Daily Current Affairs (DCA) 3 April, 2025

Daily Current Affairs Quiz
3 April, 2025

International Affairs

1. West Asia Conflict

Context:

On March 7, 2025, former U.S. President Donald Trump announced sending a letter to Iran’s Supreme Leader, Ayatollah Ali Khamenei, seeking negotiations on Tehran’s nuclear program. On March 15, the U.S. launched pre-emptive airstrikes against Ansar Allah (Houthis) in Yemen.

• Escalation in Gaza & Lebanon:
  • On March 17, Israel resumed its bombing of Gaza, killing over 400 Palestinians and ending the fragile ceasefire.
  • On March 22, Israel conducted its largest airstrikes in Lebanon since November, targeting Hezbollah.
• U.S. Military Build-Up: Washington deployed additional fighter jets and a second aircraft carrier to the region.

Background: The U.S.-Iran Conflict Over Nuclear Policy

• Obama’s 2015 JCPOA Deal: The Joint Comprehensive Plan of Action (JCPOA) sought to restrict Iran’s nuclear program in exchange for sanction relief. However, Israel and U.S. conservatives opposed the deal.
• Trump’s Withdrawal in 2018: Trump abandoned the JCPOA, reimposed sanctions, and intensified a “maximum pressure” campaign against Iran. Iran responded with nuclear expansion and stronger support for its regional allies.
• Post-October 7, 2023 Hamas Attack: Israel used the war in Gaza as a broader effort to weaken Iran’s influence, targeting Iranian military officials and key allies like Hezbollah and the Houthis.

Changing Regional Dynamics

• Trump’s Re-Election in November 2024: Provided Israel with renewed confidence to escalate military operations without fear of U.S. intervention.
• Fall of Assad’s Syria:
  • Syria’s Bashar al-Assad was Iran’s only state ally in West Asia. His removal in November 2024 severed Iran’s land route to Hezbollah.
  • This weakened Iran’s “axis of resistance”, diminishing Hezbollah’s military power.
• Israel’s Strategic Shift:
  • Israel refused to withdraw from Southern Lebanon despite a ceasefire agreement.
  • The January 2025 Gaza ceasefire was used to secure hostages, but Israel continued military action.
  • U.S. strikes on Houthis signaled Trump’s full support for Israel’s regional strategy.

Iran’s Shrinking Strategic Space & Risk of War

• Trump’s Diplomatic Conditions: The U.S. demands Iran abandon its nuclear program, reduce military capabilities, and cut ties with its regional allies.
• Iran’s Response: Tehran is open to limited nuclear talks but rejects broader concessions.
• Potential Military Scenarios:
  • Targeted Airstrikes: Joint U.S.-Israeli airstrikes could target Iran’s nuclear and military facilities, though deeply buried sites may survive.
  • Full-Scale Invasion: A regime-change war would require a large-scale U.S. military intervention, but Iran’s geographical and political landscape makes this highly challenging.

A Dangerous Crossroads

With Iran’s regional allies weakened and Israel pressing for direct confrontation, the risk of war has never been higher. The final question remains: Will Trump commit to a full-scale war against Iran, or will diplomacy prevail?

TH

2. Trump’s Fair and Reciprocal Plan

Context:

The Trump administration’s ‘Fair and Reciprocal Plan’ aims to counter non-reciprocal trade arrangements by imposing tariffs equivalent to those levied by U.S. trading partners. The plan assesses tariffs, discriminatory taxes, non-tariff barriers, exchange rate manipulation, and other restrictions that limit U.S. market access.

Global Trade Dynamics

• U.S. Share of Global Exports:
  • In 2010, the U.S. received 12% of global merchandise exports.
  • By 2019, this share rose marginally to 13% and stood at 13.4% in 2022.
  • This means that 87% of global merchandise exports do not involve the U.S..
• Country Variations:
  • High Dependence on the U.S.: Cayman Islands, Bermuda, Canada, and Mexico export over 75% of their goods to the U.S.
  • Low Dependence on the U.S.:
    • 81 out of 160 countries exported less than 5% of their goods to the U.S. in 2022.
    • 26 African nations exported less than 1% to the U.S.
    • India (18%), China (16%), and the EU (19%) sent less than a fifth of their exports to the U.S.

Tariff Disparities & Challenges of Reciprocal Tariffs

• Comparing Tariffs:
  • U.S. export tariffs are lower than partner country tariffs in only 130 out of 157 countries.
  • In 27 countries (including Canada, the EU, Japan, and the U.K.), U.S. tariffs are already higher, making reciprocal tariffs ineffective.
  • These 27 countries accounted for 50% of U.S. merchandise exports in 2022.
• Impact of Raising Reciprocal Tariffs:
  • In 57 of the 130 countries, the required U.S. tariff hike to match partner tariffs is less than 5% (including China and India).
  • In 15 of these 57 countries, the tariff increase needed is less than 1%.
  • The real challenge lies in 73 countries, where tariff hikes would exceed 5%.
• Unintended Consequences:
  • Countries facing high reciprocal tariffs could divert exports elsewhere, as 87% of global trade already excludes the U.S..
  • History shows that firms can quickly adapt to trade shocks, reducing reliance on the U.S. market.

Policy Recommendations: Alternative to Tariff Wars

• Removing Trade Barriers:
  • Instead of retaliatory tariffs, nations should remove internal trade restrictions and enhance regulatory cooperation.
  • Strengthening trade with non-U.S. partners is crucial to mitigating economic risks.
• Expanding Digital Trade:
  • According to World Bank and WTO reports, digitally delivered services are the fastest-growing segment in global trade.
  • Preferential trade agreements that address regulatory barriers can significantly boost digital services exports.

While Trump’s reciprocal tariff strategy may serve as a bargaining tool, it risks self-inflicted economic harm by encouraging trade diversion. A more sustainable approach is to enhance global trade partnerships, eliminate regulatory barriers, and invest in digital trade expansion.

TOI

3. Myanmar Earthquake

Overview of the Earthquake

• Date & Location: March 28, 2025, 20 km from Mandalay, Myanmar’s second-largest city.
• Magnitude: 7.7, followed by aftershocks, the strongest being 6.4 (11 minutes later).
• Cause: Movement along the Sagaing fault, a highly active seismic zone near Mandalay.

Impact of the Earthquake

• Devastation: Thousands dead, extensive damage to homes, religious monuments, and infrastructure.
• Regional Effects:
  • Bangkok, Thailand (1,000 km away):
    • Collapse of a 33-storey high-rise under construction.
    • Seismic seiches caused water to overflow from rooftop swimming pools.
  • Mandalay (1.5 million people): Worst-hit area with pagodas, mosques, and bridges damaged.
  • Southern Sagaing Fault: Amplified seismic energy due to alluvium deposits from the Irrawaddy River.
  • China’s Yunnan Province: Escaped major damage as the quake’s energy dispersed north-south.
  • Eastern India: Minimal impact due to energy dissipation along the fault.
• Casualty Estimate: US Geological Survey projects over 10,000 deaths.

Seismic Activity in South Asia

• South Asia, including Myanmar, is highly earthquake-prone due to its location near major tectonic boundaries:
  • Himalayas, Shillong Plateau, Indo-Burman Range, Andaman-Nicobar subduction zone.
• Notable past earthquakes:
  • 2004 Sumatra Earthquake (M 9.2): One of the largest recorded, triggering a devastating tsunami.
  • 1792 Arakan Coast Earthquake (M 8.5): Caused a tsunami and soil liquefaction in Bangladesh.
  • Historic Myanmar Earthquakes:
    • 1839 Ava Earthquake (M 7.8): Killed 500+ people in central Myanmar.
    • 1927 & 1946 Sagaing Fault Earthquakes (M 7.7): Similar magnitude to 2025.
    • 2016 Bagan Earthquake: Damaged Myanmar’s historic city of Bagan.

Geodynamic Context of the Sagaing Fault

• Plate Tectonics: India-Eurasia plate convergence is oblique, causing strain to split into strike-slip and thrust faulting.
• Sagaing Fault:
  • A 1,400 km long strike-slip fault.
  • Absorbs 50-55% of overall plate motion.
  • Slip Rate: 15-25 mm per year, with an accumulated displacement of 100-700 km.
  • Shallow Earthquakes: Typically occur at 10-15 km depth, leading to severe surface shaking.
• Comparisons:
  • Functions similarly to San Andreas Fault (USA).
  • Unlike subduction zones, it produces horizontal movement rather than vertical thrusting.

What Does the Mandalay Earthquake Signal?

• Part of an Ongoing Sequence:
  • Half of the Sagaing Fault has ruptured in recent decades, indicating continuing seismic activity.
• Warning for India & South Asia:
  • India is highly earthquake-prone, particularly in Himalayan and Northeast regions.
  • Lack of strict earthquake-resistant construction increases vulnerability.
  • Urgent need for scientific disaster preparedness and seismic safety measures.

The 2025 Mandalay earthquake underscores the urgent need for better seismic monitoring and infrastructure resilience in South Asia. With growing urbanization, the risks posed by major earthquakes could be catastrophic. Countries like India, Bangladesh, and Myanmar must strengthen earthquake mitigation strategies to minimize future disasters.

4. 6th BIMSTEC Summit in Bangkok

Event Overview

• Summit Venue: Bangkok, Thailand
• Date: April 2025
• Theme: “Prosperous, Resilient, and Open BIMSTEC”
• Format: First in-person summit since 2018 (Kathmandu); the previous (5th) summit was virtual (2022, Sri Lanka)

Key Agendas & Agreements

• Adoption of the 5th BIMSTEC Declaration
• Signing of a Maritime Transport Cooperation Agreement
• Discussions on regional security, trade, and economic collaboration

Possible High-Profile Meetings

• India-Bangladesh Talks:
  • Bangladesh’s Foreign Secretary confirmed a likely bilateral meeting between PM Narendra Modi and Bangladesh’s Chief Adviser Prof. Mohammed Yunus.
  • The Ministry of External Affairs (MEA) has not officially confirmed it.
• India-Thailand Engagement:
  • PM Modi to meet Thai PM Paetongtarn Shinawatra upon arrival at Don Mueang Airport.
  • Dinner with visiting Heads of State and Government.
  • Meeting with Thai King Maha Vajiralongkorn before departure to Sri Lanka (April 4-6).

Geopolitical Context

• Backdrop of Myanmar’s Earthquake: The summit follows a devastating earthquake in Myanmar, adding urgency to discussions on disaster relief and regional cooperation.
• India-Bangladesh Relations:
  • Ties have remained uncertain since the removal of former PM Sheikh Hasina in August 2024.
  • Rohingya crisis continues to strain Bangladesh-Myanmar relations.

Why This Summit Matters?

• Revitalization of BIMSTEC post-pandemic with in-person diplomacy.
• Strengthening India’s ties with Thailand and Bangladesh.
• Potential policy shifts following leadership changes in Bangladesh.

5. UNESCO Report

Context:

UNESCO released its report ‘Education and Nutrition: Learn to Eat Well’ on March 31, 2025, aligning with the Nutrition for Growth summit in France. The report highlights the interconnection between education and nutrition and how both impact learning outcomes, gender equality, and health.

Key Findings

A. How Nutrition Affects Education

• Boosts academic performance: The Integrated Child Development Scheme (ICDS) led to a 9% rise in secondary school completion and 11% in university completion.
• Improves enrolment and learning: In Maharashtra, bio-fortified pearl millet consumption enhanced attention and memory among adolescents.
• Promotes gender equality: India’s PM-POSHAN scheme positively influenced girls’ enrolment and supported disadvantaged groups.

B. How Education Affects Nutrition

• Intergenerational impact: Educated mothers make informed nutrition choices, improving overall family health.
• Improves dietary habits: Higher education levels lead to better individual nutritional decisions.

Key Recommendations

• Revamp nutrition education: Introduce food education in school curricula from childhood to adulthood.
• Use schools as nutrition hubs: Implement a holistic school approach—meals, physical activity, and extracurricular programs.
• Enhance professional training: Improve nutrition knowledge and skills at all levels.
• Strengthen monitoring: Track the impact of school meal programs and nutrition-linked health policies.

The report underscores the mutual dependence of nutrition and education. Implementing its recommendations can improve learning outcomes, health, and gender equality, shaping a more resilient future for students worldwide.

National Affairs

1. Lok Sabha Passes Waqf (Amendment) Bill

Key Highlights

• Passage of the Bill: The Lok Sabha passed the Waqf (Amendment) Bill after a marathon debate that extended past midnight.
• Voting Outcome: The first clause was passed with 288 MPs in favor and 232 against. Several amendments proposed by the Opposition were rejected through a division of votes.
• Bill Name Update: The revised version is titled the Unified Waqf Management Empowerment, Efficiency, and Development Bill (UMEED).

Waqf Amendment Bill, 2024

2. India to Expand Extended Producer Responsibility (EPR)

Context:

The Ministry of Environment, Forest & Climate Change (MoEFCC) is drafting EPR guidelines for:

• Construction & Demolition (C&D) waste
• Used cooking oil
• Toxic & hazardous waste

This follows previous EPR rules for plastic & e-waste management.

Extended Producer Responsibility (EPR)

Extended Producer Responsibility (EPR) is a policy approach that holds producers responsible for the entire lifecycle of their products, including the management of waste generated after consumers use them, encouraging sustainable design and recycling. 

• What it is:EPR shifts responsibility for waste management from local governments to producers, incentivizing them to design products that are easier to recycle or reuse and to take back products at the end of their life. 
• How it works:
  • Financial and/or physical responsibility: Producers are given financial and/or physical responsibility for the treatment or disposal of products post-consumption. 
  • Incentives for sustainable design: EPR encourages manufacturers to design environmentally friendly products by making them accountable for their product management during end-stage consumption. 
  • Circular economy: EPR aims to promote a circular economy model, including product reuse, buyback, and recycling programs. 
  • Waste management: EPR aims to reduce the amount of waste going to landfills by encouraging producers to take responsibility for the entire lifecycle of their products. 

Extended Producer Responsibility (EPR) & Its Objectives

• EPR Policy: Holds producers accountable for the entire lifecycle of their products, including disposal.
• Objectives:
  • Encourage sustainable waste management.
  • Promote a circular economy.
  • Reduce environmental impact of waste.

EPR Regulations for Construction & Demolition (C&D) Waste

• New Requirements:
  • Mandatory use of recycled materials in construction (buildings & roads).
  • Bulk C&D waste generators (large buildings undergoing demolition/redevelopment) must:
    • Deposit waste at authorized processing facilities.
    • Obtain recycling certificates, ensuring compliance.
• Environmental Damage Compensation:
  • 5% penalty for non-compliance (first 2 years).
  • 10% penalty thereafter.
  • The Central Pollution Control Board (CPCB) will enforce penalties.

EPR Guidelines for Used Cooking Oil (UCO)

• Key Objective: Repurpose used cooking oil into:
  • Sustainable Aviation Fuel (SAF)
  • Animal feed
  • Soap production
• Market Creation & Demand Boost:
  • Producers must purchase UCO under EPR rules.
  • Certification system to ensure compliance.
  • Demand expected to grow gradually over 5-7 years.
• SAF & India’s Aviation Goals:
  • India targets 1% SAF use in international flights by 2027, increasing to 2% by 2028.
  • Proper management is critical to prevent UCO from entering unsafe recycling streams.

EPR Framework for Toxic & Hazardous Waste

• Proposed Measures:
  • Industries must hand over hazardous waste to authorized recyclers.
  • Where feasible, waste will be repurposed into industrial products.
  • Incentives for industries using waste as input (reducing environmental burden).
• Expected Impact:
  • Minimizes hazardous waste output.
  • Generates new revenue streams for industries.

Implementation & Industry Implications

• CPCB to Set Compliance Guidelines:
  • Establish penalties & enforcement mechanisms.
  • Define standardized operating procedures for waste utilization.
• Challenges:
  • Ensuring proper waste segregation & collection.
  • Creating a viable market for recycled materials & repurposed waste.
  • Preventing misuse of EPR certificates.

Strengthening India’s Circular Economy

• EPR expansion to construction, hazardous waste & used cooking oil is a major step toward sustainable urban development.
• Expected Benefits:
  • Reduced landfill burden & better waste utilization.
  • More sustainable infrastructure development.
  • New business opportunities in waste recycling & SAF production.
• Next Steps:
  • Formation of inter-ministerial expert committees.
  • Finalization & rollout of EPR guidelines.

BS

3. India’s Maritime Boundaries Set to Expand

Key Developments

• India is considering shifting to the World Geodetic System 1984 (WGS84) datum to define its shoreline, replacing the outdated Everest Ellipsoid system.
• Adopting WGS84 will lead to changes in India’s territorial waters and Exclusive Economic Zones (EEZs).
• This could expand India’s maritime boundaries by a few meters to several hundred meters.

Impact on Maritime Borders

• India’s territorial waters (12 nautical miles) and EEZ (200 nautical miles) will be redefined.
• In Sir Mouth (part of Sir Creek), the baseline may shift by about 57 meters northwest.
• Changes could be more significant towards Bangladesh and slightly impact the Pakistan border.

Official Process & International Alignment

• 133 geographic coordinates will be revised and notified in a new gazette.
• The Ministry of External Affairs is working on aligning with global standards.
• In 2014, the Permanent Court of Arbitration used WGS84 to resolve the India-Bangladesh maritime dispute.

TET

Science & Tech

1. ChaSTE: Chandrayaan-3’s Breakthrough in Lunar Temperature Measurement

Overview of ChaSTE’s Mission

• Instrument Name: Chandra’s Surface Thermophysical Experiment (ChaSTE)
• Objective: First in-situ temperature measurement near the Moon’s south pole
• Deployment Date: August 23, 2023 (as part of Chandrayaan-3’s Vikram lander mission)
• Mission Duration: Until September 2, 2023

How ChaSTE Worked

• Design: Featured a rotating probe with 10 temperature sensors spaced 1 cm apart
• Deployment Mechanism:
  • The probe motor rotated to push the needle into the lunar soil
  • Sensors detected temperature changes to confirm penetration depth
  • Maximum penetration: 10 cm below the lunar surface

Key Scientific Achievement

• Confirmed greater prevalence of lunar water ice than previously estimated
• First successful soil penetration for a thermal probe on a celestial body

Comparison with Past Missions

Mission	Body	Instrument	Challenges Faced	Success?
ESA’s Philae (2014)	Comet 67P	MUPUS	Landed awkwardly, unable to deploy	❌
NASA’s InSight (2018)	Mars	HP3 (“The Mole”)	Insufficient soil friction, failed to measure temperature	❌
ISRO’s Chandrayaan-3 (2023)	Moon	ChaSTE	Successfully deployed, collected full data	✅

Why ChaSTE Succeeded?

• Used a rotation-based deployment mechanism instead of hammering (as in MUPUS & HP3)
• Overcame soil resistance effectively
• Accurately recorded temperature variations at different depths

TH

2. Aerosol Reduction and Its Impact on Climate in India

Aerosol

Aerosols are tiny solid or liquid particles suspended in a gas, like air, and can be natural (e.g., volcanic ash, sea spray) or human-caused (e.g., pollution, smoke). They play a role in climate, air quality, and can also be a source of health problems. 

What are Aerosols?

• Definition:An aerosol is a suspension of fine solid particles or liquid droplets in a gas, most commonly air. 
• Sources:
  • Natural: Sea spray, mineral dust, volcanic eruptions, and natural fires. 
  • Human-caused: Industrial emissions, burning fossil fuels, and agricultural activities. 
• Composition:Aerosols can be composed of various substances, including:
  • Inorganic: Sea salt, dust, and sulfates from volcanic eruptions. 
  • Organic: Soot, organic carbon, and black carbon from burning fuels. 

Key Takeaways

• Aerosols and greenhouse gases (GHGs) interact differently:
  • GHGs (e.g., CO₂, CH₄) trap heat, causing long-term warming.
  • Aerosols (e.g., sulphates, nitrates) scatter sunlight, creating a temporary cooling effect.
  • Removing aerosols too quickly could accelerate warming in highly polluted regions like India.
• India’s Dual Challenge:
  • Balancing air pollution control with climate mitigation.
  • Cutting aerosols without reducing GHGs may expose vulnerable populations to extreme heat.

Scientific Findings

• Aerosols have masked global warming effects:
  • India’s warming trend since 1901 (~0.7°C increase) was partially offset by aerosols and land-use changes.
  • Without aerosols, India’s temperature would have risen by ~2°C instead of 0.54°C (1906-2005).
• Aerosols also affect rainfall:
  • Aerosols contribute to weaker Indian monsoon rainfall by causing uneven cooling, particularly in the northern hemisphere.
  • Some studies indicate that reducing aerosols could improve monsoon precipitation, but regional effects remain uncertain.

Policy Implications

• Achieving Net-Zero Carbon Alone Is Not Enough:
  • Sudden aerosol reductions could lead to short-term climate shocks, including extreme heat.
  • Policymakers must focus on heat adaptation strategies in highly polluted areas (e.g., Indo-Gangetic plains).
• Balancing Climate and Health Benefits:
  • Immediate air quality improvements will reduce respiratory diseases and improve public health.
  • Cities must strengthen heat action plans to prepare for potential warming effects.
  • Trade-offs should be considered when designing industrial and environmental policies.

TH

Banking/Finance

1. Poonam Gupta Appointed RBI Deputy Governor

Key Highlights of Poonam Gupta’s Appointment

• New Role: Appointed as Deputy Governor of the Reserve Bank of India (RBI), likely overseeing the monetary policy department.
• Significance: Her appointment comes days before the April 7-9 Monetary Policy Committee (MPC) meeting, which may decide on further interest rate cuts.

Challenges & Policy Priorities

• Monetary Transmission Issue:
  • The repo rate was cut in February, but transmission to corporate loan rates (MCLR) and deposit rates remains weak.
  • Banks have reduced rates for retail and small business loans (EBLR-linked) but not corporate loans.
  • Liquidity remains a key factor—RBI has infused ₹5 trillion through government securities purchases and ₹1.8 trillion via repo operations.
• Liquidity Management:
  • Banking system liquidity turned from deficit to a small surplus recently.
  • RBI officials to meet bankers on April 4 to fine-tune the liquidity framework.

Debate on Inflation Targeting & Policy Framework

• Core vs. Headline Inflation:
  • Some experts argue RBI should target core inflation instead of headline inflation, which is often driven by volatile food prices.
  • Gupta co-authored a 2024 paper with Barry Eichengreen, advocating against drastic changes to the inflation-targeting framework.
• Proposed CPI Basket Adjustment:
  • Suggested reducing the food weight in CPI from 45.8% to ~40%, considering rising per capita income.
  • Expected to decline to 30% in a decade due to structural shifts.

Market Expectations from Gupta in April MPC Meeting

• Rate Cut Stance:
  • Whether she supports a rate cut larger than 25 basis points, indicating her priority between growth and inflation.
• Policy Stance Shift:
  • If she supports changing RBI’s stance from neutral to accommodative, given the recent large liquidity infusion.

2. India’s Deposit Rates Declining

Context:

Banks & NBFCs begin cutting deposit rates, signaling an expected drop in interest rates. RBI expected to cut the repo rate on April 9, following a February reduction. Liquidity improving as RBI purchases bonds worth ₹1.4 lakh crore since January, with an additional ₹80,000 crore buyback announced.

Deposit Rate Cuts by Major Lenders

• HDFC Bank: Ended special deposits; rates reduced from 7.35% to 7% (35-month deposits) and 7.40% to 7% (55-month deposits).
• Yes Bank: Reduced fixed deposit rates by 0.25 percentage points.
• Bajaj Finance: Lowered rates by 0.25 percentage points on long-tenure deposits; 42-month FD now at 8.15% (from April 10).
• Bandhan Bank: Savings deposit rates now 3-5% (previously 6%).

Government Small Savings Schemes Unaffected

• RBI Bonds & Senior Citizen Savings Scheme (SCSS) still offer 8.2% for April-June.
• Investors advised to lock in current high FD rates for long tenures.

Liquidity & Market Impact

• Systemic liquidity moved from deficit to surplus (March deficit: ₹1.3 lakh crore).
• Open Market Operations (OMOs) by RBI contributing to better liquidity conditions.
• First fiscal quarter sees slow credit growth, allowing banks to reduce deposit rates without scrambling for funds.

Investment Implications

• Fixed Deposits vs. Government Bonds:
  • AAA-rated Bajaj Finance FD: 8.4% vs. 10-year government bond yield: 6.5%.
  • Spread of 1.9 percentage points makes FDs attractive.
• Debt Funds vs. Fixed Deposits:
  • Debt fund returns vary with market conditions, while FDs offer stable returns.
  • Retirees & conservative investors prefer FDs due to regular cash flow.

Rate Cuts & Market Adjustments

• Interest rate transmission underway due to surplus liquidity.
• More banks & NBFCs likely to lower deposit rates soon.
• Borrowing rates expected to decline, boosting credit growth in coming months.

TET

3. Why RBI Should Hold Off on a CRR Cut

Liquidity vs. Policy Rates

• Businesses prioritize easy access to funds over borrowing costs, making liquidity actions more impactful than rate cuts.
• Banks are pressing RBI to reduce the cash reserve ratio (CRR) to unlock ₹1.3 lakh crore currently held without interest.

RBI’s Response to Liquidity Tightness

• Previous CRR Cut: RBI already reduced CRR by 50 basis points in December, easing liquidity strains.
• Alternative Measures: RBI has conducted bond purchases and FX swaps to inject liquidity.
• T2 Risk Factor: Trump-tariffs (T2) could fuel inflation, making a hasty CRR cut risky.

Why a CRR Cut May Not Be the Right Move Now

• CRR is a long-term policy tool, unlike OMOs or FX swaps, which can be adjusted based on market conditions.
• Banks have access to ample funds through RBI’s liquidity window.
• Upcoming RBI Dividend: A generous payout to the government will improve liquidity when reinjected into the system.

Instead of rushing to cut CRR, RBI can wait and assess the impact of its existing measures while keeping its policy options open for future uncertainties.

TET

4. AI-Driven Fintech Startups Revolutionizing Debt Collection

Why Lenders Are Turning to AI for Debt Recovery

• Rising Defaults: Increasing stress on unsecured consumer loans has forced lenders to explore more efficient collection methods.
• Traditional Methods Are Inefficient: Manual follow-ups, call centers, and field agents cannot handle the surge in small-ticket loans.
• Cost-Effective AI Models: AI-led fintech startups reduce collection costs while improving recovery rates.

Key Players in AI-Powered Debt Collection

• SpoctoX (Yubi), CreditNirvana (Perfios), Rezolv, Credgenics
• These startups leverage big data analysis to:
  • Predict borrower behavior and default risks
  • Monitor real-time transactions to anticipate repayment challenges
  • Automate reminders and personalized communication via SMS, email, and voice calls

Fintech Disrupting Traditional Debt Collection

• Perfios acquired CreditNirvana to help banks and NBFCs optimize debt recovery.
• AI models customize collection strategies based on borrower data and behavioral insights.
• Automation improves efficiency, reducing reliance on manual interventions.

The Future of AI-Driven Debt Recovery

• Massive untapped potential in the debt collection space.
• Growing investor interest as AI-driven solutions enhance repayment efficiency.
• Financial institutions adopting AI models to minimize delinquencies and improve portfolio performance.

TET

5. RBI’s Record-High Net Short Positions and Liquidity Challenges

Key Highlights

• RBI’s net short positions in the forward book reached $78.6 billion in February.
• Breakdown of short positions:
  • $45 billion in the three-month to one-year category
  • $18.8 billion in the one-to-three-month category
  • $14.8 billion in the up-to-one-month category
• Potential Rollover Required: Unwinding these positions could put further pressure on rupee liquidity.

Impact on Market and Liquidity

• Maturing short positions require RBI to sell dollars and absorb rupees, tightening liquidity.
• RBI has already conducted two $10 billion buy-sell swaps (maturing in three years) and a $5 billion swap maturing in August.
• Forex reserves declined from $704 billion in September to $658.8 billion currently.
• OMO purchases worth ₹80,000 crore announced on April 1 to ease liquidity concerns.

Possible Scenarios

• RBI may roll over short positions to prevent a liquidity drain.
• Additional liquidity infusion measures might be needed as system liquidity remains under stress.
• Forex reserves could continue to decline if RBI sells dollars aggressively to manage liquidity.

RBI faces a delicate balancing act between managing rupee liquidity and protecting forex reserves. Rolling over short positions and conducting strategic OMO purchases could help stabilize market conditions.

TET

6. Microfinance Sector Attracts Renewed Investor Interest

Key Developments in March 2025

Sector Performance and Challenges

• Listed microfinance lenders saw sharp stock declines due to rising asset quality stress and defaults:
  • Fusion & Spandana Sphoorty: Over 70% decline in share prices.
  • CreditAccess Grameen, Muthoot Microfin, Satin Creditcare: Market cap dropped 33%, 42%, and 37% respectively.
• Negative Return on Equity (ROE):
  • Q3 FY25: -1.95% vs 4.99% in Q2 FY25.

Investor Confidence in Sector Resilience

• Sector has shown resilience despite setbacks.
• Attractive valuations making investments lucrative.
• Funding to help expand geographic presence and financial inclusion, particularly for rural entrepreneurs and women.

The recent influx of investment signals renewed confidence in microfinance’s long-term prospects. While challenges persist, strategic capital infusion could help stabilize the sector and drive future growth.

TET

7. Lok Sabha Clears Banking Laws (Amendment) Bill, 2024

Key Objectives of the Bill

• Strengthening Governance in Banking: Enhances regulatory oversight and governance in banks, particularly public sector and cooperative banks.
• Better Protection for Depositors & Investors: Introduces new measures to safeguard depositors’ interests.
• Enhanced Reporting & Audit Standards: Improves compliance, audit quality, and transparency in financial reporting to the Reserve Bank of India (RBI).

Major Amendments Introduced

• Increased Nomination Flexibility:
  • Account holders can now include up to four nominees for deposits and articles in safe custody.
  • Allows simultaneous and successive nominations for better legal and financial planning.
• Transfer of Unclaimed Assets to IEPF:
  • Unclaimed dividends, shares, and interest/redemption on bonds will be transferred to the Investor Education and Protection Fund (IEPF).
  • Depositors and investors can claim refunds from the IEPF.
• Revised Banking Report Submission Dates:
  • Banks will now submit statutory reports to the RBI at the end of a fortnight, month, or quarter instead of every Friday.
• Updated ‘Substantial Interest’ Definition for Directorships:
  • The threshold for defining substantial interest will be raised from ₹5 lakh to ₹2 crore to reflect modern financial realities.
• Governance Changes in Cooperative Banks:
  • Amendments in the Banking Regulations Act will only apply to cooperative banks engaged in banking activities.
  • Tenure of directors (excluding chairpersons and full-time directors) increased from 8 years to 10 years to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.

Next Steps

• The bill will now be sent to the President for final approval before becoming law.
• Once enacted, these reforms are expected to enhance stability, transparency, and governance in the banking sector.

Mint

8. Beams Fintech Fund Invests in NBFC Infinity Fincorp

Key Highlights

• Beams Fintech Fund has invested in Infinity Fincorp Solutions Pvt Ltd, a non-banking financial company (NBFC).
• The investment is part of Infinity’s extended Series A funding round, which raised a total of $40 million (₹342 crore).
• Jungle Ventures, Archerman Capital, and Magnifico previously led the round with a $35 million (₹300 crore) investment in January.
• True North, an existing investor, has been backing Infinity Fincorp since 2016 and added more funds in 2017 and 2018.

About Beams Fintech Fund:

• Beams is a growth-stage private equity (PE) firm focused on financial services and fintech companies.
• This marks Beams’ sixth investment, following stakes in:
  • InsuranceDekho (also led a $70M round last month)
  • SK Finance
  • NiYO Solutions
  • Credgenics
  • Progcap

About Infinity Fincorp Solutions:

• Infinity Fincorp specializes in small-ticket loans (₹3-5 lakh) to underserved micro-entrepreneurs, including:
  • Tea shop owners
  • Vegetable vendors
  • Small machine enterprises
  • Restaurants
  • Provision stores

Beams’ investment in Infinity Fincorp signals strong investor confidence in the NBFC’s mission to support micro-entrepreneurs. With backing from major investors like Jungle Ventures, True North, and Beams Fintech Fund, Infinity is poised for further expansion in India’s microfinance sector.

Mint

9. SEBI’s New Regulatory Approach Under Chairman Tuhin Kanta Pandey

Context:

SEBI’s new chairman, Tuhin Kanta Pandey, emphasizes incremental reforms over disruptive big-bang changes. SEBI aims for optimum regulation rather than excessive rule-making, reducing compliance burdens and fostering a business-friendly regulatory environment.

Reviewing & Eliminating Outdated Regulations

• SEBI acknowledges that some regulations are outdated and may no longer serve a purpose. It is open to reviewing and discontinuing redundant rules. There are calls for a Regulations Review Authority similar to RBI’s model to assess the impact and necessity of existing regulations.

Market Integrity & Strengthening Institutions

• SEBI seeks to empower market infrastructure institutions (MIIs) while ensuring accountability. MIIs will be subject to independent external evaluations and checks to prevent misuse of power.

Transparent & Structured Consultation Process

• SEBI has institutionalized a regulation that mandates a transparent consultative process. A 21-day consultation period has been introduced for regulatory proposals, an improvement from the previous two-week timeline. However, concerns remain about overlapping consultation papers, which could overwhelm stakeholders.

Encouraging Voluntary Compliance & Fair Enforcement

• SEBI will focus on nudging market participants toward voluntary compliance rather than relying solely on punitive measures. It has committed to uniform enforcement actions, eliminating arbitrary decisions. Technical & procedural violations will be handled with opportunities for corrective action, ensuring a balanced approach between supervision and market freedom.

A Positive Start for SEBI’s New Era

Market participants welcome this pragmatic, consultative, and business-friendly approach. The focus is on maintaining market integrity while removing unnecessary regulatory burdens. The early signs of Chairman Pandey’s leadership indicate a shift toward efficiency, transparency, and fairness, marking a constructive beginning for SEBI’s regulatory framework and fostering continued stability and growth in India’s capital markets.

Mint

10. NABARD-SBI Partnership for Rural Growth in Assam

Context:

NABARD and SBI have entered a strategic partnership to promote sustainable rural development in Assam, focusing on institutional lending, credit ecosystem strengthening, and livelihood enhancement.

Key Financial Commitments:

• Initial financing of ₹500 crores for FY 2025-26.
• Target of ₹1,000 crores annually from the second year onward.

Key Focus Areas:

• Agriculture and Rural Development: Financing for farmers, rural artisans, and MSMEs.
• Public Infrastructure: Strengthening credit accessibility and rural economic activities.
• Capacity Building: Training rural communities to ensure sustainable enterprises and loan repayment.

Stakeholder Perspectives:

• NABARD (Loken Das, CGM): Emphasized skill-building and credit ecosystem development.
• SBI (S Radhakrishnan, CGM, Guwahati Circle): Stressed clear objectives and regular reviews for effective implementation, encouraging similar initiatives by other banks.

This MoU aims to drive rural prosperity by ensuring accessible and structured financing for key economic sectors in Assam.

TET

Economy

1. India’s Manufacturing PMI Rebounds in March

Key Highlights:

• Manufacturing PMI Jumps to 58.1 in March
  • After falling to a 14-month low of 56.3 in February, India’s HSBC Manufacturing PMI rebounded to 58.1, the highest in eight months.
  • A PMI above 50 indicates expansion, signaling strong growth momentum.
• Surge Driven by New Orders
  • The New Orders Index, the PMI’s largest sub-component, expanded at its fastest pace since July 2024.
  • Companies cited strong demand, better marketing, and improved customer interest as key growth drivers.
  • Production ramped up to meet year-end targets.

Potential Economic Risks

• US Tariff Threats & Global Trade Tensions
  • US President Donald Trump’s new tariffs (expected April 2) may disrupt global trade.
  • India’s exports could be moderately impacted, with subdued international orders already reflected in the PMI.
  • A 20% average tariff hike could shrink India’s GDP by 0.4%, according to Capital Economics.
  • The RBI may need to act if confidence in business and consumption declines.
• Impact on RBI’s Monetary Policy
  • RBI is set to meet on April 7-9, with a repo rate cut of 25bps (to 6%) widely expected.
  • RBI already cut rates in February and introduced liquidity measures to support economic growth.
• Economic Growth Projections
  • GDP growth for Q3 FY24-25 improved to 6.2% YoY (from 5.6%), but urban consumption slowdown remains a concern.
  • Barclays estimates Q4 GDP growth at 6.7%, averaging 6.2% for FY24-25, slightly below RBI’s 6.5% forecast.
  • RBI’s updates on growth and inflation forecasts for FY25 and FY26 will be closely monitored.

Inflationary Pressures & Business Confidence

• Input Costs Rising:
  • Copper, electronics, leather, LPG, and rubber saw price hikes, pushing PMI’s input cost index to a three-month high.
• Weaker Output Price Growth:
  • Despite rising costs, there was a softer increase in prices charged for Indian goods.
• Business Confidence Dips Slightly:
  • The Future Output Index dropped from 64.9 in February to 64.4 in March, signaling potential risks to growth expectations.

While India’s manufacturing sector shows resilience, external risks like US tariffs, global trade tensions, and rising inflationary pressures could impact future growth. The RBI’s upcoming policy decisions and macroeconomic indicators will be crucial in determining the next phase of economic momentum.

Mint

2. MGNREGA wage revised to ₹370 a day from April 1

Wage Revision for FY 2025-26

The daily wage under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been revised from ₹349 to ₹370 per person, effective April 1, 2025. The revision was announced by Mandya Zilla Panchayat CEO K.R. Nandini, citing an order from the Union Ministry of Rural Development.

Impact on Rural Earnings

• With this ₹21 increase, a family completing 100 days of work under the scheme can now earn ₹37,000 per year, up from ₹34,900 last year.
• The hike is expected to boost rural household incomes and enhance financial security for job card-holders.

Equal Pay & Gender Inclusion

• MGNREGA ensures gender equality, as both men and women receive equal wages.
• The scheme continues to play a crucial role in providing employment to rural workers, especially in economically weaker regions.

Demand for Adjusted Work Hours in Summer

• Workers in heatwave-prone Kalyana Karnataka have demanded a reduction in mandatory work hours during peak summer months to account for extreme weather conditions.

The wage revision under MGNREGA is a positive step towards improving rural livelihoods. However, concerns over seasonal working conditions highlight the need for further policy adjustments to safeguard worker welfare.

Facts To Remember

1. Poonam Gupta appointed as RBI Deputy Governor

The Union Government has appointed Poonam Gupta as the Deputy Governor of the Reserve Bank of India (RBI).

2. Top Gun and Batman star Val Kilmer dies aged 65

Val Kilmer, one of the biggest Hollywood actors of the 1990s who shot to fame playing Iceman in the original Top Gun, has died aged 65 after a career of memorable hits and on-set bust ups.

3. Ramann Set to Be Next PFRDA Chairperson

The government has named Sivasubramanian Ramann as the new chairperson of the Pension Fund Regulatory and Development Authority (PFRDA).

4. RS clears immigration bill amid Cong, TMC walkout

Congress MP Abhishek Manu Singhvi criticised the Immigration and Foreigners Bill, 2025, which was passed by the Rajya Sabha on Wednesday, and said that the legislation sought to treat all foreigners as “potential criminals” who were liable to be viewed with serious suspicion by India.

5. India & Thailand ink six agreements in various fields during bilateral talks between  PM Modi and Thai PM Shinawatra

India and Thailand signed six agreements for cooperation in various fields including IT, maritime, MSME, handicrafts and handloom sectors.

6. Lok Sabha Passes Waqf (Amendment) Bill 2025

The Lok Sabha passed the Waqf (Amendment) Bill 2025.    288 Members Voted in Favour and 232 Members Voted Against the Bill. 

7. IPL T20: Gujarat Titans defear RCB by 8 wickets

In IPL T20 Cricket, the Gujarat Titans defeated Royal Challengers Bengaluru by 8 wickets at M. Chinnaswamy Stadium in Bengaluru. 

8. Strong earthquake measuring 6 hits Japan

In Japan, a strong earthquake measuring 6.0 on the Richter Scale struck Kyushu region today at 7:34 PM (IST).