)

What is EFF?

The Extended Fund Facility is an IMF lending program designed to assist countries facing long-term balance of payments issues stemming from structural economic weaknesses.

Key Features of EFF

• Administered by: International Monetary Fund (IMF), a Bretton Woods institution
• Nature of Loan: Repayable (not financial aid or grant)
• Tenure: Extended (usually 3+ years) with longer repayment timelines
• Objective: Supports medium-term structural reforms, such as:
  • Tax system overhaul
  • Inflation control
  • Fiscal deficit reduction
• Disbursement: In phases (tranches) based on IMF policy review of reform progress

Eligibility Criteria

• Persistent current account deficits or external payment imbalances
• Deep-seated issues in governance, public finances, tax administration, or investment climate
• Strong commitment to IMF-monitored economic reforms

EFF Loan Approval Process

1. Request: Borrowing country formally seeks IMF assistance
2. Staff-Level Agreement: Negotiation of proposed reform measures and targets
3. Executive Board Approval: IMF reviews and clears the reform agenda and macroeconomic framework
4. Tranche Disbursement: Funds released in phases, linked to reform milestones

Context in Pakistan’s Case (May 2025):

• The IMF Executive Board approved a $1 billion immediate disbursement
• The funds support Pakistan’s efforts to stabilize the economy amid fiscal imbalances and structural challenges
• Reforms target areas like tax collection, energy pricing, fiscal deficit control, and inflation containment

National Affairs

1. India’s Proposed Repairability Index

Context:

The Department of Consumer Affairs (DoCA) has received a committee report recommending a Repairability Index (RI) for mobile phones and electronic appliances in India. This framework seeks to promote transparency, sustainability, and consumer rights by scoring products on how easily they can be repaired.

What Is the Repairability Index (RI)?

• Purpose:
  The RI will assign a score to products based on ease of repair using criteria such as:
  • Availability and cost of spare parts
  • Access to software updates
  • Availability of repair information
  • Overall repair costs
• Goal:
  • Encourage consumers to make informed choices and incentivize manufacturers to produce repair-friendly devices.

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2. EPIC (Elector Photo Identity Card) Numbers

Context:

The Election Commission of India (ECI) has addressed and resolved the issue of duplicate EPIC (Elector Photo Identity Card) numbers, a problem flagged by political leaders including West Bengal CM Mamata Banerjee. All affected voters have now been issued fresh and unique EPICs, reinforcing the credibility and integrity of the voter identification process.

What is the EPIC Number?

• A 10-digit alphanumeric code assigned to each registered voter in India
• Used to prevent impersonation and duplication
• Acts as a unique identifier for each elector

Nature of the Duplication Problem

• Allegations arose that multiple voters shared the same EPIC number

Resolution Process

• Action Taken:
  • All such voters have been issued new and unique EPIC numbers
  • Field-level verifications confirmed no impersonation or fraud

Key Implications

• Electoral Integrity: The issue was procedural and did not affect voting rights or results
• Database Clean-Up: Reflects a major back-end data audit across constituencies
• Political Sensitivity: Highlights the growing focus on voter list transparency and accountability

3. DigiYatra

Context

DigiYatra is India’s national digital traveller identity platform, offering biometric-based, paperless boarding at airports. It is the world’s first federated, voluntary, and privacy-preserving system for digital passenger identity. As of May 2025, it is operational at 13 Indian airports, with plans to cover 50+ airports by 2026.

Digi Yatra: Seamless Contactless Travel Using Facial Recognition Technology (FRT)

Overview:

• Digi Yatra is a digital initiative aimed at ensuring contactless and paperless travel for passengers using Facial Recognition Technology (FRT).
• It enables passengers to move through airport checkpoints by verifying identity linked with their boarding pass using facial biometrics.

Key Features of DigiYatra

• Consent-based Biometric Verification: Facial recognition is used for identity verification at entry, security, and boarding gates.
• Decentralized and Privacy-First:
  • Biometric data is stored only on the user’s device.
  • No central storage of personal data.
  • Data is purged within 24 hours of travel.
• Federated Architecture: Connects airlines, airports, and passengers in a unified digital ecosystem.

Institutional Framework

• Managed by DigiYatra Foundation, a Section 8 not-for-profit entity owned by major airport operators:
  • Airports Authority of India
  • GMR, Adani, BIAL, etc.
• Oversight by the Ministry of Civil Aviation, ensuring public trust and interoperability.

Implementation Timeline

• Phase 1:
  • Launched at Varanasi and Bengaluru Airports in August 2022.
• Further Expansion:
  • Rolled out at Pune, Vijayawada, Kolkata, Delhi, and Hyderabad by March 2023.
  • AAI to continue phased rollout across more Indian airports.

Objectives of Digi Yatra

• Simplify and enhance the passenger travel experience.
• Optimize infrastructure use through a digital framework.
• Reduce operational costs and increase security standards.
• Digitize manual processes to improve efficiency and system performance.
• Enable a secure, verifiable Digital ID using Aadhaar or other government-issued identity proofs.

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4. PM SHRI (Pradhan Mantri Schools for Rising India) Scheme

Context:

The Kerala government on Tuesday announced it will pursue a legal course, along with protests on ground, to recover over Rs 1,500 crore allegedly withheld by the Centre. The funds, linked to centrally sponsored schemes, have reportedly been held back after Kerala refused to sign the PM SHRI scheme memorandum.

PM-SHRI Scheme: Transforming Schools into Models of NEP 2020 Implementation

Overview

• PM SHRI (Pradhan Mantri Schools for Rising India) is a centrally sponsored scheme, launched in 2022.
• It aims to develop over 14,500 model schools across India to demonstrate best practices from the National Education Policy (NEP) 2020.
• The scheme focuses on revamping existing government schools, not creating new ones.

Objective

• To foster an inclusive, safe, and modern learning environment.
• Enhance student well-being, promote holistic development, and ensure access to quality infrastructure and resources.

Funding Pattern

• General States/UTs with legislatures: 60:40 (Centre:State).
• North Eastern & Himalayan States, UT of J&K: 90:10.
• UTs without legislature: 100% Central Government funding.
• States/UTs must sign an MoU with the Ministry of Education to participate.

Duration

• The scheme will run from 2022–23 to 2026–27.
• Post-2027, maintenance of standards becomes the responsibility of respective States/UTs.

Key Features of PM SHRI Schools

• Holistic Education focusing on communication, collaboration, creativity, and critical thinking.
• Modern infrastructure including:
  • Smart Classrooms
  • Integrated Science Labs
  • ICT-enabled libraries
  • Vocational/Skill Labs & Atal Tinkering Labs
• Green Practices: Emphasis on water conservation, waste recycling, and energy-efficient practices.
• Competency-Based Education with focus on real-life application through experiential and inquiry-based learning.
• Emphasis on inclusive education with support for diverse learning needs.

Eligible Schools

• Government schools under Centre/State/UT/local bodies.
• Includes all Kendriya Vidyalayas (KVs) and Jawahar Navodaya Vidyalayas (JNVs) that meet infrastructure norms and operate from permanent campuses.

Selection Process (Challenge Mode)

1. Stage 1: State/UT signs MoU with Centre.
2. Stage 2: Schools shortlisted using UDISE+ data.
3. Stage 3: Eligible schools compete by meeting pre-defined quality criteria.

• Final selection by an Expert Committee chaired by the Secretary, Department of School Education & Literacy.

Monitoring Mechanism

• School Quality Assessment Framework (SQAF) will be used to:
  • Monitor performance.
  • Ensure institutional excellence.
  • Conduct periodic evaluations to uphold educational benchmarks.

5. India Identifies Priority Corridors for Zero-Emission Trucking (ZET)

What is Zero-Emission Trucking (ZET)?

Zero-Emission Trucking refers to freight transport using battery electric or hydrogen fuel cell trucks that produce no tailpipe emissions, unlike traditional diesel-powered vehicles.

Key Features of ZET

• Powered by clean energy: electricity or green hydrogen
• Equipped with high-capacity batteries or fuel cells
• Backed by charging/refueling infrastructure and smart logistics systems
• Offers lower maintenance costs and longer vehicle lifespan

Significance of ZET in India

1. Environmental Impact:
   • Trucks contribute to ~40% of fuel consumption and transport-related emissions
   • ZET adoption will drastically reduce carbon and particulate pollution
2. Health & Air Quality:
   • Lowers PM2.5 and NOx pollution in urban-industrial corridors
   • Improves public health outcomes in densely populated regions
3. Energy Security:
   • Cuts India’s diesel import dependency
   • Shifts toward domestically produced electricity and green hydrogen
4. Economic & Industrial Benefits:
   • Enhances logistics efficiency and fleet productivity
   • Supports future-ready infrastructure and industrial competitiveness
5. Policy Alignment:
   • Complements central schemes like:
     • PM E-DRIVE (₹500 crore initiative for EV ecosystem)
     • Atmanirbhar Bharat (Self-reliant India Mission)

Banking/Finance

1. Fitch Upgrades Shriram Finance to ‘BB+’

Context:

Fitch Ratings upgraded Shriram Finance Ltd.’s (SFL) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) from ‘BB’ to ‘BB+’, with a ‘Stable’ outlook, reflecting the company’s consistent improvements across key operational and financial parameters.

Key Drivers of the Upgrade

• Funding Diversity
• Risk Management
• Portfolio Quality
• Profitability

Ratings Details

• New Ratings:
  • Long-Term Foreign-Currency IDR: ‘BB+’ (Stable)
  • Long-Term Local-Currency IDR: ‘BB+’ (Stable)
• The upgrade moves SFL one notch closer to investment grade, though it remains in the speculative category.

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2. Challenges Faced by Indian MSMEs: SIDBI Report

Context:

A new report by the Small Industries Development Bank of India (SIDBI), titled “Understanding the Indian MSME Sector: Progress and Challenges”, reveals that access to timely credit and shortage of skilled manpower are among the most pressing challenges faced by MSMEs. The study is based on a survey of 2,000 MSMEs across 19 sectors.

Key Highlights:

Credit Access: A Persistent Bottleneck

• Despite multiple government schemes, MSMEs still face a 24% credit gap, equivalent to about ₹30 lakh crore.
• Micro enterprises are most dependent on informal borrowing (12%), compared to 3% for small enterprises and 2% for the overall MSME sector.
• The services sector faces a higher credit gap (27%).
• Women-led MSMEs experience the most acute shortfall, with a 35% credit gap.

Digital Finance Adoption

• 90% of MSMEs accept digital payments, showing strong digital integration for transactions.
• 18% of MSMEs have adopted digital lending platforms.
• The report highlights potential for wider digital credit access through tools like UPI, especially when combined with financial literacy support.

Workforce Challenges

• 25% of MSMEs cite shortage of skilled manpower as a major operational hurdle.
• The skills gap is particularly problematic in technologically driven sectors and labor-intensive manufacturing.

Policy Recommendations

• Targeted financial inclusion policies are needed for services and women-led enterprises.
• Focus on scaling digital lending ecosystems integrated with UPI and public credit registries.
• Investment in skilling programs, especially for micro enterprises and underrepresented regions, to bridge the manpower deficit.

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3. Treasury Bills (T-Bills): A Key Short-Term Government Instrument

Context:

India has extended its financial support to the Maldives by rolling over a $50 million Treasury Bill, continuing a practice that began in 2019. The move comes amid the island nation’s struggle with high public debt, a widening fiscal deficit, and billion-dollar debt servicing commitments in 2025 and 2026.

Currency Swap Support

• In 2023, the Reserve Bank of India (RBI) provided a $400 million USD swap and ₹30 billion INR swap to ease a financial crunch in the Maldives.
• These facilities helped maintain foreign exchange liquidity and avert balance-of-payment pressures.

Treasury Bills (T-Bills): A Key Short-Term Government Instrument

What are Treasury Bills?

• Treasury Bills (T-Bills) are short-term money market instruments issued by the Government of India.
• They serve as promissory notes with guaranteed repayment on maturity.
• T-Bills are issued at a discount to face value and carry no coupon (zero interest rate).

Purpose of Issuance:

• To meet short-term funding requirements of the central government.
• To bridge fiscal deficits and manage temporary cash flow mismatches.
• Utilized by RBI under Open Market Operations (OMO) to regulate money supply and inflation.

Key Features:

• Zero-Coupon Security: Issued at a discount, redeemed at face value.
• Tenure: Maximum maturity of 364 days.
• Risk-Free Instrument: Backed by the Government of India; highly secure.
• Tradability: Actively traded in the secondary market.
• High Liquidity: Suitable for short-term investment and fund parking.

How Investors Benefit:

• Profit arises from the difference between issue price and face value.
  • Example: A 91-day T-Bill with a face value of ₹120 may be bought at ₹118.40. On maturity, the investor receives ₹120, making a profit of ₹1.60.

Monetary Policy Tool – RBI’s Use of T-Bills:

• During Inflation (Boom Periods):
  • RBI issues more T-Bills to absorb excess liquidity.
  • Helps curb inflationary pressures by reducing money supply and demand.
• During Recession (Slowdown Periods):
  • RBI reduces issuance or lowers discounts to discourage T-Bill investments.
  • Encourages liquidity to move to stock markets and productive sectors, enhancing GDP and employment.

Types of Treasury Bills in India (Based on Tenure):

1. 91-day T-Bill – Most frequently traded; short-term liquidity solution.
2. 182-day T-Bill – Medium-duration T-Bill for moderate-term investments.
3. 364-day T-Bill – Longest tenure under T-Bills; used by institutional investors for near one-year parking of funds.

Who Can Invest?

• Individuals
• Banks
• Corporates
• Mutual Funds
• Insurance Companies
• Foreign Portfolio Investors (FPIs)

Advantages of Treasury Bills (T-Bills)

1. Government-Backed Security:
   • T-Bills are backed by the Government of India, offering high credit safety and zero default risk.
   • Even during economic crises, repayment is assured, making them ideal for risk-averse investors.
2. Short-Term Investment with Predictable Returns:
   • T-Bills offer fixed returns over short durations (up to 364 days).
   • Suitable for individuals seeking secure, short-term capital appreciation.
3. High Liquidity and Tradability:
   • Treasury bills can be easily sold in the secondary market, offering liquidity in emergencies.
   • Investors can convert holdings into cash before maturity.
4. Access for Small Investors:
   • Retail investors can participate through non-competitive bidding in weekly RBI auctions.
   • No need to quote yield or price, promoting financial inclusion and market exposure for new investors.
5. No TDS on Redemption:
   • No tax deducted at source (TDS) at maturity.
   • Beneficial for those in non-taxable income brackets, as there’s no need to claim TDS refunds.

Limitations of Treasury Bills:

1. Low Returns Compared to Market Instruments:
   • As zero-coupon securities, T-Bills offer fixed and relatively lower returns than stocks or mutual funds.
   • Returns remain unaffected by favorable economic conditions or market upswings.
2. Limited Capital Growth:
   • The return potential is capped, unlike equity instruments that may yield exponential gains during bull runs.
3. Interest Rate Risk (for Secondary Market Investors):
   • If sold before maturity, T-Bill prices may fluctuate with interest rate movements, potentially affecting gains.

Taxation of Treasury Bills:

• Short-Term Capital Gains (STCG):
  • Gains from T-Bills are considered STCG, taxed as per the investor’s income tax slab.
  • Applies if the investor sells before maturity or redeems within one year.
• No TDS Deduction:
  • No TDS is deducted at source, reducing compliance burden.
  • Investors in lower tax brackets avoid unnecessary deductions and refund claims.

4. Payment Aggregator

Context:

Prosus-backed fintech firm PayU Payments Pvt. Ltd. has received final authorisation from the Reserve Bank of India (RBI) to function as an online payment aggregator, marking a major regulatory milestone after over a year since securing in-principle approval.

Key Highlights

• Final RBI Nod: PayU is now officially authorised under the Payment and Settlement Systems Act, 2007.
• Industry Status: Joins over 50 RBI-approved payment aggregators, including Razorpay, BillDesk, Cashfree Payments, and CCAvenue.

What is a Payment Aggregator?

A Payment Aggregator (PA) is a third-party service provider that enables merchants to accept digital payments through multiple methods such as UPI, credit/debit cards, e-wallets, bank transfers, and EMIs. They are licensed by the Reserve Bank of India (RBI) and manage the entire payment process on behalf of merchants via a nodal account.

How Payment Aggregators Work: A Step-by-Step Process

1. Merchant Onboarding
   • Merchants register with a PA who opens a sub-account (linked to the PA’s nodal account).
2. Customer Payment Initiation
   • The customer selects a payment method and enters details at checkout.
   • Payment data is tokenized and encrypted.
3. Transaction Processing
   • PA forwards the request to the customer’s issuing bank via card networks or UPI rails.
   • Fraud checks are performed by card networks and the PA.
4. Bank Verification
   • Customer’s bank verifies fund availability and authenticity.
5. Approval/Denial
   • Response is routed back through the same channel to the PA and merchant.
6. Fund Collection
   • Upon approval, funds are moved to the PA’s nodal account.
7. Settlement
   • PA settles funds to the merchant’s account (daily, same-day, or instantly).

Types of Payment Aggregators in India

1. Bank Payment Aggregators
   • Operated by banks (e.g., HDFC, ICICI)
   • Do not require RBI registration
   • Higher setup and integration costs
   • Less suited for small businesses
2. Third-Party Payment Aggregators
   • Non-banks like Razorpay, Mobikwik, Airpay
   • Require RBI approval
   • Easier integration, lower cost
   • Offer analytics, sub-merchant onboarding, and APIs

Key Features & Benefits of Payment Aggregators

1. Seamless Onboarding & Sub-Merchant Management
   • Onboard multiple sub-merchants (e.g., AMCs, sellers) using APIs or dashboards.
2. Secure Payment Infrastructure
   • No sensitive data storage
   • PCI-DSS & ISO compliant
   • Card tokenization and encryption
3. Fraud Detection & Compliance
   • Use of machine learning to detect fraud patterns
   • Compliance with RBI and PCI-DSS standards
4. Multiple Payment Options
   • UPI, cards, NetBanking, BNPL, e-mandates, EMIs, wallets
5. Fast Settlements
   • Instant or same-day settlements
   • Useful during weekends, holidays
6. Smooth Checkout Experience
   • Reduces cart abandonment
   • Supports mobile-friendly and one-click payment flows
7. Dedicated Customer Support
   • 24×7 support for payment status, refunds, disputes, and technical queries

Payment Aggregator vs Payment Gateway: Key Differences

Parameter	Payment Aggregator (PA)	Payment Gateway (PG)
Function	Handles funds and settlements	Facilitates data encryption and transaction routing
License Requirement	Must be RBI-authorised (non-bank entities)	No RBI license needed
MID Requirement	PA provides its own Merchant ID (MID)	Requires merchant to have its own MID
Examples	Razorpay, Mobikwik, Airpay	Razorpay, CC Avenue, PayU

What is a Payment Aggregator License and How to Get One?

A Payment Aggregator License is issued by the Reserve Bank of India (RBI) to entities that facilitate online payments on behalf of businesses. These entities enable merchants to accept digital payments through various methods like cards, UPI, and net banking, without the need for a separate payment infrastructure.

Eligibility Criteria:

To obtain this license, a firm must fulfill the following requirements:

• Maintain a net worth of INR 15 crore by March 31, 2021
• Maintain a net worth of INR 25 crore by March 31, 2023

Application Requirements:

The application submitted to RBI must include:

• Proof of financial stability
• Details of business experience in handling payment processing
• Technical capabilities to securely manage transactions

Compliance Obligations:

Payment aggregators are required to:

• Ensure clear agreements with merchants and customers
• Address complaints, refunds, failed transactions, and dispute resolution effectively

This license ensures that only qualified and responsible entities are permitted to handle digital payments in India, fostering secure and efficient payment ecosystems.

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5. Expression of Interest (EOI)

Context:

A consortium of banks led by Union Bank of India has received 17–18 expressions of interest (EoIs) for the sale of ₹728.58 crore in stressed loans of Sahara Hospitality Ltd, which operates the Sahara Star Hotel in Mumbai.

What is an Expression of Interest (EOI)?

An Expression of Interest (EOI) is a non-binding document that a potential buyer shares with a seller in the early stages of a mergers and acquisitions (M&A) process. It signals a serious intent from the buyer to acquire the seller’s business, subject to due diligence and final agreement. While not legally binding, it lays the foundation for further negotiations and due diligence by outlining the proposed terms and expectations of the buyer.

Key Concept of Expression of Interest (EOI)

• Purchase Price
  • States the total consideration the buyer is willing to pay on a cash-free, debt-free basis.
  • May include components for ESOPs, bonuses, severance.
  • Terms are non-binding and subject to revision based on further evaluations.
• Valuation Methodology
  • Includes the basis for valuation such as financial projections, historical data, and assumptions like:
    • Accuracy of seller’s financials
    • Fully funded retirement benefits
    • Normal working capital
    • Seamless transfer of contracts without extra payments
• Due Diligence
  • Requests access to conduct due diligence across finance, legal, HR, technology, facilities, and more.
  • Ensures the buyer is fully informed before proceeding to a definitive agreement.
• Transaction Structure
  • Clarifies whether the buyer seeks a full acquisition or a carve-out.
  • Describes assets, liabilities, and earn-out arrangements.
  • Explains funding method: internal reserves or bank financing.
• Management Retention Plan
  • Outlines intentions for retaining key senior management and proposed incentives.
• Transition and Support Services
  • Requests post-transaction support from the seller for a specified time without additional cost beyond the purchase price.
• Approvals Required
  • Notes that deal closure is subject to buyer’s board approval, aligning timelines accordingly.
• Conduct of Business
  • Asks the seller to continue operations in the normal course and to notify any major changes that could affect valuation or terms.
• Transaction Expenses
  • Specifies that each party will bear their own costs related to legal, financial, and due diligence processes.
• Confidentiality
  • Prohibits sharing of buyer’s identity or deal details without written consent.
  • Disclosure allowed only post-signing of definitive agreements.

• Non-Binding Nature
  • Clarifies the EOI is not legally binding.
  • No party can claim damages or force the other to proceed with the deal based on the EOI.

6. Public Sector Banks Launch Special Deposit Products to Boost Resource Mobilisation

Context:

With deposit growth slowing to 10.3% in FY25 from 13.5% in FY24, state-run banks are launching innovative deposit schemes to attract customers. Most public sector banks (PSBs) are targeting a 9–11% deposit growth for FY25.

Union Bank of India: Special Term Deposit with Health Cover

• Scheme: Special 375-day fixed deposit
• Interest Rate: 6.75% per annum
• Eligibility: Minimum deposit of ₹10 lakh, maximum ₹3 crore
• Unique Feature: Includes a 375-day Super Top-up Health Insurance cover:
  • Coverage: ₹5 lakh
  • Facility: Cashless hospitalisation
• Objective: Combine financial returns with healthcare benefits to appeal to high-value depositors

Canara Bank: Launch of Canara TruEdge (CASA Product)

• Product Type: Current Account and Savings Account (CASA) combo
• Target Group: Customers requiring tailored financial and operational solutions
• Features:
  • Customer Segmentation: Personalised account management
  • Flexible Benefit System:
    • Waivers and concessions on charges
    • Benefits linked to Monthly Average Balance (MAB) of the previous month
• Objective: Deepen customer relationships through customisation and retention-focused incentives

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7. SEBI Proposes Relaxed Norms for FPIs Investing Only in Indian Government Bonds

Context:

The Securities and Exchange Board of India (SEBI) has proposed a new framework to ease regulatory requirements for Foreign Portfolio Investors (FPIs) investing exclusively in Indian government bonds.

• The move follows India’s upcoming inclusion in major global bond indices, including:
  • JP Morgan Global Emerging Markets Bond Index
  • Bloomberg EM Local Currency Government Index
  • FTSE Russell EM Government Bond Index (effective September 2025)

Key Proposals

• Creation of a New Category: IGBFPI
  • FPIs investing only through the Voluntary Retention Route (VRR) and Fully Accessible Route (FAR) will be classified as Indian Government Bond FPIs (IGBFPIs).
  • This classification will be assigned at the time of registration or transition by existing FPIs.
• Transition Guidelines for Existing FPIs
  • Existing FPIs can opt-in as IGBFPI by:
    • Declaring their intent.
    • Divesting non-eligible holdings (i.e., securities other than permitted government bonds).
    • Closing related demat and trading accounts.
• Relaxed Ownership Restrictions
  • Current FPI rules cap NRI/OCI/RI investment at:
    • 25% individually
    • 50% collectively of FPI corpus.
  • Under the new proposal:
    • NRIs and OCIs can control IGBFPIs with no cap.
    • Resident Indians (RIs) may still face certain restrictions, which will remain.
• Purpose and Benefit
  • Aims to attract passive foreign inflows by simplifying compliance.
  • Helps align regulatory framework with India’s increasing global bond market integration.
  • Supports smoother execution for funds benchmarking global indices.

Implications for the Market

• These changes could enhance foreign participation in government securities, improving liquidity and depth in the bond market.
• It strengthens India’s positioning as a trusted sovereign debt market in the emerging market investment universe.

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8. Liquid Exchange-Traded Funds (ETFs)

Context:

Brokers are increasingly guiding clients to liquid exchange-traded funds (ETFs) as a solution for managing idle cash. Liquid ETFs allow brokers to retain funds within their platforms, bypassing regulatory requirements that mandate transferring unutilized funds back to clients’ bank accounts at month-end. As of the latest figures, assets under management (AUM) in liquid ETFs have increased by 31% over the past year, growing from ₹17,200 crore to ₹23,550 crore.

What Are Liquid ETFs?

Liquid Exchange-Traded Funds (ETFs) are short-term debt instruments designed to invest in low-risk assets like money market instruments and overnight securities. These funds typically have a 1-day maturity and are traded on stock exchanges such as NSE and BSE, providing easy access and high liquidity for investors. Dividends from liquid ETFs are calculated daily and reinvested into additional units, credited to the demat account every 30 days.

Who Can Invest in Liquid ETFs?
Liquid ETFs are ideal for:

• Investors looking for a secure way to park unused funds temporarily.
• Those seeking consistent daily returns without committing funds for a long time.

Advantages of Liquid ETFs

• Earn Better Returns: Liquid ETFs ensure that funds earn returns immediately after settlement, unlike idle funds in a margin account or savings account.
• High Liquidity: Easy to buy and sell, ensuring quick access to funds when needed.
• Transparency: Daily updates on portfolio holdings, providing clarity on assets and strategies.
• Convenient Transactions: No need for frequent fund transfers between trading and bank accounts.
• No Securities Transaction Tax (STT): Liquid ETFs are exempt from STT, reducing the cost of investment.
• Low Expense Ratio: Expense ratios for liquid ETFs are generally lower compared to mutual funds.

Disadvantages of Liquid ETFs

• Market Risks: Subject to market fluctuations, which may impact value despite aiming for stability.
• Lack of Control Over Holdings: Investors don’t have control over individual securities within the ETF’s portfolio.

Taxation on Liquid ETFs in India

• Short-Term Capital Gains (STCG): If sold within 1 year of purchase, gains are taxed as short-term capital gains.
• Long-Term Capital Gains (LTCG): If sold after 1 year, gains are taxed at 12.5% (with the initial ₹1.25 lakh of profits exempted per financial year).

Factors to Consider When Investing in Liquid ETFs

• Investment Objective: Ideal for managing short-term liquidity or parking surplus funds temporarily.
• Time Horizon: Best suited for investors with a short-term investment horizon (days to months).
• Risk Tolerance: Liquid ETFs are low-risk but still subject to market fluctuations.
• Credit Quality: Ensure the ETF invests in high credit quality instruments to reduce default risk.

Parameter	Liquid Funds	Liquid ETFs
Liquidity	T+1 redemption; some offer instant access	Intraday trading possible; real-time liquidity on exchanges
Suitability	Beginners, traditional investors	Market-savvy investors with trading/demat accounts
Transaction Cost	No brokerage; possible exit loads for early exit	Brokerage fees apply for buy/sell transactions
Expense Ratio	Slightly higher than ETFs	Lower expense ratio; more cost-efficient
Accessibility	Available through banks, AMCs, MF platforms	Requires a demat and trading account
Customisation	More fund options tailored to risk profiles	Limited ETF choices in market
Taxation	<1 yr: taxed as per slab; >1 yr: LTCG with indexation	<1 yr: STCG; >1 yr: LTCG like equity investments

9. Qatar National Bank Becomes First MEA-Based Bank to Open Branch in India’s GIFT City

Context:

Qatar National Bank (QNB), the largest financial institution in the Middle East and Africa (MEA), has inaugurated a new branch in Gujarat International Finance Tec-City (GIFT City), making it the first MEA-based bank to do so.

• Significance for India: The move underscores India’s growing prominence as a global economic and manufacturing hub. GIFT City is positioned as a gateway for international financial services, attracting global institutions.
• Services Offered: The QNB GIFT City branch will offer:
  • Credit facilities
  • Foreign currency financing
  • Trade finance solutions
  • Wholesale banking services for Indian corporates and global clients
• India’s Long-Term Appeal: QNB sees India as a long-term opportunity for its wholesale banking operations, leveraging India’s stable economic fundamentals and its own global reach.

Implications:

• Strengthened Indo-MEA Financial Ties: QNB’s entry is expected to enhance cross-border banking cooperation and open new avenues for trade and investment flows between India and the MEA region.
• Boost for GIFT City: The development adds further credibility to GIFT City’s role as a thriving international financial centre and an attractive base for global banking institutions.

10. RBI Makes Reporting of Digital Lending Apps Mandatory from May 13, 2025

Context:

The Reserve Bank of India (RBI) has issued new compliance guidelines under the Reserve Bank of India (Digital Lending) Directions, 2025. These reforms aim to regulate digital lending platforms, enhance borrower protection, and ensure transparent and ethical lending practices.

Objective

To clean up the digital lending ecosystem by:

• Enforcing uniform regulatory standards
• Protecting borrowers from hidden charges and unethical practices
• Promoting transparency and accountability in the sector

Key Highlights

• Mandatory Reporting via CIMS Portal:
  • All Regulated Entities (REs) must upload details of their Digital Lending Apps (DLAs) on the RBI’s Centralised Information Management System (CIMS).
  • Portal Activation Date: May 13, 2025
  • Compliance Deadline for REs: June 15, 2025
• Public Directory of DLAs:
  • Launch Date: July 1, 2025
  • RBI will host a live public directory on its website for consumers to verify DLAs linked to RBI-regulated lenders.
  • The directory will be auto-updated as REs add or delist apps.
• Enhanced Transparency for Aggregators:
  • Lending Service Providers (LSPs) must display all loan offers from multiple REs.
  • Offers must include even those not matched or selected, along with the lender names.
• Stricter Vetting of Third Parties:
  • REs must perform due diligence on third-party partners before engagement.
  • Assessment criteria include technical capability, data privacy compliance, and data storage security.

Recent Context:

• In March 2025, the RBI conducted a $10 billion dollar-rupee buy-sell swap on February 21 to inject longer-term rupee liquidity into the financial system.

Significance

• Empowers borrowers through better access to verified digital lenders
• Curbs misuse of fintech platforms for exploitative lending
• Reinforces trust in RBI-regulated digital finance infrastructure

11. LIC Launches WhatsApp-Based Premium Payment Facility for Policyholders

Context:

Life Insurance Corporation of India (LIC), India’s largest life insurer, has introduced a new WhatsApp-based premium payment service, enabling policyholders to pay premiums and access policy details through a chatbot interface.

Key Features of the Service

• Available to all registered LIC customers
• Access through a WhatsApp bot for a seamless, interactive experience
• Allows checking of policy status and premium due dates
• Payment modes supported: UPI, net banking, credit/debit cards
• Entire journey—from policy identification to payment and receipt—happens within WhatsApp
• Launched by LIC Chairman & MD Siddhartha Mohanty and senior officials

Significance

• Enhances customer convenience and accessibility
• Enables policyholders to pay anytime, from anywhere
• Supports LIC’s broader digital transformation goals
• Over 2.2 crore policyholders are registered on LIC’s digital platform, with 3+ lakh daily logins

About LIC:

• Founded: 1 September 1956
• Headquarters: Mumbai, Maharashtra
• Chairman: Siddhartha Mohanty

Economy

1. India’s National Manufacturing Mission

Context:

The Union Government has set up an inter-ministerial panel to draft a National Manufacturing Mission. The initiative aligns with the Make in India vision and aims to reinvigorate the manufacturing sector, which has historically contributed only 15–17% to GDP, far below the 25% target.

Five Pillars of the Proposed Manufacturing Mission

1. Ease and Cost of Doing Business: Focus on reducing regulatory burdens and improving business environment.
2. Future-Ready Workforce: Skilling initiatives aligned with emerging manufacturing technologies.
3. Revitalising MSMEs: Addressing credit, technology, and compliance challenges for micro, small, and medium enterprises.
4. Access to Advanced Technology: Promoting adoption of cutting-edge tech and improving R&D capacity.
5. Global Quality Standards: Enhancing competitiveness by boosting quality and consistency in manufacturing output.

Key Challenges Addressed

• Underperformance of Past Initiatives: Despite the National Manufacturing Policy (2011) and Make in India (2014), the sector has struggled due to structural inefficiencies.
• MSME Marginalisation: Existing schemes like PLI favor capital-intensive industries, leaving labour-intensive MSMEs (e.g., apparel, furniture, toys) underserved.
• Geographical Disparity: High-value manufacturing is concentrated in states like Tamil Nadu, Maharashtra, Gujarat, and Uttar Pradesh, leading to regional imbalance.
• Global Competitiveness Gaps: Compared to countries like Vietnam, India lacks scale, standardisation, and export momentum.

Opportunities for Structural Reform

• Cleantech Manufacturing Push:
  • Photovoltaic cells, electric vehicles, wind and grid battery components are key sectors.
  • Supports both climate goals and reduction in import dependency.
• Cluster-Based Industrial Development:
  • Could help build scale, integrate supply chains, and improve logistics.
• Improved Physical and Trade Infrastructure:
  • Calls for low tariffs on input goods, efficient logistics, and investor-friendly regulations.

BS

2. Sectors of Economy

What Is a Sector?

A sector is a broad category that groups businesses and industries that engage in similar or related activities within the economy. Dividing the economy into sectors allows economists to analyze economic activities and trends, helping identify which sectors are expanding or contracting.

Key Sectors in the Economy

Four Main Economic Sectors

1. Primary: Resource extraction and agriculture.
2. Secondary: Manufacturing and construction.
3. Tertiary: Service industries.
4. Quaternary: Knowledge-based activities (R&D, IT, education).

• Primary Sector
  • Involves the extraction and harvesting of natural resources from the Earth.
  • Activities include:
    • Mining
    • Agriculture
    • Fishing
    • Forestry
    • Hunting
  • Common in emerging economies, where a significant portion of employment is concentrated in resource extraction.
• Secondary Sector
  • Focuses on the processing, manufacturing, and construction industries that transform raw materials into finished goods.
  • Activities include:
    • Automobile production
    • Textile manufacturing
    • Chemical engineering
    • Shipbuilding
    • Energy utilities
  • Represents the industrial base of developed nations.
• Tertiary Sector
  • Comprises service-based industries that provide services rather than goods.
  • Key areas include:
    • Retail
    • Transportation and distribution
    • Banking and financial services
    • Healthcare
    • Insurance
    • Legal services
  • This sector forms the backbone of developed economies, supporting the functioning of the primary and secondary sectors.
• Quaternary Sector
  • Encompasses knowledge-based activities that focus on intellectual pursuits and innovation.
  • Key activities include:
    • Research and development (R&D)
    • Information technology
    • Education
    • Consulting services
  • With the rise of technology and the knowledge economy, the quaternary sector has become increasingly significant.

Economic Sectors vs. Investment Sectors

• Economic sectors categorize activities in an economy, such as extraction, manufacturing, or services.
• Investment sectors are more granular and are used in financial markets to group companies that have similar business activities, such as:
  • Technology (software, electronics)
  • Energy (oil, renewable energy)
  • Healthcare (pharmaceuticals, healthcare services)
  • Financial services (banks, insurance)

Investment Sector Importance

Investment sectors help investors understand how specific groups of companies are performing, offering insights into market conditions and economic performance. Sector-specific funds and ETFs allow investors to target particular sectors for investment opportunities.

Agriculture

1. India to Introduce Natural Farming Certification System (NFCS)

Overview of the Proposal

• The Indian government is planning to introduce a Natural Farming Certification System (NFCS) to boost consumer trust and farmer income.
• This initiative will benefit the 1.8 million farmers practicing natural farming across 780,000 hectares of land.
• The certification aims to provide premium pricing for chemical and synthetic fertilizer-free products, improving farmers’ incomes.

Key Features of the NFCS

• Voluntary Participation: The system will be non-binding, meaning farmers can choose whether to participate.
• Increased Market Access: Certified natural farming products will likely be able to command higher prices, similar to organic farming.
• Distinct from Organic Farming: Unlike organic farming that uses natural inputs like compost and manure, natural farming avoids all external inputs, relying solely on natural ecological processes.

Targeted Regions and Support for Farmers

• Key States: Punjab, Haryana, Madhya Pradesh, Uttarakhand, Jharkhand, West Bengal, Mizoram, Telangana, and Kerala have been identified as major areas where natural farming is gaining traction.
• Farmer-Led Movements: Various farmer-led movements and state governments are supporting the adoption of natural farming in these regions.

Certification Process and Benefits

• Certification Agencies: State and union territory boards responsible for organic farming may also oversee natural farming certification.
• The NFCS will operate under the existing Participatory Guarantee System (PGS-India), which already certifies organic products, with separate standards for natural farming.
• Benefits for Farmers: The certification will help farmers gain access to better markets and secure fair pricing for their products.
• Consumer Confidence: It will also enhance consumer confidence in the quality and safety of natural farming products.

Impact on Natural Farming

• The introduction of NFCS is expected to bring about greater accountability in natural farming practices.
• It is likely to influence policy changes, attract government support, and raise consumer awareness of natural farming products.

Mint

2. Kendu Leaves – “Green Gold of Odisha”

Context:

Gram Sabhas in Odisha’s Koraput District Seek Deregulation of Kendu Leaf Trade.

Background

• Location: Eight Gram Sabhas in Boipariguda block, Koraput district, Odisha.
• Action: These communities have harvested over 4 lakh bundles of kendu leaves during the 2025 season.
• Key Villages: Kalatha Jodi, Kupuli Guda, Badali Beda, among others.

Kendu Leaves – “Green Gold of Odisha”

• Known as Tendu Leaf in other regions, kendu leaves are essential Non-Wood Forest Products (NWFPs).
• The leaves are primarily used for bidi rolling (local cigarettes) and have medicinal properties.
• Key Producer States: Odisha, Madhya Pradesh, Chhattisgarh, Jharkhand, Maharashtra, Gujarat, Andhra Pradesh.

Legal Framework – Forest Rights Act (FRA), 2006:

• FRA (2006): Recognizes the rights of forest-dwelling communities to collect, use, and sell minor forest produce (MFP) like kendu leaves.
• 2012 FRA Amendment:
  • Empowers communities to process, store, transport, and sell MFP without paying royalties or needing government approval.
  • Transit Permits: Must be issued by the Community Forest Rights Management Committee (CFRMC), which has the authority under the FRA.

Request for Deregulation

• The Gram Sabhas seek to manage and sell kendu leaves independently under FRA’s legal framework.
• The state government’s Odisha Kendu Leaf (Control of Trade) Act should not override the FRA, as the latter’s provisions have legal supremacy.

Significance

• Kendu leaves are a crucial livelihood source for tribal communities in Odisha.
• Granting the right to independently manage the trade would improve their economic autonomy and reduce government control.

Facts To Remember

1. Renesas India to Lead India’s First 3nm Chip Design Initiative

This milestone was declared during the inauguration of Renesas India’s new R&D office in Noida, with a design centre in Bengaluru also inaugurated virtually. Renesas Electronics, a Japanese semiconductor major, will become the first company to design 3-nanometre (nm) chips end-to-end in India, as announced by Union Electronics & IT Minister Ashwini Vaishnaw.

2. India’s retail inflation eases to a 6-year low of 3.16% in April

India’s retail inflation eased to 3.16 percent in April from 3.34 percent in March, driven by significant easing in food prices. 

3. Khelo India Youth Games: Rajasthan cyclists dominate, push state to 2nd spot in medal tally

In the Khelo India Youth Games, players of Rajasthan today made a clean sweep in the events of the Cycling Time Trial category. 

4. Cargo handled by India’s major ports surges to record 855 million tonnes in FY25

India’s major ports have registered remarkable growth in cargo handling in the last financial year. In a statement, the Ministry of Ports, Shipping and Waterways said that the country’s ports handled 819 million tonnes of cargo in the financial year 2023-24, which increased to 855 million tonnes in FY 2024-25, marking an annual growth of 4.3 per cent. 

5. India informs WTO of tariff plan to counter US duties on steel

India has proposed to impose retaliatory tariffs to counter US duties on Indian Steel and Aluminium. India has informed the World Trade Organisation (WTO) of its plans to impose such tariffs on select American goods.