6th DECEMBER-DAILY CURRENT AFFAIRS + PIB- IASbhai

• When you borrow money from the bank, the transaction attracts interest on the principal amount.
• This is referred to as the cost of credit. Similarly, banks also borrow money from RBI during a cash crunch on which they are required to pay interest to the Central Bank.
• This interest rate is called the repo rate.

Below are the parameters on the basis of which the RBI agrees to execute the transaction with the banks:

Preventing Economy “squeezes” – The Central bank increases or decreases the Repo rate depending on the inflation. Thus, it aims at controlling the economy by keeping inflation in the limit.

Hedging & Leveraging – RBI aims to hedge and leverage by buying securities and bonds from the banks and provide cash to them in return for the collateral deposited.

Short-Term Borrowing – RBI lends money for a short period of time, maximum being an overnight post which the banks buy back their securities deposited at a predetermined price.

Collaterals & Securities – RBI accepts collateral in the form of gold, bonds etc.

Cash Reserve (or) Liquidity – Banks borrow money from RBI to maintain liquidity or cash reserve as a precautionary measure.

• Repo rate is a powerful arm of the Indian monetary policy that can regulate the country’s money supply, inflation levels, and liquidity.
• Additionally, the levels of repo have a direct impact on the cost of borrowing for banks. Higher the repo rate, higher will be the cost of borrowing for banks and vice-versa.

A. RISE IN INFLATION

During high levels of inflation, RBI makes strong attempts to bring down the flow of money in the economy. One way to do this is by increasing the repo rate. This makes borrowing a costly affair for businesses and industries, which in turn slows down investment and money supply in the market. As a result, it negatively impacts the growth of the economy, which helps in controlling inflation.

B. INCREASING LIQUIDITY IN THE MARKET

On the other hand, when the RBI needs to pump funds into the system, it lowers the repo rate. Consequently, businesses and industries find it cheaper to borrow money for different investment purposes. It also increases the overall supply of money in the economy. This ultimately boosts the growth rate of the economy.

Reverse Repo Rate is a mechanism to absorb the liquidity in the market, thus restricting the borrowing power of investors.

Reverse Repo Rate is when the RBI borrows money from banks when there is excess liquidity in the market. The banks benefit out of it by receiving interest for their holdings with the central bank.

• So far, four cyclones have formed over the Arabian Sea. Vayu in June and Hikka in September were recognized as “very severe” cyclonic storms.
• The formation of cyclones Kyarr and Maha simultaneously in end-October was considered to be an unusual occurrence observed last in 1965.
• The last such occurrence (five cyclones) was observed in 1902.

While the Arabian Sea has witnessed five cyclones against the usual occurrence of one every year, Bay of Bengal on the wastern side remains relatively quite with only three cyclones—Pabuk, Fani and Bulbul—compared to the normal occurrence of four cyclones per year.

Taken together, the Arabian Sea and Bay of Bengal, which form a part of the North Indian Ocean, have witnessed eight cyclones this year.

PAWAN ?

• According to weather scientists, warming of oceans is fuelling stronger cyclones in the North Indian Ocean, with increasing potential energy available to these cyclonic disturbances.
• The systems also seem to have intensified rapidly, most probably due to higher sea-surface temperatures, which lead to an increase in cyclonic wind speeds.
• Tropical Cyclone Pawan (locally, Cyclonic Storm Pawan) was a weak system that made landfall in Somali . It will bring increased moisture and possibly heavy rain and flooding to Somalia and other parts of eastern Africa into this weekend.

KEYFACTS:

• “The amendments inter alia propose that intermediaries should proactively identify and remove child sexual abuse material, rape/gang-rape imagery and contents promoting terrorism without compromising accuracy or privacy using technology-based tools and mechanism.
• He said the Information Technology (IT) Act, 2000, has adequate provisions for removal of objectionable online content.
• “Social media platforms are intermediaries as defined in the Act,”

SECTION 69A OF THE IT ACT, 2000:

This empowers the government to block any information generated, transmitted, received, stored or hosted in any computer resource in the interest of sovereignty and integrity of India, defence of India, security of the state, friendly relations with foreign states or public order or for preventing incitement to the commission of any cognisable offence relating to above.