Daily Current Affairs (DCA) 8 May, 2025

Daily Current Affairs Quiz
8 May, 2025

International Affairs

1. India-UK FTA

Context:

The recently finalised India-UK Free Trade Agreement (FTA) could become a template for India’s ongoing FTA negotiations with major partners like the EU and the US. The deal signals a major policy shift as India agrees to slash automobile import tariffs from 100% to 10%, albeit with quotas to limit volume.

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2. IMO’s Draft Net-Zero Framework

Context:

The International Maritime Organization (IMO) has approved a draft Net-Zero Framework aimed at reducing greenhouse gas (GHG) emissions from the shipping sector, with a goal of achieving net-zero emissions by 2050.

Key Features of the Framework

• Legal Basis:
  • New Chapter 5 of MARPOL Annex VI (Prevention of Air Pollution from Ships).
• Global Fuel Standard (GFI):
  • Requires ships to reduce GHG fuel intensity per energy unit used, based on a well-to-wake model.
• Carbon Pricing:
  • Ships exceeding GFI limits must purchase remedial units, while low-GHG ships can earn surplus credits.
• IMO Net-Zero Fund:
  • Redistributes carbon revenues to:
    • Reward zero-emission ships.
    • Fund R&D, capacity building, and climate resilience in Small Island Developing States (SIDS) and Least Developed Countries (LDCs).
• Coverage:
  • Targets ships over 5,000 GT (gross tonnage), which are responsible for 85% of maritime CO₂ emissions.

Significance of the Framework

• First Global Sector-Wide Regulation:
  • Unifies global emissions caps and carbon pricing across international waters.
• Drives Low-Carbon Innovation:
  • Encourages adoption of green fuels, onboard CCS, and hybrid technologies.
• Climate Alignment:
  • Supports the Paris Agreement goals and the 2023 IMO Strategy.
• Equity Focused:
  • Provides support to vulnerable nations through climate financing and technology transfer.
• Energy Transition Catalyst:
  • Encourages investment in alternative fuels such as ammonia, methanol, and hydrogen.

3. The Lancet Report on Sexual Violence Against Children

Context:

A global meta-analysis published in The Lancet (1990–2023) led by the Institute for Health Metrics and Evaluation (IHME), University of Washington, provides the first age-standardized estimates of child sexual abuse globally using consistent metrics.

Key Findings

• India:
  • 30.8% of girls and 13% of boys experienced sexual abuse before the age of 18.
  • This marks the highest prevalence for girls in South Asia.
• Global Average (2023):
  • 18.9% of females and 14.8% of males worldwide have experienced childhood sexual abuse.
• Timing of Abuse:
  • 70% of victims were first abused before they turned 18.

POCSO Act

The Protection of Children from Sexual Offences (POCSO) Act came into effect on 14th November 2012. It was enacted in response to India’s ratification of the UN Convention on the Rights of the Child in 1992. The aim of the Act is to address sexual exploitation and abuse of children, which were either not specifically defined or inadequately penalized in existing laws.

Key Features of the POCSO Act

• Definition of a Child:
  • The Act defines a child as any person below the age of 18 years.
• Punishments:
  • The Act prescribes punishments based on the gravity of the offence. It was amended in 2019 to include stricter penalties, including the death penalty for committing sexual crimes on children, aiming to deter perpetrators.
• POCSO Rules, 2020:
  • The Government of India notified the POCSO Rules, 2020, to provide a detailed framework for the implementation of the Act.
• Gender-Neutral Nature:
  • The Act recognizes that both girls and boys can be victims of sexual abuse, ensuring that such abuse is penalized regardless of the victim’s gender.

• Ease in Reporting Cases:
  • The Act encourages greater awareness and ease of reporting cases of child sexual exploitation, both by individuals and institutions.
• Explicit Definition of Terms:
  • The Act explicitly defines sexual assault, with increased minimum punishments, offering clarity compared to the more abstract term “outraging modesty” in the Indian Penal Code.
  • Storage of child pornography has been defined as a new offence under the Act.

National Affairs

1. Human Development Index (HDI) Report 2025

Title of Report

A Matter of Choice: People and Possibilities in the Age of Artificial Intelligence (UNDP)

Why in News?

India has been ranked 130th out of 193 countries in the United Nations Human Development Report (HDR) 2025, titled “A Matter of Choice: People and Possibilities in the Age of AI” by United Nations Development Programme (UNDP). The report highlights steady progress in human development indicators for India but flags persistent inequality and gender gaps as critical areas of concern.

Key Highlights of Human Development Report 2025

Global Insights:

• HDI Stagnation: Global human development progress has slowed to the weakest pace since 1990 (excluding the pandemic years).
• Global Rankings:
  • Top: Iceland (HDI: 0.972)
  • Bottom: South Sudan (HDI: 0.388)
• Inequality Rising: The gap between high and low-HDI countries continues to widen, stalling convergence.
• AI and Human Development:
  • 1 in 5 people globally use AI tools.
  • 60% believe AI will create opportunities; ~50% fear job displacement.
  • Call for inclusive AI policies that prioritize equity and mitigate automation-related job losses.

India’s Performance

• HDI Score: Improved from 0.676 (2022) to 0.685 (2023)
• Ranking: Rose from 133rd to 130th
• Category: Medium Human Development (close to “high” threshold of 0.700)
• Regional Standings:
  • Above: China (78), Sri Lanka (89), Bhutan (125)
  • Equal: Bangladesh (130)
  • Below: Nepal (145), Myanmar (150), Pakistan (168)
• Gender and Inequality Adjustments:
  • Inequality-Adjusted HDI (IHDI): Drops to 0.475, showing a 30.66% decline
  • Gender Development Index (GDI): 0.874 (Male: 0.722, Female: 0.631)
  • Gender Inequality Index (GII): India ranks 102nd, score: 0.403
• India Among Regional and BRICS Peers:
  • BRICS Rankings: Brazil (89), Russia (59), China (75), South Africa (110), India (130)
  • South Asia Region: Sri Lanka leads, India ahead of Nepal, Myanmar, and Pakistan

Progress in Key Areas

• Health:
  • Life expectancy rose from 58.6 years (1990) to 72 years (2023)
  • Driven by programs like Ayushman Bharat, NHM, Janani Suraksha Yojana, and Poshan Abhiyaan
• Education:
  • Expected years of schooling: Increased to 13 years (from 8.2 in 1990)
  • Supported by RTE Act, NEP 2020, Samagra Shiksha Abhiyan
• Income:
  • GNI per capita (PPP): Rose from $2,167 (1990) to $9,046 (2023)
  • 135 million Indians exited multidimensional poverty (2015-2021)
• AI Skills Leadership:
  • Highest global self-reported AI skill penetration
  • 20% of Indian AI researchers now remain in India (vs. 0% in 2019)

Regional Comparison: India vs. Neighbours

Country	HDI Rank (2025)	HDI Value
China	75
Sri Lanka	78
Bhutan	127
India	130	0.685
Bangladesh	130 (tied)
Nepal	145
Myanmar	149
Pakistan	168

Global HDI Leaders (2023)

Rank	Country	HDI Value
1	Iceland	0.972
2	Norway	0.970
2	Switzerland	0.970
4	Denmark	0.962
5	Germany	0.959
5	Sweden	0.959
7	Australia	0.958
8	Hong Kong (China SAR)	0.955
8	Netherlands	0.955
17	United States	0.938

How Can Artificial Intelligence Contribute to Human Development?

• Boosting Economic Productivity:
  • AI is expected to contribute ₹33.8 lakh crore to India’s GDP by 2030 (Google estimate)
  • Enhances innovation across manufacturing, agriculture, and services
• Transforming Healthcare:
  • AI in diagnostics (radiology, oncology), telemedicine, and remote monitoring
  • Personalized treatment, VR-based medical training, and improved access in rural areas
• Improving Education Outcomes:
  • Adaptive learning platforms, AI tutors, and chatbot-based support
  • Real-time monitoring to identify learning gaps
• Enabling Smart Governance:
  • Public service delivery tools like MuleHunter.AI (RBI fraud detection)
  • Projects like Bhashini enhance multilingual accessibility
• Promoting Inclusion:
  • AI can detect delivery gaps and aid marginalized groups if guided by ethical, human-centered design

Challenges

• Inequality Impact:
  • Inequality-adjusted HDI loss: 30.7%, among the highest in the region
• Gender Inequality:
  • Female labor force participation: 41.7%
  • Political representation and decision-making remain low
  • Promise shown by the 106th Constitutional Amendment for one-third legislative reservation

Policy Recommendations: How Can India Address Human Development Challenges?

• Promote Gender Equality:
  • Ensure effective implementation of legislative reservation
  • Expand access to PM Mudra Yojana, Stand-Up India, and digital skilling platforms
  • Support women via flexible work, childcare (crèches), and STEM programs like Vigyan Jyoti
  • Enforce laws against child marriage and workplace harassment
  • Strengthen Nirbhaya Fund and One Stop Centres
• Address Income Inequality:
  • Scale inclusive programs: MGNREGA, PMEGP, Jan Dhan Yojana
  • Focus on land reforms, quality healthcare, and accessible education
  • Promote SDG 10 for reduced inequalities
  • Leverage CSR for equitable development projects
• Improve Health and Education:
  • Prioritize universal healthcare access and nutrition (Poshan Abhiyaan)
  • Reform teacher training and curricula under NEP 2020
  • Expand use of EdTech and AI-based learning tools
• Leverage AI for Inclusion and Innovation:
  • Ensure ethical, inclusive AI governance
  • Expand AI-based solutions in farming, health, and education
  • Promote green jobs, manufacturing, and skilling in emerging sectors
  • Enhance financial/digital inclusion via UPI, Jan Dhan, and digital literacy drives

India’s HDI improvement in 2025 reflects tangible progress in health, education, and income. However, sustained attention to inequality, gender gaps, and inclusive AI adoption will be critical to unlocking high human development status and achieving Sustainable Development Goals (SDGs) by 2030.

2. Cabinet Approves ₹60,000 Cr. Scheme for Industrial Training Institute (ITI) Upgradation Scheme

Context:

The Union Cabinet has approved a new ₹60,000 crore Industrial Training Institute (ITI) upgradation scheme aimed at improving skilling infrastructure across the country. The initiative will focus on 1,000 government ITIs, using a hub-and-spoke model in partnership with industry players.

Scheme Duration and Budget Allocation

• Announced in the Union Budget 2024–25, the scheme will run for five years.
• Funding structure:
  • ₹30,000 crore from the Central Government
  • ₹20,000 crore from State Governments
  • ₹10,000 crore from Industry
• Co-financing: 50% of the central share will be jointly funded by the Asian Development Bank (ADB) and the World Bank.

Objectives

• Past financial support was inadequate for full ITI upgrades, especially in infrastructure and emerging trade requirements.
• This scheme introduces a need-based investment model, allowing flexible fund allocation tailored to each institution’s requirements.

National Centres of Excellence for Skilling

• Five new National Centres of Excellence will be set up in existing National Skill Training Institutes (NSTIs) at:
  • Bhubaneswar
  • Chennai
  • Hyderabad
  • Kanpur
  • Ludhiana
• These will enhance trainer development and advance vocational training standards.

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3. State Performance Ranking Report by Care Edge Ratings

Context:

The 2025 State Performance Ranking Report by Care Edge Ratings (a Care Ratings subsidiary) has received wide media attention. Although prepared by a private entity, it gained semi-official stature through a foreword by the CEO of NITI Aayog.

• The report evaluates states based on seven pillars: economic, fiscal, financial, infrastructure, social, governance, and environment.

Methodology

• Utilizes 50 indicators, weighted and normalized based on expert judgment.
• States are grouped into:
  • Group A: Large states
  • Group B: Northeastern, hilly, and smaller states
• Each pillar has a designated weight:
  • Economic (25%), Fiscal (20%), Financial & Infrastructure (15% each), Social & Governance (10% each), Environment (5%)

2025 Rankings

• Top Performers:
  • Group A: Maharashtra, Gujarat, Karnataka
  • Group B: Goa, Sikkim, Himachal Pradesh
• Lowest Performers:
  • Group A: Madhya Pradesh, Jharkhand, Bihar
  • Group B: Arunachal Pradesh, Manipur, Nagaland

Limitations of Utility

• Unlike credit ratings, these rankings do not affect borrowing costs since state bonds are sovereign-backed.
• While intended to promote competitive federalism, there’s no binding incentive or accountability mechanism to encourage actual policy reforms by state governments.

Policy Recommendations

• Redesign indicators to reflect real outcomes (e.g., actual service quality in education/health).
• Incorporate institutional strength and governance quality into the framework.
• Ensure transparency in assigning weights and consider broader stakeholder consultations.

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4. Revised SHAKTI Policy for Coal Linkages

Context:

The Cabinet Committee on Economic Affairs (CCEA) has accorded its approval for the Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy for Coal Allocation to Power Sector.

Key Features of the Revised SHAKTI Policy

• Window-I:
  • Coal at Notified Price
  • Continuation of existing coal linkage mechanisms for Central Sector Thermal Power Projects and State-linked IPPs
  • Coal earmarked for State Generating Companies (Gencos) can also be utilized by IPPs through Tariff-Based Competitive Bidding (TBCB) or for new expansion units with Power Purchase Agreements (PPAs)
• Window-II:
  • Coal at Premium Price
  • Available to domestic and imported coal-based power producers
  • Flexible tenure from 12 months to 25 years
  • No PPA required for power generation from coal secured under this window, allowing plants flexibility in selling electricity
• Objective of the Revised SHAKTI Policy
  • Grant fresh coal linkages to thermal power plants (TPPs) in the Central Sector, State Sector, and Independent Power Producers (IPPs)
  • Streamline the coal allocation process, offering flexibility in coal procurement and meeting dynamic power sector needs

Implications

• Employment Generation
• Flexibility for Fuel Supply Agreement (FSA) Holders
• Optimal Use of Power Plants

PIB

5. INS Kiltan Arrives in Singapore for IMDEX Asia 2025

Context:

INS Kiltan, part of the Indian Navy, has arrived in Singapore to participate in IMDEX Asia 2025 at the Changi Exhibition Centre. The visit is a key element of India’s ongoing operational deployment, reinforcing the growing maritime cooperation between India and Singapore.

INS Kiltan (P30)

• Overview
  • INS Kiltan (P30) is an anti-submarine warfare (ASW) corvette of the Indian Navy, developed under Project 28.
  • It is the third of four Kamorta-class corvettes, designed for stealth and specialized ASW operations.
• Construction and Commissioning
  • Built by Garden Reach Shipbuilders & Engineers (GRSE) in Kolkata.
  • Launched: 26 March 2013
  • Commissioned: 16 October 2017

IMDEX Asia

IMDEX Asia is recognized as Asia’s leading naval and maritime defence exhibition, showcasing the world’s naval elite and cutting-edge maritime innovations. Since its launch in 1997, the event has become a key platform for debuting new vessels, systems, and technologies across the global maritime industry.

PIB

6. SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) Scheme

Context:

India is poised to play a crucial role at the 2025 World Bank Land Conference, set to take place from May 5th to 8th at the World Bank Headquarters in Washington, D.C. A high-level Indian delegation, led by Shri Vivek Bharadwaj, Secretary, Ministry of Panchayati Raj (MoPR), will present India’s transformative SVAMITVA Scheme, alongside the Gram Manchitra platform.

SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) Scheme

SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) scheme is a collaborative effort of the Ministry of Panchayati Raj, State Panchayati Raj Departments, State Revenue Departments and Survey of India.

• The Scheme was launched on April 24th of the year 2020. It is meant to register a Record of Rights for rural property owners in the Abadi areas (inhabited regions) using innovative drone and GIS technology.
  • It follows the Whole-of-Government approach with various departments and stakeholders for improving financial inclusion.
  • SVAMITVA Through property ownership validation, it ensures better credit access and socio-economic stability.
• Goal
  • Integrate a rural land property validation system
• Features
  • This scheme involves mapping parcels of lands, through a utilization of the power of drones technology along with the use of Continuously Operating Reference Station or CORS.
  • The mapping will be done all over the country on a phase by phase basis, over a time period of four years, i.e. between 2020-2024.

Status

• India has surveyed 68,000 square kilometers of rural land under SVAMITVA, unlocking assets worth $1.16 trillion.

7. Indo-Pacific Logistics Network (IPLN)

Context:

IPLN (Indo-Pacific Logistics Network) is a multilateral initiative aimed at developing a shared logistics framework to enable efficient and coordinated civilian disaster response across the Indo-Pacific region. It facilitates faster deployment of humanitarian aid through enhanced logistical infrastructure and interoperability between participating countries.

Key Features

• Objective: To improve disaster response coordination and enhance the efficiency of humanitarian aid deployment in the Indo-Pacific region.
• Shared Logistics Infrastructure: IPLN works on creating interoperability between the logistics systems of participating countries, making aid delivery more rapid and organized.

Participating Countries

• India
• United States
• Japan
• Australia

Launch and Initiatives

• Simulated via Tabletop Exercise (TTX): The initiative was first simulated through a Tabletop Exercise (TTX) hosted at the Asia-Pacific Centre for Security Studies in Honolulu, Hawaii.
• Complementary Initiatives: IPLN is aligned with broader regional efforts like the Indo-Pacific Partnership for Maritime Domain Awareness (IPMDA) and the Quad Pandemic Preparedness Workshop, supporting collaborative efforts in maritime security and disaster management.

Banking/Finance

1. Exim Bank Withdraws ₹2,500 Crore 10-Year Bond Issue

Context:

Exim Bank withdrew its planned ₹2,500 crore 10-year bond issuance after investors demanded higher-than-expected yields, according to multiple market sources.

Bonds in Corporate Financing

Bonds serve as a form of loan between an investor and a corporation. When a company issues bonds, it borrows a specific amount of money from investors, agreeing to pay back the principal amount along with periodic interest payments until the bond matures. Once the bond matures, the company repays the principal, concluding the bond agreement.

Bonds vs. Other Methods of Raising Capital

Bonds vs. Bank Loans

• Interest Rates: Companies typically pay lower interest rates on bonds compared to bank loans, which is advantageous for firms aiming to minimize their borrowing costs.
• Operational Freedom: Unlike bank loans, which often come with restrictive conditions (such as prohibiting further debt issuance or acquisitions), bonds offer greater operational freedom without such strings attached.

Key Features of Bonds

• Types of Bonds:
  • Collateralized Bonds: These bonds are backed by a company’s assets (e.g., real estate or equipment). If the company defaults, the bondholders can claim these assets.
  • Unsecured Bonds: These are not backed by any assets, and therefore carry higher risk and typically higher interest rates.
  • Convertible Bonds: These bonds can be converted into a specified number of shares, allowing bondholders to benefit from rising stock prices.
  • Callable Bonds: These bonds can be redeemed by the issuing company before the maturity date, especially if interest rates decrease, allowing the company to refinance at a lower rate.
• Interest Rates: A bond’s interest rate is influenced by factors like the company’s credit quality and the duration of the bond. Healthier companies or those issuing shorter-term bonds typically offer lower interest rates.

Why Companies Issue Callable Bonds

• Interest Rate Flexibility: Callable bonds allow companies to redeem and reissue debt at a lower interest rate if market rates drop. This lowers the cost of capital for the company, similar to refinancing a mortgage at a lower rate.

Corporate Bonds vs. Government Bonds

• Issuer: Corporate bonds are issued by companies to fund business activities, while government bonds are issued by governments to finance public expenditures.
• Risk and Return: Corporate bonds are generally riskier than government bonds, as corporations are more likely to default. However, this increased risk often results in higher returns for corporate bondholders.

2. Bank Bonds

Context:

Bank bonds are a type of debt security issued by banks and financial institutions to raise funds, manage risk, and offer investment opportunities to individuals and institutions. They offer structured returns and are considered relatively safe financial instruments.

What Are Bank Bonds?

• Definition: Debt securities issued by banks to raise capital.
• Purpose:
  • To strengthen weak balance sheets.
  • To fund expansions or regulatory capital requirements.
  • To hedge market risks (e.g., interest rate or currency exposure).

Typical Features of Bank Bonds

• Issuer: Banks, some insurance companies, and other financial entities.
• Maturity: Issued for a specific term.
• Interest: Fixed-rate or floating-rate interest payments.
• Security: Often backed by loans, mortgages, or other bank assets.
• Types:
  • Treasury securities (T-bills).
  • Agency securities (AIGs).
  • Mortgage-backed securities (MBSs).
  • Asset-backed commercial paper (ABCP).

Bank Bonds vs. Other Instruments

• Higher Yields: Compared to central bank-issued government bonds.
• Market Accessibility: Can be traded in the open market, often without permits or licenses.
• Institutional Buyers: Pension funds, insurance firms, and other banks frequently invest.

For Consumers

• Utility:
  • Used for saving, debt repayment, or emergency funds.
  • No need for a pre-existing bank account to purchase.
• Purchase Requirements:
  • Valid identity and payment method (credit/debit).
  • Sometimes requires documentation if no prior credit history exists.
• Ease of Access:
  • Same-day account setup often available.
  • Online purchases possible through most banks.

Investment Value and Benefits

• Safer Than Stocks: Less volatile due to backing by bank assets.
• Stable Returns: Less impacted by inflation or market fluctuation.
• Quality Assurance: Issued by regulated institutions, providing reliability.
• Indirect Equity Link:
  • Banks use bond proceeds to invest in growth (e.g., branches, tech upgrades).
  • As banks grow, their financial stability boosts the bond’s perceived value.

Key Difference: Bank Bonds vs. Stocks

Feature	Bank Bonds	Stocks
Ownership	No ownership rights	Ownership stake in a company
Risk	Lower, fixed return	Higher, variable return
Return	Interest payments	Dividends + potential capital gains
Maturity	Fixed-term	No maturity; held as long as desired
Control/Influence	No voting rights	Shareholders may vote on corporate matters

Bank bonds offer a secure, income-generating option for both conservative investors and institutions. They provide banks with critical funding while giving investors a predictable and relatively low-risk return— making them an essential part of the modern financial ecosystem.

3. Electricity Derivatives

Context:

The National Stock Exchange (NSE) has received in-principle approval from the Securities and Exchange Board of India (SEBI) to launch electricity derivatives. The announcement was made during the NSE’s fourth-quarter earnings analyst call.

Key Features of Electricity Markets and Derivatives

This chapter outlines the unique characteristics of electricity, the structure of electricity markets, and introduces market-specific derivatives, focusing on features that directly affect pricing and trading.

Key Properties of Electricity Affecting Markets

• Non-Storability
  • Electricity cannot be stored economically at scale.
  • This makes real-time balancing of supply and demand crucial.
  • Strongly influences market volatility and price formation.
• Transport Constraints
  • Electricity is location-specific due to transmission limitations.
  • There is no truly global or regional electricity market.
  • Markets are fragmented: each country (or even sub-region) has its own localized market.

Electricity Market Microstructure

• Fragmentation
  • Unlike gas or oil markets, electricity markets lack international homogeneity.
  • Every country has a distinct market design, regulatory framework, and pricing mechanism.
• Common Structural Features
  • Despite fragmentation, most electricity markets share:
    • A day-ahead market (based on forecasts)
    • Intraday and real-time balancing markets
    • Use of merit-order dispatch and marginal pricing

Electricity Derivatives

• Purpose and Use
  • Used for hedging price risk due to high volatility.
  • Commonly used by:
    • Utilities (both generators and retailers)
    • Large consumers (e.g., manufacturers)
• Types of Derivatives
  • Futures and forwards: Lock in prices for future delivery
  • Options: Offer flexibility with the right but not the obligation to trade
  • Contracts for difference (CfDs): Common in regulated markets for stabilizing revenue
  • Spread contracts: Hedge price differentials between locations or time periods
• Market Participants
  • Varying strategies depending on:
    • Size of the utility (large vs. small)
    • Nature of business (generation vs. retail)
    • Risk tolerance and access to capital markets

How Derivatives Exchanges Work

• Market Mechanism: Continuous auction where prices are set via supply-demand bids.
• Benefits:
  • Price transparency.
  • Predictability for producers and consumers.
• Participants: Mostly large corporations, banks, and trading firms.
• Barriers to Entry:
  • High capital requirements.
  • Daily financial reporting and transaction capabilities.

Trading Electricity vs. Financial Markets

Understanding the electricity wholesale market requires recognizing how electricity trading differs from traditional financial asset trading.

Key Differences Between Electricity and Financial Market Trading

• Instant Production and Consumption
  • Electricity must be produced and consumed in real-time.
  • Unlike commodities (e.g., oil) or financial assets (e.g., stocks, bonds), electricity cannot be stored efficiently at the wholesale level.
• Real-Time Market Balance
  • Continuous balancing of supply and demand is essential to maintain grid stability.
  • Market design is based on immediate delivery, not future settlements.
• Market Design
  • Electricity markets operate on a day-ahead or intraday basis, requiring precision forecasting.
  • Pricing reflects real-time constraints such as demand spikes, generation failures, or weather variability.

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4. RBI Introduces New Framework for Regulation Formulation and Public Consultation

Context:

The Reserve Bank of India (RBI) has introduced a new framework aimed at standardizing the process of regulation-making to ensure greater transparency, accountability, and stakeholder participation. The framework will involve publishing draft regulations on the RBI’s website along with a statement of particulars, inviting public comments before finalizing any new regulations.

Key Highlights of the Framework

Scope of Regulations

• Applies to all regulatory instruments issued by the RBI:
  • Directions
  • Guidelines
  • Notifications
  • Orders
  • Policies
  • Specifications and Standards

Draft Publication Requirements

• RBI must publish draft regulations on its official website: www.rbi.org.in
• A Statement of Particulars must accompany the draft, including:
  • Objectives of the regulation
  • Impact analysis, to the extent feasible
  • Reference to international standards and global best practices

Objective

To create a consistent, participatory, and evidence-based regulatory process, improving the quality and legitimacy of RBI’s regulatory instruments.

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5. Weighted Average Lending Rate (WALR)

Context:

The overall spread between the weighted average lending rate (WALR) and weighted average domestic term deposit rate fell to 2.71% in March 2025, a 10-year low, down 5 bps month-on-month (M-o-M). Spread on fresh loans fell sharply by 22 bps to 2.7% during the same period.

Weighted Average Lending Rate (WALR)

The Weighted Average Lending Rate (WALR) is a key financial metric that reflects the average interest rate at which a bank lends to its borrowers, adjusted for the size of each loan.

Key Features of WALR

Definition and Purpose

• Represents the average interest rate on all outstanding loans.
• Weighed by loan size, making it more accurate than a simple average.
• Larger loans influence the WALR more than smaller ones.

Calculation

• Involves aggregating all loans by size and interest rate.
• Formula: WALR= (∑ Loan Amount * Interest Rate) / ∑ Loan Amount. 

Characteristics

• Dynamic metric: Changes as loans are added, repaid, or modified.
• Reflects loan portfolio composition and prevailing interest rate trends.
• Includes all types of loans – retail, corporate, etc.

Applications

• Used to:
  • Compare lending rates across banks.
  • Assess competitiveness in the lending market.
  • Gauge transmission of monetary policy by central banks.
  • Monitor sector-specific trends (e.g., retail or SME lending).

Regulatory Relevance

• Used by regulators to assess:
  • Effectiveness of policy rate changes.
  • Credit market dynamics.
  • Cost of borrowing across the economy.

Implications

• A lower WALR indicates:
  • Cheaper credit availability
  • Higher competition among banks
• Changes in WALR directly impact:
  • Borrowing costs for consumers and businesses
  • Bank profitability

The weighted average domestic term deposit rate (WADTDR)

The weighted average domestic term deposit rate (WADTDR) is a metric that reflects the average interest rate paid on term deposits by commercial banks, adjusted for the size of the deposits. It essentially provides a weighted average of the interest rates on different deposit maturities and amounts, considering the relative importance of each deposit in the bank’s overall deposit portfolio. 

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6. RBI Surplus Transfer

Context:

The Reserve Bank of India (RBI) is likely to transfer a record ₹3 lakh crore surplus to the central government for FY25. This is 50% higher than FY24’s ₹2.1 lakh crore transfer and well above the budget estimate of ₹2.3 lakh crore.

What is RBI Surplus?

• Surplus = RBI’s income – expenditure
• RBI generates surplus primarily from:
  • Interest on Rupee Securities (RS)
  • Earnings from Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF)
  • Interest on loans to central/state governments and banks
  • Interest from Foreign Currency Assets (FCA)

Key Expenditure Items of RBI

• Risk Provisions:
  • Contingency Fund (CF): For absorbing market and operational risks.
  • Asset Development Fund (ADF): For internal capital expenditure and investments in subsidiaries.
• Other Expenditures:
  • Printing of currency
  • Commission to banks, dealers
  • Employee costs

Provisions & Legal Basis

• Section 47, RBI Act, 1934: RBI must transfer surplus to the Central Government after risk provisions.
• Section 48: RBI is exempt from income and super tax.
• Committees that guided surplus transfers:
  • V Subrahmanyam (1997)
  • Usha Thorat (2004)
  • Y.H. Malegam (2013)
  • Bimal Jalan Committee (2018) → Finalized the Revised Economic Capital Framework (ECF)

Economic Capital Framework (ECF) – Key Metrics

• Realized Equity (CF):
  • Range: 5.5–6.5% of RBI’s balance sheet.
  • RBI Board decided to maintain it at 5.5%.
• Economic Capital (includes CGRA):
  • Range: 20.8–25.4% of balance sheet.
  • Excess above upper limit is transferrable.
  • CGRA = Unrealized valuation gains from forex, gold, interest rate movements.

Why Was the Surplus So High?

• Higher earnings from foreign exchange reserves
• Lower provisioning requirement under revised risk thresholds
• Strong returns on domestic and global investments

Historical RBI Surplus Payouts (₹ Cr)

Fiscal Year	Surplus Transferred
FY16	65,876
FY17	30,659
FY18	50,000
FY19	1,75,987
FY20	57,128
FY21	99,122
FY22	30,307
FY23	87,416
FY24	2,10,874

Benefits to the Government

• Reduce Fiscal Deficit: Supports achieving FY25 target of 5.1%.
• Enhances Non-Tax Revenue: Provides fiscal space for welfare and growth expenditures.
• Lower Government Borrowing:
  • May cut FY25 borrowing by ₹1 trillion.
  • Reduces pressure on bond markets and yields.
• Keeps Interest Rates Low:
  • Lower G-Sec yields → lower corporate borrowing costs → boosts investment.

TET

7. RBI’s Co-lending Framework

Context:

The Reserve Bank of India (RBI) has proposed a new co-lending model requiring simultaneous loan disbursal by both banks and non-bank financial companies (NBFCs). The existing model, which allows NBFCs to originate and assign loans to banks, may be phased out. The Finance Industry Development Council (FIDC) is preparing to represent NBFC concerns formally to the RBI.

RBI to Expand Co-Lending Framework Beyond NBFCs and PSL

The Reserve Bank of India (RBI) is set to roll out a new, more inclusive co-lending framework, expanding the scope beyond existing arrangements between banks and NBFCs and beyond Priority Sector Lending (PSL).

Current Co-Lending Framework (Status Quo)

• Applicable Parties: Banks and Non-Banking Financial Companies (NBFCs) only
• Scope: Restricted to Priority Sector Lending (PSL) categories
• Risk Sharing: Typically, NBFCs initiate and service the loan, while banks share the risk and funding
• Objective: Leverage NBFC reach with bank liquidity to serve underserved segments

Why Change is Needed

• Increased Complexity: Co-lending models have diversified, sometimes involving fintechs and multilayered structures
• Elevated Interest Rates: Some arrangements led to higher borrower costs, drawing regulatory concern
• Inconsistent Risk Sharing: Varying practices created regulatory grey areas
• Consumer Protection Risks: Need for better transparency, grievance redressal, and fair lending practices

Related Developments

• RBI sees lower inflation in FY26: Forecast cut to 4%
• Repo Rate Cut: 25 bps reduction; stance now ‘accommodative’
• NPCI Empowered on UPI Limits: Can revise P2M transaction limits after consultation with banks
• Securitisation of Stressed Assets: RBI plans to enable market-based resolution

Implications of Expanded Co-Lending Framework

• For Borrowers: Potential for wider access to affordable credit with improved transparency
• For Banks & NBFCs: Clearer rules may reduce compliance uncertainty and risk exposure
• For Fintechs: Opportunity to be part of regulated co-lending partnerships
• For Economy: Supports financial inclusion and MSME growth with diversified credit models

The RBI’s Co-lending Framework

The RBI’s Co-lending Framework allows two financial institutions, like a bank and a non-banking financial company (NBFC), to jointly fund a loan portfolio in a pre-agreed proportion, with both sharing revenue and risk. This framework aims to improve credit flow to underserved sectors by combining the low-cost funding of banks with the reach of NBFCs and other financial entities. 

Key Aspects:

• Joint Funding: Co-lending involves two or more financial institutions jointly disbursing loans to borrowers. 
• Pre-agreed Proportion: The lending partners agree on the proportion of the loan each will fund. 
• Risk and Revenue Sharing: Both partners share the risks and rewards associated with the loan portfolio. 
• Sourcing and Management: Co-lending arrangements can include provisions for one partner to handle loan sourcing, credit appraisal, and management, while the other provides funding. 
• Expansion Beyond Priority Sector: The RBI has expanded the framework to include all regulated entities and loan types, not just priority sector lending. 
• Escrow Accounts: Escrow accounts are used to ensure transparency and compliance with regulations in co-lending partnerships. 

Benefits of the Co-lending Framework

• Improved Credit Access: It allows financial institutions to reach a wider range of borrowers, including those in underserved areas. 
• Risk Diversification: Sharing risks and rewards allows institutions to manage their lending portfolios more effectively. 
• Credit Cost Optimization: The blending of low-cost bank funding with higher-cost NBFC funding can lead to more competitive lending rates. 
• Enhanced Credit Delivery: NBFCs’ and other lenders’ strong distribution networks help reach borrowers that might be difficult for banks to access. 

RBI’s Role:

• Regulatory Framework: The RBI provides the regulatory framework for co-lending, ensuring transparency, compliance, and consumer protection. 
• Expanding Access: The RBI’s recent expansion of the framework aims to make it more accessible to all regulated entities and loan types, further promoting credit flow to underserved sectors. 
• Customer Grievance Redressal: The RBI’s guidelines emphasize the importance of customer grievance redressal mechanisms within the co-lending framework. 

TET

8. SEBI Tightens Disclosure Norms for REITs and InvITs

Overview of SEBI’s New Disclosure Norms

• On May 8, SEBI issued revised disclosure guidelines for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
• The changes aim to enhance transparency, improve investor protection, and align disclosures with global best practices.
• Issued via two circulars, the revised norms are based on the recommendations of a Working Group under HySAC (Hybrid Securities and Advisory Committee).

Key Changes in Offer Document Disclosures

• Audited Financial Statements: REITs and InvITs must disclose:
  • Audited financials for the past 3 financial years
  • Stub period financials, if the latest audited figures are older than 6 months
• Entity Age Clause: In follow-on offers, if the REIT/InvIT has not existed for 3 years:
  • Financials must be provided for the actual period of existence + stub period
• Initial Offers: Must include audited combined financials in the offer document or placement memorandum
• Additional Audited Disclosures:
  • Project-wise operating cash flows
  • Contingent liabilities and commitments
  • All to be audited by peer-reviewed auditors approved under REIT/InvIT regulations

TET

9. SEBI Introduces Regulations for Securitised Debt Instruments (SDIs)

Context:

The Securities and Exchange Board of India (SEBI) has introduced a new set of regulations for securitised debt instruments (SDIs), focusing on enhancing transparency, risk management, and investor confidence. The regulations, announced through a gazette notification, mandate key changes in the issuance, transfer, and management of SDIs.

What are SDIs?

• Securitised Debt Instruments (SDIs) are created by pooling various debt assets (e.g., loans, mortgages, receivables).
• These pooled assets are sold as securities to investors, enabling originators (like banks) to convert illiquid assets into tradable instruments.
• Investors earn returns based on the performance of the underlying debt pool, with risk diversification across multiple assets.

Key Highlights of SEBI’s New Rules on Securitisation

Minimum Investment Threshold (Ticket Size)

• Primary Issuance:
  • ₹1 crore minimum investment size for all investors in SDIs.
• Subsequent Transfers:
  • ₹1 crore for originators not regulated by the RBI.
  • For SDIs backed by listed securities: Minimum ticket size equals the highest face value among underlying securities.

Issue Process and Form

• Public Offer Duration:
  • Minimum: 3 days
  • Maximum: 10 days
• Dematerialised Form (Demat):
  • All SDIs must be issued and transferred in demat form only.

Originator Eligibility & Track Record

• Operating History:
  • Minimum of 3 years of operational track record required for originators.

Risk Retention and Holding Period

• Minimum Risk Retention:
  • 10% of securitised pool
  • 5% if underlying receivables mature within 24 months
• Minimum Holding Period (MHP):
  • 3 months for loans with tenure ≤ 2 years
  • 6 months for loans with tenure > 2 years

Asset Eligibility & Definitions

• Permissible Underlying Assets:
  • Listed debt securities
  • Accepted trade receivables
  • Rental incomes
  • Equipment leases
• Prohibited Assets:
  • Re-securitisation (i.e., securitising existing securitised assets)
  • Synthetic securitisation (derivative-based exposure)

10. Sa-Dhan and Bank of India Collaborate to Boost Financial Inclusion for Small, Micro, and Women-Led Businesses

Memorandum of Understanding (MoU) Signed

• Sa-Dhan, a self-regulatory organization for microfinance institutions (MFIs), has entered into a Memorandum of Understanding (MoU) with the Bank of India (BoI) to enhance financial access for small, micro, and women-led enterprises in India.
• The collaboration aims to address key barriers to financial inclusion and foster sustainable economic growth.

Focus on National Financial Inclusion and SDGs

• The partnership is aligned with India’s National Financial Inclusion goals and the Sustainable Development Goals (SDGs), particularly in areas such as:
  • Poverty alleviation
  • Gender equality
  • Economic empowerment of underserved communities.

Key Areas of Collaboration

The MoU outlines the following key areas of collaboration:

• Enterprise finance for self-help groups (SHGs) and non-SHG members.
• Climate-resilient technologies and green financing, enabling businesses to adapt to climate change.
• WASH (Water, Sanitation, and Hygiene) financing to improve infrastructure and living conditions.
• Co-lending to Microfinance Institutions (MFIs) to provide credit to underserved businesses.
• Financial literacy and awareness programs, including guidance on government schemes to improve access to financial services.

Agriculture

1. Luminis Partners with Forvis Mazars to Scale Microbiome Solutions in India

Context:

Luminis, a leader in microbiome intelligence and precision agri-tech, has entered a strategic alliance with Forvis Mazars in India, a global advisory, audit and tax firm. Nalanda Capital Partners facilitated the deal, providing strategic advisory and capital-raising support

Partnership Objectives

• Deepen impact in aquaculture through Luminis’ Omni Biome AI platform and genomics capabilities
• Expand into soil microbiome for agriculture, addressing soil degradation, yield variability, disease pressures and climate resilience
• Eliminate antibiotics in food production by harnessing next-gen bioproducts and microbiome-based solutions

Expected Impact on India’s Agri-Food Systems

• Enhanced soil health and carbon resilience through targeted microbial applications
• Stabilised crop yields and reduced disease incidence via data-driven biocontrol solutions
• Sustainable aquaculture growth by optimising microbial communities in water and feed

Microbiome

The microbiome refers to the community of microorganisms, including bacteria, fungi, viruses, and archaea, that live in a specific environment, such as the human body or the soil. It encompasses not only the microbes themselves but also their genomes and the interactions they have with their surroundings. 

Composition

• The microbiome includes a wide variety of microbes, including bacteria, archaea, fungi, protists, viruses, and other microorganisms. 
• It’s a dynamic and interactive community, with microbes constantly changing and interacting with each other and their environment. 

BL

Facts To Remember

1. The Hindu Made of Chennai wins laurels at WAN-IFRA World Media Awards 2025

The Hindu has been honoured with the “World Winner” award under the “Best in Digital Advertising Product or Initiative” category at the WAN-IFRA World Media Awards, 2025, recently held in Krakow, Poland.