MASTER THE CURRENT AFFAIRS – DAY 226

Q.1) Consider the following statements with respect to Secured Overnight Financing Rate (SOFR)

1. It is a benchmark interest rate that financial institutions use to price U.S. dollar-denominated derivatives and loans.
2. It is one of the alternatives to London Interbank Offered Rate (Libor).
3. SOFOR is based on completed financial transactions whereas Libor is self-reported and may not accurately represent the true cost of borrowing.
Which of the statement(s) given above is/are correct?

a. 1 only
b. 1 and 2 only
c. 2 and 3 only
d. 1, 2 and 3

Answer : D
In a first for any NBFC in India, Rural Electrification Corporation Limited (REC) has successfully raised a USD 75 million, 5-year Secured Overnight Financing Rate (SOFR) linked Syndicated Term Loan with Sumitomo Mitsui Banking Corporation (SMBC), Singapore Branch appointed as the sole Mandated Lead Arranger and Bookrunner.
Along with the loan, REC has also entered into interest rate swap referencing SOFR to hedge the interest rate risk on this facility, which is the first such deal by any Corporate in India.
Background
Once upon a time, Libor—the London Interbank Offered Rate—was among the most important benchmarks in the world for setting interest rates on commercial and consumer loans.
But multiple scandals, plus a starring role in the financial meltdown of the Great Recession, have inspired efforts to replace Libor worldwide.
Secured Overnight Financing Rate (SOFR)
SOFR is a benchmark that financial institutions use to price loans for businesses and consumers.
The overnight financing part of its name references how SOFR sets rates for lenders: It is based on the rates that large financial institutions pay each other for overnight loans.
SOFR is an alternative risk-free rate that will serve as the successor to Libor in many U.S. dollar borrowing agreements.
Libor Vs SOFR
LIBOR
Libor is simply based on the rates that financial institutions say they would offer each other for short-term loans.
With fewer transactions, Libor began reflecting quoted rates, rather than actual rates from transactions.
And this self-reported Libor rate may not accurately represent the true cost of borrowing.
SOFR
By taking into account actual lending transactions between institutions, SOFR will be more reliable than Libor, which was subject to insider manipulation.
It means there is much more real transaction data to rely on, rather than self-reported hypothetical rates.
Other differences
Libor is forward-looking while SOFR is backward-looking.
It means the bank knows what the borrowing rate is at the beginning of the period. Since SOFR is backward-looking, the borrower won’t know exactly what they owe until the end of the loan.
Libor is unsecured and doesn’t use collateral, so it includes a credit risk premium.
SOFR is a secured rate, based on transactions that involve collateral, in the form of Treasuries, so there’s no credit risk premium baked into the rates.
Other Alternatives to Libor
Sterling Overnight Index Average (SONIA)
Federal Funds Overnight Index
Ameribor
U.S. prime rate

Q.2) With respect to Genetically Modified Crops, consider the following statements:

1. The cultivation of genetically modified rice is not banned in India.
2. Cotton, brinjal and mustard are also genetically modified in India.
3. Genetic Engineering Appraisal Committee is the apex regulating body.
Identify the correct statement.

a. 1 and 2 only
b. 3 only
c. 1 and 3 only
d. 2 and 3 only

Answer : B
Genetically Modified Crops in India
Genetically modified crops (GM crops) are plants used in agriculture, the DNA of which has been modified using genetic engineering techniques. More than 10% of the world’s croplands are planted with GM crops.
The aim is to introduce a new trait to the plant which does not occur naturally in the species like resistance to certain pests, diseases, environmental conditions, herbicides etc.
Genetic Modification is also done to increase nutritional value, bioremediation and for other purposes like production of pharmaceutical agents, bio fuels etc.
India does not export genetically modified (GM) rice as there is no commercial variety of such crop in the country and its cultivation is also banned here.
Cotton is the only crop cultivated in India using this method.
Genetic Engineering Appraisal Committee (GEAC)
The Committee shall function as a Statutory Body under the Ministry of Environment & Forests.
The Committee shall also be responsible for approval of proposal relating to release of genetically engineered organisms and products into the environment.
One third members of the GEAC will constitute the quorum for convening the meeting.
The members of the GEAC will be required to sign a ‘Statement of Declaration of Independence’ and ‘Statement of Confidentiality’.
The Committee shall function for a period of three year from the date of issue of this notification.

Q.3) With reference to Tamil Nadu urban employment scheme, consider the following statements:

1. The scheme is based on the recommendations made by a committee led by former RBI Governor C. Rangarajan.
2. Not less than 50% of the total person days under the Scheme would be earmarked for women.
3. Women and men would be paid the same wages for the same unskilled and semi-skilled work.
Which of the statements given above is/are correct?

a) 2 and 3 only
b) 1 only
c) 1 and 2 only
d) 1, 2 and 3

Answer : D
Tamil Nadu to implement urban employment scheme
The State government has issued orders to implement the Tamil Nadu Urban Employment Scheme
It is aimed at improving livelihood and social security.
No less than 50% of the total person days under the Tamil Nadu Urban Employment Scheme would be earmarked for women.
Women and men would be paid the same wages for the same unskilled and semi-skilled work.
The scheme is based on the recommendations made by a committee led by former RBI Governor C. Rangarajan. An initial allocation of ₹100 crore has been made during 2021-22 for the scheme.

Q.4) With reference to Troika Plus, consider the following statements:
1. It is the meeting led by US, Russia, China and Pakistan on Afghanistan peace process along with Afghanistan representatives.
2. India is also the member of Troika Plus.
Which of the statements given above is/are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer: A
Notes:
Statement 1 is correct: Troika-plus-Pakistan meeting involves consultations between the US, Russia, China, Pakistan along with the representatives of the Afghanistan government, Taliban, and other senior Afghan leaders. It aims to reduce the level of violence and to end the armed conflict in Afghanistan. Statement 2 is incorrect: India is not the member of this meeting.

Q.5) Abraham Accords brokered by the U.S.A established diplomatic relations with which of the following countries:

a) India and UK
b) UAE and Israel
c) Israel and USA
d) UAE and Qatar

Answer : B
Jaishankar, Israeli counterpart meet in Jerusalem, also hold quadilateral meet with the U.S. and UAE
The quadrilateral meeting, seen as an outcome of last year’s Abraham Accords brokered by the U.S. that saw the UAE and Israel establish diplomatic relations, also underlines India’s close relationships with both the West Asian countries and Washington.
The push for an FTA between India and Israel is the latest in a series of attempts to negotiate a trade agreement over the past 14 years.
Lapsed talks
Both in 2007, then Prime Minister Manmohan Singh, and in 2017, Prime Minister Narendra Modi announced that an FTA would be completed, but talks have lapsed over a number of issues.
During the last round of talks, both sides explored the possibility of a limited trade deal or a Preferential Trade Agreement for about 200 goods, which had also not been concluded.

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