Daily Quiz #34 UPSC Prelims Marathon – December 10, 2019

Explanation: ARCs were introduced to India under the SARFAESI Act (2002), as specialists to resolve the burden of NPAs. But the ARCs (most are privately-owned) finding it difficult to resolve the NPAs they purchased, are today only willing to purchase such loans at low prices. As a result, banks have been unwilling to sell them loans on a large scale. Since (2014) the fee structure of the ARCs was modified (requiring ARCs to pay a greater proportion of the purchase price up-front in cash to the banks) purchases of NPAs by them have slowed down further— only about 5 per cent of total NPAs were sold during 2014-15 and 2015-16.

Explanation: S4A (Scheme for Sustainable Structuring of Stressed Assets): Introduced in June 2016, in it, an independent agency is hired by the banks which decide as how much of the stressed debt of a company is ‘sustainable’. The rest (‘unsustainable’) is converted into equity and preference shares. Unlike the SDR arrangement, this involves no change in the ownership of the company.

Explanation: The Basel Accords (i.e., Basel I, II and now III) are a set of agreements set by the Basel Committee on Bank Supervision (BCBS), which provides recommendations on banking regulations in regards to capital risk, market risk and operational risk. The purpose of the accords is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses. They are of paramount importance to the banking world and are presently implemented by over 100 countries across the world.

Explanation: The public sector insurance company, Agriculture Insurance Company of India Limited (AICIL) was set up by the Government of India in December 2002 (commenced its business in April 2003). This is a dedicated agri-insurance company and aims “to serve the needs of farmers better and to move towards a sustainable actuarial regime”. This company was responsible to look after the National Agriculture Insurance Scheme (NAIS) which was launched in 1999. Since January 2016, the company is looking after the newly launched PMFBY (Prime Minister Fasal Bima Yojana) which subsumed the existing agri-insurance schemes— the NAIS and the Modified NAIS (of 2010).

Explanation: The Bombay Stock Exchange Ltd. (BSE), earlier a regional stock exchange, converted into a national one in 2002. The biggest in India, it accounts for almost 75 per cent of total stocks traded in India and is the fifth largest in the world (on the basis of market capitalisation). There are at present four indices connected with the BSE:
•Sensex: The sensitive index (i.e., Sensex) is a 30 stocks index of the BSE which was enlarged to include 50 stocks in 2000 but soon was cut down to the original level. This index represents the Indian stock market.
•BSE-200: This is a 200 stock share index of the BSE (including the 30 stocks of the Sensex) which has its Dollar version too—the Dollex.
•BSE-500: In mid-1999, the BSE came up with a 500-stock index representing major industries and many sub-sectors of the economy with information technology getting a significant weightage.
•National Index: An index of 100 stocks being quoted nationwide (Bombay, Delhi, Kolkata, etc.) was developed to give broader/wider representation of the stock market since the Sensex consists of only 30 stocks. The 30 stocks of the sensex are included in the National Index.