What's New :

26th September 2022

Banking system liquidity

Context

For the first time since May 2019, the banking system liquidity situation turned into a deficit mode of Rs 21,873.4 crore in September 2022.

About

Banking system liquidity:

  • Liquidity in the banking system refers to readily available cash that banks need to meet short-term business and financial needs.
  • On a given day, if the banking system is a net borrower from the RBI under Liquidity Adjustment Facility (LAF), the system liquidity can be said to be in deficit and if the banking system is a net lender to the RBI, the system liquidity can be said to be in surplus.
    • The LAF refers to the RBI’s operations through which it injects or absorbs liquidity into or from the banking system.

What has Triggered this Deficit?

  • The change in the liquidity situation has come due to advance tax outflows. This also increases the call money rate temporarily above the repo rate.
    • Call money rate is the rate at which short term funds are borrowed and lent in the money market.
    • Banks resort to these types of loans to fill the asset liability mismatch, comply with the statutory CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio)requirements and to meet the sudden demand of funds. RBI, banks, primary dealers etc. are the participants of the call money market.
  • Besides, there is the continuous intervention of the RBI to stem the fall in the rupee against the US dollar.
  • The deficit in the liquidity situation has been caused by an uptick in bank credit, intervention of the RBI into the forex market, and also incremental deposit growth not keeping pace with credit demand.

How Can a Bank Achieve Liquidity?

  • Large banking groups engage themselves in substantial capital markets businesses and they have considerable added complexity in their liquidity requirements. This is done to support repo businesses, derivatives transactions, prime brokerage, and other activities.
  • Banks can achieve liquidity in multiple ways. Each of these methods ordinarily has a cost, comprising of −
    • Shorten asset maturities
    • Improve the average liquidity of assets
    • Lengthen
    • Liability maturities
    • Issue more equity
    • Reduce contingent commitments
    • Obtain liquidity protection

Impact of Tight Liquidity Condition on Consumers:

  • A tight liquidity condition could lead to a rise in the government securities yields and subsequently lead to a rise in interest rates for consumers too.
  • RBI may increase Repo Rate, which can lead to a higher cost of funds.
  • Banks will increase their repo-linked lending rates and the marginal cost of funds-based lending rate (MCLR), to which all loans are linked to. This rise will result in higher interest rates for consumers.
  • The MCLR is the minimum interest rate that a bank can lend at.

Steps that needs to be taken:

  • RBI’s actions will depend upon the nature of the liquidity situation. If the current liquidity deficit situation is temporary and is largely on account of advance tax flow, the RBI may not have to act, as the funds should eventually come back into the system.
  • However, if it is long-term in nature then the RBI may have to take measures to improve the liquidity situation in the system.

Algae biofuels

Context

Big industries and startups around the globe have been working to commercialise algae-based biofuel processes to reduce dependence on conventional fossil fuels like petrol and diesel. 

About

Algae biofuel:

  • Algae are sometimes grown to make algae biofuels, which make up the third generation of biofuels.
  • Many types of algae can be used and processed to become a biofuel. Biofuel is a fuel made from living things, or the waste of a living thing, also known as biomass.
  • The algae oils can be converted to biodiesel and the remaining material can be used to create 
  • Both biodiesel and bioethanol are developing biofuels. Biodiesel is a renewable fuel made from seed oils.
  • Bioethanol is an alcohol made from algae, corn, sugar cane or other sugar containing feedstock. It is usually blended with gasoline and used in internal combustion engines.
  • Algae can synthesise large volumes of oil (20 times more than that of mustard per acre), grow fast (10 times quicker than terrestrial plants) and capture carbon dioxide (CO2). 
  • Microalgae are excellent at converting CO2 and sunlight into oil-rich biomass, especially when compared to land-based crop plants like oil palm and soy.

Algae biofuel industry in India:

  • India’s Reliance Industries Ltd has been successfully running large algae raceway ponds the last five years at their facility near Jamnagar, to convert sunshine, CO2 and seawater into bio-oil.
  • It also displayed the utilisation of catalytic hydrothermal liquefaction technology to convert algae biomass to oil.

Catalytic Hydrothermal Liquefaction Technology:

  • Under this process, water is used as solvent under high temperature and pressure to extract oil from the biomass.
  • The benefits of this technology include direct utilisation of wet biomass without any need for drying and conversion of every organic fragment of biomass into oil and without any wastage.

Issues in algae bio-fuel industry:

  • The energy cost of extracting oil from algae biomass is 10 times higher than the energy cost of extracting soybean oil. 
  • The cost has a large variability because of inappropriate assumptions, including those related to the products, cultivation methods, biomass productivities, oil contents, production capacity and conversion technologies. 
  • The results of the cost estimation were directly impacted by an overestimation of the combined biomass yield and lipid content. 

Novel integrated technology:

  • Scientists from the National Renewable Energy Laboratory, United States have illustrated process which uses medium temperature and low pH to more readily extract available lipids from the algae biomass to further process them into biodiesel. 
  • This method can reduce per-gallon fuel expenses by up to 33 per cent compared to a standard lipid extraction-only method. 
  • A research group led by Anushree Malik at the Indian Institute of Technology (IIT), Delhi has designed different models of biofilm reactors to cultivate microalgae, to substantially reduce the algae biomass harvesting cost.
  • Algal biofilm reactors offer a robust cultivation system promising high biomass productivity, low harvesting cost and the ability to handle complex industrial effluents.
  • These have emerged as important tools for efficient resource recovery from waste streams in terms of algal biofuels.

Swachh Toycathon

Context

The ministry of housing and urban affairs (MoHUA) has launched the Swachh Toycathon under the Swachh Amrit Mahotsav recently.

About

About Swachh Toycathon:

  • The competition is a convergence between the National Action Plan for Toys (NAPT) and Swachh Bharat Mission phase two (SBM 2.0).
  • It seeks to explore solutions for the use of waste in manufacturing toys.

The National Action Plan for Toys (NAPT) 2020 was introduced to promote the Indian toy industry including traditional handicrafts and handmade toys with the objective of establishing India as a global Toy hub.

  • The competition will be open to individuals and groups to bring forth innovation in toy designs using dry waste.
  • It will focus on efficient designs that can be replicated on a larger scale, toys that comply with minimum safety standards, as well as aesthetics of the toys.
  • Center for Creative Learning, IIT Gandhinagar is the knowledge partner for the initiative.
  • The competition will be hosted on MyGov’s Innovate India portal.

Status of Toy Market:

  • Global toy market is worth nearly $100 billion.
  • Of which, India contributes only around $1.5 billion.
  • India imports around 80% of toys from abroad, which means crores of rupees of the country are going abroad on them.

Swachh Bharat Mission phase two (SBM 2.0).

  • SBM-U 2.0, announced in Budget 2021-22, is the continuation of SBM-U first phase.
  • The government is trying to tap safe containment, transportation, disposal of faecal sludge, and septage from toilets.
  • It will be implemented over five years from 2021 to 2026 with an outlay of Rs.1.41 lakh crore.
  • Objectives:
    • It focuses on source segregation of garbage, reduction in single-use plastic and air pollution, by effectively managing waste from construction and demolition activities and bioremediation of all legacy dump sites.
    • Under this mission, all wastewater will be treated properly before it is discharged into water bodies, and the government is trying to make maximum reuse a priority.

Effect of the Moon on mangrove forests

Context

In a new study published in Science Advances, scientists have found that the oscillation of the moon’s orbit or ‘moon wobble’ has a significant impact on the mangrove canopy cover of the world.

About

Moon Wobble:

  • Unlike the Chandler Wobble, which describes the movements in the Earth’s orbit, a moon wobble describes the fluctuations in the moon’s orbit, with wobbles occurring as a result of changes in the moon’s elliptical orbit and their resulting gravitational pull on the Earth.
  • Such changes are part of the moon’s natural cycle, in which its 18.6 year span is split down the middle, with half of its cycle seeing more suppressed daily tide levels and the other half amplifying tide levels.
  • It is a regular oscillation that humans have known about for centuries, and it is one of many factors that can either exacerbate rising sea levels or counteract them, alongside other variables like weather and geography.

Effects of Moon Wobble:

  • The moon plays an important role when it comes to regulating the Earth’s oceans.
  • Its gravitational pull forms tides that maintain the health of the oceans, coastal areas and biodiversity.
  • The new study has found that these long-phase tidal cycles play an important role in the regulation of tidal wetland ecosystems— such as the growth of mangrove forests. 
  • When the lunar wobble is in its minimum phase, the researchers figured that mangrove ecosystems would be sucked dry, experiencing fewer days where their roots were saturated and greater water stress, leading to thinner canopy cover.
  • At its maximum, the lunar wobble might thrust tides higher, boosting mangrove growth.
  • The synchronicity between the lunar wobble and mangrove canopy cover stood out against a backdrop of steady climate change, whereby higher air temperatures, sea levels, and CO2 levels are associated with mangrove expansion and canopy thickening.
  • The new research has also discovered these factors of lunar cycles and daily tides also interact with other climatic events such as the El Niño-Southern Oscillation, which influences alternating periods of heavy rainfall and prolonged droughts in eastern Australia and the western coasts of North and South America.

2023 Breakthrough Prize

Context

The 2023 winners of the Breakthrough Prizes, dubbed the "Oscars of Science," were announced recently.

About

Breakthrough Prize:

  • The Breakthrough Prize, renowned as the “Oscars of Science”, recognizes the world’s top scientists working in the fundamental sciences – the disciplines that ask the biggest questions and find the deepest explanations.
  • Each prize is $3 million and presented in the fields of Life Sciences, Fundamental Physics and Mathematics.
  • In addition, the New Horizons in Physics and Mathematics Prizes and the Maryam Mirzakhani New Frontiers Prize are awarded to early-career researchers.
  • The Breakthrough Prizes were founded by Sergey Brin, Priscilla Chan and Mark Zuckerberg, Yuri and Julia Milner, and Anne Wojcicki.
  • The Prizes have been sponsored by the personal foundations established by Sergey Brin, Priscilla Chan and Mark Zuckerberg, Ma Huateng, Jack Ma, Yuri and Julia Milner, and Anne Wojcicki.

2023 winners:

  • Mathematics: The Breakthrough Prize in mathematics was awarded to Daniel Spielman of Yale University for multiple discoveries in theoretical computer science and mathematics.
  • Fundamental Physics: The prize in fundamental physics was shared by Charles Bennett, Gilles Brassard, David Deutsch and Peter Shor for their work in quantum information.
  • Life Science: Clifford Brangwynne and Anthony Hyman won a life sciences prize for discovering a new mechanism of cellular organization. DemisHassabis and John Jumper were recognized for the development of AlphaFold, which predicts the structure of proteins. The prize was also given to Emmanuel Mignot and Masashi Yanagisawa for the discovery of causes of narcolepsy – the chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep.

Rajya Sabha to introduce ‘gender-neutral’ language

Context

The Rajya Sabha has decided to use gender-neutral terms in responses to parliamentary questions from the next session onwards.

About
  • The announcement came in response to a request made by Shiv Sena MP Priyanka Chaturvedi last month.
  • As per conventions and Rule of Procedure and Conduct of Business in Rajya Sabha, all proceedings of the House are addressed to the Chair.
    • Replies to the parliamentary Questions being a part of the proceedings are also addressed to the Chairperson only.
    • However, ministries will be informed to furnish gender-neutral replies to the parliamentary Questions from the next session of Rajya Sabha session.

What are the trends of gender-neutrality in the law making bodies in India and across the world?

  • Internationally, even mature democracies that legalised universal suffrage after India, such as Canada (1960 for Aboriginal women), Australia (1962 for Indigenous women), and the United States (1965 for women of African-American descent), have successfully adopted a framework for gender-inclusive legislation and communication.
  • In 2014, the Rules of Procedure of the Lok Sabha were amended to make it entirely gender neutral. Since then, each Lok Sabha Committee Head has been referred to as Chairperson in all documents.
    Way Forward
    • The Supreme Court judgment in National Legal Services Authority vs Union of India, 2014, has given impetus to gender identity and has given the movement greater impetus.
    • There should be political will to amend legal documents to make them inclusive for all genders.
    • The Parliament must lead to sensitivity, equal treatment, and appreciation for the people of India, regardless of gender
    • The Indian Parliament can conduct gender audits. For example, in 2018, the U.K. Parliament conducted a gender audit to understand its culture, environment, and policies as a workspace.

    Editorial

    Soft power, the new race every country wants to win

    Context:

    It is now thought that success in international sporting events boosts a nation’s chances of attaining soft power and the smaller nations seem to be following it.

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    ThinkQ

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    QUIZ - 26th September 2022

    Mains Question:

    What do you understand by the term banking system liquidity? Discuss the major factors responsible for liquidity surplus and liquidity deficit. (150 words)

     Approach

     Introduction-Define banking system liquidity 

    Current situation in India 

    Discuss the major factors responsible for deficit and surplus 

    Briefly discuss the impacts 

    Conclude accordingly 

    Verifying, please be patient.

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