Today's Prelims Bits 28-05-2022| Short CA Notes for UPSC Preliminary Examination

Today’s Prelims Bits 28-05-2022| Short CA Notes for UPSC Preliminary Examination

This article contains important and must read current affairs picked from today’s dailies, specifically for UPSC preliminary examination preparation.

Table of Contents

BRICS Expansion

In News: China, which is the BRICS chair for this year, said the recently held meeting of BRICS Foreign Ministers “reached consensus on the BRICS expansion process”.

Brief History Of BRICS Formation

– BRICS was not invented by any of its members.
– In 2001, Goldman Sachs’ Jim O’Neill authored a paper called “Building Better Global Economic BRICs”, pointing out that future GDP growth in the world would come from China, India, Russia and Brazil.
– In 2006, leaders of the BRIC countries met on the margins of a G-8 (now called G-7) summit in St. Petersburg, Russia, and BRIC was formalised that year.
– The global financial crisis of 2007-08 reinforced the idea as BRIC countries had been relatively unscathed in the market collapse.
– On June 16, 2009, Prime Minister Manmohan Singh met with Presidents Hu Jintao, Dmitry Medvedev and Lula da Silva for the first BRIC summit in Yekaterinburg, and South Africa was subsequently admitted two years later.

Why Expansion?

– It is important to enhance cooperation with other emerging markets and developing countries, further improve the representation of BRICS, make BRICS’ voice in major international and regional issues more widely heard.
– To join hands to meet challenges, and uphold the common interests and development space of emerging markets and developing countries.”

Possible New Members

– The May 19 BRICS Foreign Ministers’ virtual meeting this year also invited Foreign Ministers of Argentina, Egypt, Indonesia, Kazakhstan, Saudi Arabia, the UAE, Nigeria, Senegal and Thailand to attend.
– So, some of them could join the grouping.

Progress so far

The BRICS-backed New Development Bank (NDB), based in Shanghai, has already inducted new members, with Bangladesh and the UAE joining last year, and Egypt and Uruguay approved to join the financial institution.

24th BRICS Summit

A virtual summit of leaders of the Brazil-Russia-India-China-South Africa grouping, likely to be held at the end of June this year.

ONDC

In News: Google is in talks with the Indian government to integrate its shopping services with the country’s open e-commerce network ONDC.

About ONDC

– India soft-launched its Open Network for Digital Commerce (ONDC) last month as the Centre tries to end the dominance of U.S. firms Amazon.com and Walmart in the fast-growing e-commerce market.
– The platform aims to create new opportunities, curb digital monopolies and by supporting micro, small and medium enterprises and small traders and help them get on online platforms.
– It is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.

NARCL

Why in News: RBI flags possibility of increased slippages from sectors that have been more exposed to the pandemic

What is NARCL?

– NARCL has been incorporated under the Companies Act and has applied to Reserve Bank of India for license as an Asset Reconstruction Company (ARC).

– NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution.

– PSBs will maintain51% ownership in NARCL.

– The NARCL will acquire assets by making an offer to the lead bank. Once NARCL’s offer is accepted, then, India Debt Resolution Company Ltd. (IDRCL) will be engaged for management and value addition.

Key Benefits of NARCL- IDRCL Mechanism

– It will incentivize quicker action on resolving stressed assets thereby helping in better value realization.

– This approach will also permit freeing up of personnel in banks to focus on increasing business and credit growth.

– As the holders of these stressed assets and SRs, banks will receive the gains.

– Further, it will bring about improvement in bank’s valuation and enhance their ability to raise market capital.

Why is it being set up now?

Insolvency and Bankruptcy Code (IBC), strengthening of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI Act) and Debt Recovery Tribunals, as well as setting up of dedicated Stressed Asset Management Verticals (SAMVs) in banks for large-value NPA accounts have brought sharper focus on recovery. In spite of these efforts, substantial amount of NPAs continue on balance sheets of banks primarily because the stock of bad loans as revealed by the Asset Quality Review is not only large but fragmented across various lenders. High levels of provisioning by banks against legacy NPAs has presented a unique opportunity for faster resolution.

Way Forward

National Asset Reconstruction Company would help in the resolution of large value, legacy stressed assets, and serve as a time-efficient mechanism for reviving investor interest in primary and secondary markets for stressed assets, going forward, continued commitment, professionalism and transparency would help in making the exercise cost-and time-effective.