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Day#73 Current Affairs Flash Cards [PRELIMS 2020]

‘Geotail’; Pattinappaalai; Automatic Exchange of Information (AEOI); P-notes; HR Khan Committee; Foreign portfolio investment (FPI);
By IASToppers
October 17, 2019

 

 

Recently term ‘Geotail’ appeared in news. What is Geotail?

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Solution:

The Earth’s magnetosphere is compressed into a region approximately three to four times the Earth on the side facing the Sun but is stretched into a long tail on the opposite side that goes beyond the orbit of Moon. This tail is called geotail.

Enrich Your Learning:

Why in news?

  • Recently, an instrument on Chandrayaan-2 named CLASS (Chandrayaan-2 Large Area Soft X-ray Spectrometer) has detected charged particles present on the moon soil through the geotail.
  • These charged particles can help to understand the complex interaction of these particles with the magnetic field, measure the fluxes, energy spectra, and charge types of charged particles bombarding the lunar surface.

About Geotail:

  • The Geotail region exists as a result of the interactions between the Sun and Earth, this interaction results in the formation of a magnetic envelope around Earth.
  • On the earth side facing opposite to the Sun, the envelope is stretched into a long tail, which extends beyond the orbit of the Moon called the Geotail.
  • Geotail provides information about the way the magnetic envelope surrounding Earth, called the magnetosphere, responds to incoming material and energy from the Sun.
  • The geotail is a region in space that allows the best observations.
  • On every 29 days, the Moon traverses the Geotail for about six days.

 

 

Securities and Exchange Board of India (SEBI) formed which committee to ease the measures of Foreign Portfolio Investors (FPIs)?

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Solution:

Securities and Exchange Board of India (SEBI) formed HR Khan committee to ease the measures of Foreign Portfolio Investors (FPIs)?

Enrich Your Learning:

HR Khan Committee:

The committee was formed by the Securities and Exchange Board of India (SEBI) under the chairmanship of HR Khan, former deputy governor of RBI, to suggest measures about Foreign Portfolio Investors (FPIs).

Recommendations of Committee:

  • NRIs, overseas citizens of India and resident Indians should be allowed to hold non-controlling stakes in FPIs and they should be allowed to manage non-investing FPIs.
  • NRIs will be allowed to invest as FPIs if the single holding is under 25% and group holding under 50% in a fund, according to the panel.
  • Formerly, PIOs should not be subjected to any restrictions, while clubbing of investment limits for well-regulated and publicly held FPIs having common control should be allowed.
  • Time for compliance with conditions should be extended by six months, after they are finalised and also the non-compliant investors should be given further 180 days to ease their positions.
  • SEBI should do away with additional Know Your Customer (KYC) requirements for beneficial owner in case of government related FPI’s.

Reforms SEBI Initiated:

  • SEBI eased the KYC norms and eligibility terms for FPIs. Now the beneficial ownership criteria in the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PMLA Rules), will apply for KYC.
  • There will be separate set of norms for determining conditions, wherein NRIs, OCIs and resident Indian are constituents.
  • NRIs, OCIs and resident Indians are allowed to be constituents of FPIs if a single NRI, OCI or RI holds less than 25% of holding.
  • If Investment managers of NRIs, OCIs and RIs are regulated in the home jurisdiction and registered with SEBI as a non-investing FPI, they can control the FPI Such an FPI may be directly or indirectly fully-owned and controlled by an NRI, OCI, or RI.
  • Securities and Exchange Board of India (SEBI) is conceiving an idea to merge Non Resident Indian (NRI) and Portfolio Investment Scheme (PIS) routes with that of Foreign Portfolio Investors (FPIs).
  • Easing the regulatory framework for foreign portfolio investors, SEBI on simplified KYC requirements for them and permitted them to carry out off-market transfer of securities.
  • The proposals were cleared by the SEBI board during its meeting here as part of efforts to simplify and expedite the registration process for foreign portfolio investors (FPIs).

What is FPI:

  • Foreign portfolio investment (FPI) is a common way to invest in overseas economies. It includes securities and financial assets held by investors in another country.
  • Stocks or American Depositary Receipts (ADRs) of companies in nations other than the investor’s nation are securities included in FPI. It also includes bonds or other debt issued by these companies or foreign governments, mutual funds, or exchange-traded funds (ETFs) that invest in overseas.
  • On a macro-level, foreign portfolio investment is part of a country’s capital account and shown on its balance of payments (BOP).

 

 

What are P-Notes? What are the pros and cons associated with its usages?

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Answer & Enrich Your Learning:

What are P-notes?

Participatory notes also referred to as P-Notes, or Off-shore Derivatives Instruments (ODIs), allow foreign investors to take exposure to Indian stocks without registering with SEBI.

  • These instruments are issued by foreign portfolio investors (FPIs) registered with SEBI.
  • They allow foreign investors to buy stocks listed on Indian exchanges without being registered.
  • The instrument gained popularity as FIIs, to avoid the formalities of registering and to remain anonymous, started betting on stocks through this route.
  • Morgan Stanley, Goldman Sachs, JP Morgan and Credit Suisse are among the biggest P-note issuers on the Indian market.

Why are they popular?

  • These are a popular way to invest in Indian markets as not only do these save the investor from regulatory hassles of registration, but also allow the final beneficiary to remain anonymous.
  • Large hedge funds and high net worth individuals find this a hassle-free and simple way to get exposure to Indian markets.
  • Reports also suggest that P-notes may aid in movement of black money or unaccounted funds. Such funds leave the country through various routes and can easily re-enter via investments aided by P-notes, which won’t reveal the identity of the beneficiary.
  • Given that P-notes are issued outside India to overseas investors, they are not regulated and are open to misuse.

Pros of P-notes:

  • Participatory notes are easily traded overseas through endorsement and delivery.
  • They are popular because investors anonymously take positions in Indian markets, and hedge funds may anonymously carry out their operations.
  • Investors are saving their time, money and scrutiny associated with direct registration.

Cons of P-notes:

  • Because of the anonymity, Indian regulators face difficulty determining a participatory notes original owner and end owner.
  • Therefore, substantial amounts of unaccounted for money enters the country through participatory notes.
  • Some entities route their investments through participatory notes to take advantage of tax laws that are available in certain countries.
  • This practice may lead to the P-Notes being used for money laundering or other illegal activity.
  • SEBI has no jurisdiction over participatory note trading.

 

 

Under the Automatic Information Exchange pact, India recently got information on which subject?

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Solution:

Recently, India has got the first set of Swiss bank account details of its nationals under a new automatic information exchange pact

Enrich Your Learning:

What is Automatic Exchange of Information (AEOI)?

Automatic Exchange of Information

  • Automatic Exchange of Information (AEOI) is systematic transmission of bulk taxpayer information by the source country to the residence country, which is possible under most of the Double Taxation Avoidance Agreements (DTAAs) and Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC).
  • The information which is exchanged automatically is normally collected in the source country on a routine basis.
  • Automatic exchange can also be used to transmit other types of useful information such as changes of residence, the purchase or disposition of immovable property
  • As a result, the tax authority of a taxpayer’s country of residence can check its tax records to verify that taxpayers have accurately reported their foreign source income.

Obtaining Swiss bank account details

  • India is among 75 countries with which Switzerland’s Federal Tax Administration (FTA) has exchanged information on financial accounts within the framework of global standards on Automatic Exchange of Information (AEOI).
  • The exchanged details include identification, account and financial information including name, address, state of residence and tax identification number, capital income etc. However, the FTA cannot provide any information on the amount of financial assets.
  • The exchanged information allows the tax authorities to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns.
  • According to the international agreement, the exchange of information have to take place within nine months after the end of the respective calendar year. This means the next exchange will take place in September 2020.

 

 

Who was written Tamil poetic work ‘Pattinappaalai’?

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Solution:

  • Pattinappaalai was written by the poet Uruttiragannanar in praise of the Chola king Karikala.

Enrich Your Learning:

Pattinappaalai:

  • Pattinappaalai (Tamil word meaning the city and the desert) is a Tamil poetic work in the Pathinenmaelkanakku collection of Tamil literature.
  • It is a post Sangam period work.
  • It is part of the Pattupattu collection, which is the oldest available collection of long poems in Tamil literature.
  • Pattinappaalai poems belong to the Akam, or subjective themes of love and human relationships and utilises the location of the story to sing praises of the ruler.
  • Pattinappaalai contains vivid descriptions of the ancient Chola capital of Kaveripattinam (Puhar), which was located at the mouth of the river Kaveri. Food from Eelam is imported to the Chola country at the port.
  • The flourishing sea-trade and the antics of Yavanas, the merchants from ancient Greece and Rome, their living quarters, etc. are colourfully described by the poet. It cites the anchorage of a Chinese ship on the eastern coast of ancient Tamil Nadu.
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