RBI’s Proposed Framework to Administer Project Financing

• The RBI has released draft rules for a revised DCCO criterion and a Harmonized Prudential Framework to improve the Regulatory Framework for long-term project financing in the commercial real estate, non-infrastructure, and infrastructure sectors.
• The RBI is doing this to oversee and control the nation’s payment and settlement systems and provide safe, effective, and secure means of conducting financial transactions.

Date of Commencement of Commercial Operations (DCCO) :

• The DCCO is a critical milestone for project loans, indicating the start of revenue-generating activities for the project.

Key Highlights of the Proposed New Framework:

• Guidelines for Income Recognition, Asset Classification, and Provisioning of Advances for Projects Under Implementation (IRACP-PUIMP) are outlined in the proposed framework.
• It highlights how crucial it is to keep an eye on project stress and start developing resolution plans early on.
• Increased general provisioning throughout the building phase, to be phased in over three years (2% for FY25, 3.5% for FY26, and 5% for FY27), from 0.4% to 5% on all new and existing exposures.
• Restructuring Norms: In light of modifications to the DCCO, the RBI has established guidelines for projects’ restructuring vulnerability.
• Lenders must have a board-approved policy in place for handling project stress that arises from a credit event that occurs during the building phase.
• If specific requirements are satisfied, provisioning can be lowered to 2.5% and 1% during the operating period.
• Consortium Arrangements: Depending on the total exposure of lenders, appropriate exposure limitations have been defined for projects funded under consortium arrangements.
• A Minimum Exposure Percentage must be upheld by each lender in order to guarantee a fair risk-sharing arrangement.
• Financial Settlement and Structure of Repayment: Funds cannot be disbursed until financial closure has been reached, per the framework.
• It establishes standards for the repayment tenor not to exceed 85% of the project’s economic life and opposes moratoriums on repayments beyond the DCCO period.
• In order to meet all payback obligations, projects must show a positive net operating cash flow and a minimum 20% decrease in total long-term debt.
• Net Present Value (NPV) Requirement: Any project that receives financing from lenders must have a positive NPV. The RBI emphasizes that in order to guarantee financial sustainability and manage credit impairment risks, the project NPV must be reevaluated on a yearly basis.
• Guidelines for a standby credit facility that would provide 10% of the initial project cost in additional capital to cover cost overruns brought on by delays.

Way Forward:

• Improved Monitoring and Compliance: To guarantee adherence to the new rules, put in place strong monitoring systems. Review and update the regulatory framework on a regular basis to accommodate changing market conditions.
• Building Capacity: Educate stakeholders and bank employees on the most effective project finance techniques and the most recent regulatory requirements.

1. The Reserve Bank of India regulates the commercial banks in matters of: (UPSC CSE 2013)
2. liquidity of assets
3. branch expansion
4. merger of banks
5. winding-up of banks

Select the correct answer using the codes given below.

(a) 1 and 4 only

(b) 2, 3 and 4 only

(c) 1, 2 and 3 only

(d) 1, 2, 3 and 4

26th Meeting of the Committee for Environmental Protection (CEP) 

The 26th Meeting of the Committee for Environmental Protection (CEP) is set to be held in Kochi, Kerala.

26th CEP Agenda

• Review of the Protocol on Environmental Protection to the Antarctic Treaty (the Madrid Protocol).
• Evaluation of the effectiveness of existing Environmental Protection Measures.
• Identification of areas for potential enhancement or amendment to strengthen environmental conservation efforts.

What is the Committee for Environmental Protection (CEP)?

• A body created under the Antarctic Treaty System (ATS) is the CEP.
• It was created as a component of the Antarctic Treaty’s Environmental Protocol (Madrid Protocol, 1991), which went into effect in 1998.
• Goal: To provide guidance and suggestions for Antarctic environmental conservation measures.
• Members of the consultative parties to the Antarctic Treaty, which include nations engaged in research and governance in the region, make up its composition.

Functions:

• Environmental Impact Assessment (EIA): To guarantee that operations carried out in the Antarctic region have the fewest negative effects on the environment, the CEP supervises the EIA procedure.
• Site Inspections: In order to confirm adherence to environmental laws, it inspects Antarctica-related installations and operations.
• Scientific Research: In addition to offering recommendations on ways to preserve biodiversity, the CEP encourages scientific research on Antarctic ecosystems.
• garbage Management: With the goal of reducing the influence of humans on the environment, it creates regulations for the management of garbage and the avoidance of contamination in the Antarctic.
• Policy Formulation: Under the Antarctic Treaty, the CEP develops rules and regulations pertaining to environmental preservation.

1. The formation of ozone hole in the Antarctic region has been a cause of concern. What could be the reason for the formation of this hole?

(a) Presence of prominent tropospheric turbulence; and inflow of chlorofluorocarbons.

(b) Presence of prominent polar front and stratospheric clouds; and inflow of chlorofluorocarbons.

(c) Absence of polar front and stratospheric clouds; and inflow of methane and chlorofluorocarbons.

(d) Increased temperature at polar region due to global warming.

50 year of Pokhran-I: Why India conducted its first nuclear tests

The 1974 Pokhran testing took place in secrecy. The United States and other nations opposed the idea of more countries obtaining nuclear weapons. What followed the tests, and why did India proceed with them?

Context:

• Post-World War II Era: In the midst of the Cold War between the US and USSR, new international alliances and alignments were formed after World War II.
• The NPT, or Nuclear Nonproliferation Treaty: intended to stop the spread of nuclear weapons when it was signed in 1968. It distinguished between states with nuclear weapons and non-nuclear weapons, but India had issue with it since it showed bias against non-nuclear states.
• India’s Discontent: India declined to sign the NPT because it did not resolve its reservations about the treaty’s discriminatory nature, especially with regard to the duties of non-nuclear states.

Why did India choose to conduct nuclear tests?

• Dissatisfaction with NPT: India decided to carry out independent nuclear testing because it believed the NPT discriminated against non-nuclear states like itself.
• Domestic Developments: The foundation for nuclear energy in India was established by Indian scientists, particularly Homi J. Bhabha and Vikram Sarabhai. In 1954, the Department of Atomic Energy (DAE) was founded.
• The change in the geopolitical environment and leadership: India’s determination to develop nuclear capability was influenced by tensions with China and Pakistan, as well as changes in leadership following the 1960s. The 1964 nuclear tests conducted by China also had an impact.

How did Pokhran-I happen?

• Secrecy and Uncertainty: Despite internal uncertainty among important decision-makers, India carried out the nuclear test at Pokhran in 1974 without previous announcement.
• Gandhi’s Endorsement: Prime Minister Indira Gandhi gave the test the green light against criticism from some advisors, demonstrating India’s commitment.
• Date and Place: May 18, 1974, in Pokhran, Rajasthan, the test codenamed “Smiling Buddha” was carried out. Pokhran was selected for the test because of its distant location.
• Message & Symbolism: Although India decided not to weaponize right away, the test showed off its nuclear weapons capability and self-defense capabilities. Buddha Jayanti was selected as the test day with symbolic meaning.

What happened after?

• International Reaction: After the tests, several nations, notably the US, criticized and sanctioned India. India no longer received nuclear assistance from the US after the Nuclear Non-Proliferation Act was passed in 1978.
• Strategic Shift: India demonstrated its nuclear capability in the face of international criticism, opening the door for later advances such as Pokhran-II in 1998.
• Diplomatic Efforts: India faced opposition from several nations, most notably China, as it attempted to join international organizations such as the Nuclear Suppliers Group (NSG) and gain recognition as a responsible nuclear state.
• Long-term Impact: India’s nuclear tests were a major turning point in its diplomatic and defense policies, influencing its position in international nuclear politics and its attitude toward nuclear matters.

Way forward for to be the part of NSG group:

• Promote Diplomatic Outreach by fortifying bilateral ties with NSG member nations.
• Talk diplomatically to resolve issues and reach an agreement for India’s membership.
• Show Your Commitment to Nonproliferation: Keep up your adherence to the rules and guidelines for nonproliferation.
• Highlight India’s history of nuclear security and responsible nuclear behavior.

With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy. (250 Words, 15 Marks) (2018)