Government Schemes & Policies
- Government issues one-time partial credit guarantee schemes to PSBs
Environment, Ecology & Disaster Management
- Crop residue burning declines 41 pc in Punjab, Haryana, UP, Delhi
Key Facts for Prelims
- RPF Launches “Operation Number Plate” across Indian Railways
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Government Schemes & Policies
Government issues one-time partial credit guarantee schemes to PSBs
India has operationalised a partial guarantee scheme announced in the budget for non-banking and housing finance companies (NBFCs and HFCs), which will allow state-run banks (PSBs) to purchase their assets.
ABOUT THE SCHEME:
- The name of the scheme is ‘Partial Credit Guarantee offered by Government of India to Public Sector Banks (PSBs) for purchasing high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs)’.
- The Scheme would enable the public sector banks (PSBs) to purchase pooled assets of financially sound Non-bank financial institution (NBFCs) amounting to Rs. one lakh crore.
- The Department of Economic Affairs will provide government guarantee of up to 10% of the fair value of assets purchased by a bank from a stressed NBFC or HFC.
- The scheme is capped at Rs 1 lakh crore and will be open for up to six months.
- To address temporary asset liability mismatches of otherwise solvent NBFCs/HFCs without having to resort to distress sale of their assets for meeting their commitments.
- The stress on NBFCs and HFCs is seen as a key reason for a slowdown in the economy, as it has caused reduced credit flow to small businesses and consumers.
- It would provide liquidity to the NBFC Sector and enable them to continue to play their role in meeting the financing requirements of economy including MSME, retail and housing.
WHAT IS ASSET–LIABILITY MISMATCH?
- In finance, an asset–liability mismatch occurs when the financial terms of an institution’s assets and liabilities do not correspond.
- Banks’ primary source of funds is deposits, which typically have short- to medium-term maturities. They need to be paid back to the investor in 3-5 years. In contrast banks usually provide loans for a longer period to borrowers.
- Home loans, for instance, can have a tenure of up to 20 years. Providing such loans from much shorter maturity funds is called asset-liability mismatch. It creates risks for banks that need to be managed.
WHAT ARE THE CONSEQUENCES OF ASSET-LIABILITY MISMATCH?
- The most serious consequences of asset-liability mismatch are interest rate risk and liquidity risk.
- Because deposits are of shorter maturity they are repriced faster than loans. Every time a deposit matures and is rebooked, if the interest rates have moved up bank will have to pay a higher rate on them.
- Because of this faster adjusting of deposits to interest rates, asset-liability mismatch affects net interest margin or the spread banks earn.
- Liquidity issues also arise when loans and deposits have different maturities. Depositors have to be repaid when their funds mature, but banks cannot recall their loans.
- They will have to find new deposits or else they will not be able to service their depositors. In an acute situation they may have to pay really high interests to raise funds.
HOW DO BANKS MANAGE ASSET-LIABILITY MISMATCHES?
- Most banks have elaborate institutional arrangement to manage asset-liability mismatches. The interest rate risk is usually managed by pricing a large percentage of loans at variable interest rates that move in harmony with market rates.
- Fixed rate loans are, therefore, usually priced at a huge mark up to variable rate loans to entice borrowers to opt for the latter.
- This takes care of interest rate risks as loans are linked to a benchmark and repriced when the benchmark rate moves up.
- Sophisticated derivatives are also used to manage interest rate risk. Liquidity risk involves a more hands on management.
- RBI requires banks to have dedicated asset-liability management committees to manage liquidity risks.
Environment, Ecology & Disaster Management
Crop residue burning declines 41 pc in Punjab, Haryana, UP, Delhi
Burning of paddy crop residue, one of the major causes of air pollution, declined by 41 per cent last year over 2016-level in Punjab, Haryana, Uttar Pradesh and Delhi-NCR with the help of a Rs 1,151 crore central scheme.
ABOUT THE ‘PROMOTION OF AGRICULTURAL MECHANIZATION FOR IN-SITU MANAGEMENT OF CROP RESIDUE IN THE STATE OF PUNJAB, HARYANA, UTTAR PRADESH & NCT OF DELHI’ SCHEME
- It is a Central Sector Scheme launched to tackle air pollution and to subsidize machinery required for in-situ management of crop residue in the States of Punjab, Haryana, Uttar Pradesh and NCT of Delhi.
- It was launched with a total outgo of Rs.1151 Crores for the period from 2018-19 to 2019-20.
- It is implemented by the Indian Council of Agricultural Research (ICAR) through 60 Krishi Vigyan Kendras (KVKs) of Punjab, Haryana, Delhi and UP.
- Under the scheme, financial assistance at 50% of the cost is provided to the farmers for purchase of in-situ crop residue management machines on individual ownership basis.
- The financial assistance for establishment of Custom Hiring Centres (CHCs) of in-situ crop residue management machinery is at 80% of the project cost.
Impact of the scheme
- Through this scheme, the paddy residue burning events have reduced by 15% and 41% in 2018 as compared to that in 2017 and 2016.
- More than 4500 villages in Punjab and Haryana was declared as Zero Stubble Burning Villages during 2018 as not a single crop burning incident was reported from these villages during the year.
- Within one year of its implementation, the happy seeder/zero tillage technology was adopted in 8 lakh hectares of land in the North- Western States of India.
ABOUT SUB-MISSION ON AGRICULTURAL MECHANIZATION:
- Introduced in 2014, this scheme is being implemented to promote the usage of farm mechanization and increase the ratio of farm power to cultivable unit area up to 2 kW/ha.
- The Central Sector schemes of ‘Promotion and Strengthening of Agricultural Mechanization through Training, Testing and Demonstration’ and ‘Post Harvest Technology & Management’ have been merged with this Sub-Mission.
- Increasing the reach of farm mechanization to small and marginal farmers and to the region where availability of farm power is low
- Promoting ‘Custom Hiring Centres’ to offset the adverse economies of scale arising due to small landholding and high cost of individual ownership
- Creating hubs for hi-tech & high value farm equipments
- Ensuring performance testing and certification at designated testing centers.
- Promotion and strengthening of Agricultural Mechanization via training, testing and demonstration
- Demonstration, training and distribution of the Post-Harvest Technology and Management (PHTM)
- Financial assistance to obtain agricultural machinery and equipment
- Establish farm machinery banks for custom hiring
- Promote farm machinery and equipment in selected villages and in the North-Eastern Region
- It is being implemented under the National Mission on Agricultural Extension and Technology.
- Farm Mechanization programmes are implemented through other missions/schemes such as Remunerative Approach for Agriculture and Allied sector Rejuvenation (RKVY), Mission for Integrated Development of Horticulture (MIDH), National Mission on Oilseeds and Oil Palm (NMOOP) and Sub Mission on Agricultural Mechanization (SMAM).
- For the Centrally Sponsored Schemes under SMAM, Government of India contributes 60% and while states contribute 40%.
- Funding pattern for states of Northern-Eastern and Himalayan region, the share of Govt. of India & State Govt. is 90:10.
- India accounts for 2.4% of the world’s geographical area and 4% of its water resources, and has 17% of the world’s human population and 15% of the livestock.
To know about Stubble Burning, refer IASToppers’ Mains Article.[Ref: PIB, The Week]
Key Facts for Prelims
RPF Launches “Operation Number Plate” across Indian Railways
Railway Protection Force (RPF) of Indian Railways launched a Special Drive with a Code Name – Operation ‘Number Plate’.
OBJECTIVE OF OPERATION NUMBER PLATE
- It was launched to identify and verify all vehicles parked in Railway premises, circulating area, parkings and even in the ‘No Parking’ areas for longer duration.
- The unidentified vehicles are considered as a serious threat to security and safety of passengers and other stake holders of railways.
ABOUT RAILWAY PROTECTION FORCE
- The Railway Protection Force is a security force, established by the Railway Protection Force Act, 1957.
- It is the only central armed police force (CAPF) which has the power to arrest, investigate and prosecute criminals.
ROLE OF RPF
- To protect and safeguard railway property, passenger area and passenger
- To remove any obstruction in the movement of railway property or passenger area
- To Remain vigilant to prevent trafficking in women and children and take appropriate action to rehabilitate destitute children found in Railway areas
- To do any other act conducive to the better protection and security of railway property, passenger area and passenger
- To investigate in Railways Act cases