 Good evening aspirants on Republic Day at 5pm we are publishing the third capsule of the weekly international relations program as you know already the sessions are being handled by Shri T.P. Srinivasan sir who is a former ambassador of India and a former permanent representative of India to the united nations Vienna he has also served as the governor for India at the international atomic energy agency his experience in international atomic energy agency and in UN Security Council comes in handy in relation to the third capsule this is because the third capsule is all about the latest developments in the Middle East especially the Gulf region aspirants are advised to watch the session and utilize the opportunity with this let us start a news analysis for the day the topics analyzed for the day along with their page numbers in different editions are given here let us see the first article for the day after the storm on tightening scrutiny of large nbfcs this is written in the context of shift of rbi's regulatory approach towards nbfcs in India the syllabus is highlighted here for your reference first we'll know what are nbfcs these are companies that are engaged in the business of loans and advances then they are engaged in acquisition of shares stocks bonds debentures securities that are issued by government or local authority then they are engaged in leasing higher purchase then in insurance business and in cheat business note that nbfcs do not include any institution whose principal business is that of agricultural activity industrial activity purchase or sale of any goods other than securities or whose principal business is in providing services and sale purchase construction of immovable property this means that the principal business of nbfcs is only financial activity nbfcs lend and make investments and therefore their activities are like that of banks but there are few differences while banks can accept demand deposits nbfcs cannot accept demand deposits while banks form part of payment and settlement system nbfcs do not form part of the payment and settlement system and nbfc cannot issue checks drawn on itself one more difference is that deposit insurance facility of deposit insurance and credit guarantee corporation is available for depositors of banks such a deposit insurance facility is not available to depositors of nbfcs today's article says that rba has proposed a significant shift in its regulatory approach towards non banking financial companies previous or current approach is of light touch regulation and now rba wants to monitor large players almost as closely as it does banks if implemented this could be the biggest overall of the regulatory framework for such finance companies in the recent decades but this is not the first time rba is coming up with such stringent regulations towards nbfcs for example in 1997 parliament through the rba amendment act 1997 bestowed greater powers over nbfcs to the central bank back then it was to fix the issues as many investors lost their deposits by investing in nbfcs when they were promised high interest on fixed deposits even now the trigger for rba is similar but the scale of problem has changed in the recent decades the nbfcs grew into very big companies some even larger than banks the size of nbfc balance sheets is now more than 25 percent of that bank's balance sheet from just about 12 percent in 2010 in absolute terms their balance sheets have more than doubled from 20.7 lakh crore in 2015 to 49.2 lakh crore in 2020 this high growth can be attributed to lighter regulations as they have given nbfcs the flexibility to meet a wide range of financing needs from home loans to microfinance and even large infrastructure projects but this flexibility also manifested into a systemic risk the risk was apparent when one of the largest infrastructure investment focused nbfc players il and fs went into financial crisis in 2018 the payment defaults of il and fs catalyzed a crisis for the entire sector this failure had a negative impact on other nbfcs as well they could not raise funds easily and faced liquidity pressures that escalated to solvency concerns in some instances one more example that we can think of is the d1 housing finance cooperation limited that is dhfl recently its creditors approved a resolution plan for the firm for these reasons rba has proposed a tougher regulatory approach towards nbfcs the new approach comes with the four tiered regulatory structure in first tier it entails a largely less fire approach that is minimum regulations for smaller nbfcs and mild regulations for mid-sized nbfcs in second tier in third tier it imposes tougher bank like capitalization governance and monitoring norms for largest players and those which could pose a systemic risk due to the nature of their operations a top tier has also been envisaged with even more scrutiny but the rba wants to ideally use this approach only when a certain large player poses extreme risk given the banking sector's own problems in the past two years a complete reboot of the overnight mechanism for nbfcs and banks is critical to retain confidence and maintain financial stability even the rba governor has recently termed financial stability as a public good it is hoped that the blueprint for regulation of nbfcs which can lend for activities that often banks do not support what are these banks often do not support loans like giving microloans or infrastructure projects so what this editorial is expecting it is expecting that this blueprint is formalized soon this would ensure the improving economic recovery is not impacted by the funding constraints this is all about this editorial now let us move on to the next article the shipping sector is at sea here the author talks about the problems faced by india's shipping sector he also talks about the way forward so that the indian shipping sector could prosper and india can be a world leader in this sector in this context let us discuss about india's shipping industry and then the points mentioned in this article the syllabus here is highlighted for your reference see shipping plays a vital role in world trade and it is considered as the backbone of the world economy without ships and the transportation services these ships provide the world would not be as prosperous as it is today and also many countries would not be able to participate in world trade and we all know that india is blessed with over 7500 kilometer of coastline along the indian ocean region in this regard india is the 16th largest maritime country in the world it is host to one of the world's most important trade route that is it connects far east with europe nearly 50% of the world maritime trade 50% of the container traffic and 70% of trade in energy sails through the indian ocean region so we can easily say that this region is the epicenter of economic activity and india is strategically placed at the very center of this network in this regard indian ports and shipping industry play a vital role in sustaining growth in the country's trade and commerce why is this so because according to the ministry of shipping around 95% of india's trading by volume and 70% by value is done through maritime transport as of now india has 12 major and 205 notified minor and intermediate ports under the national perspective plan for sagarmala six new mega ports will be developed in the country but all this said shipping sector in india has not been able to realize its fullest potential due to a few constraints now according to the author he analyzes what are the problems faced by shipping sector of india here the authors of the opinion that all of india's actions on the shipping front have been counter effective due to a visionless administration now what are this issue let us analyze them one by one first issue is the lack of shore based infrastructural support here shore based infrastructure includes the road and rail connectivity the authors of the opinion that roads and rails are not properly connected to port areas second issue is that all the shipping infrastructure in peninsular india only helps foreign shipping liners why is it so it is due to reduced carrying capacity here the authors of the opinion that the indigenous shipping industry sees a poor growth in terms of ship ownerships so this has greatly affected our cargo carrying capacity and as a result these foreign companies continue to benefit much from india's extreme trade as they put enormous hidden charges in the logistics cycle and much of foreign currency is drained as transshipment and handling cost every day here we should see why do we have a reduced carrying capacity according to the author this is due to bureaucratic and infrastructural bottleneck due to this members of our maritime business community have preferred to be just agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves this has also resulted in reduced shipbuilding reduced repair and ownership business in peninsular india the small ship owning community in india also prefers foreign registry for their ships instead of domestic registration third issue is that the bureaucracy has repeatedly allowed similar infrastructural developments in multiple cargo handling ports instead of creating regional cargo specific ports in peninsular india and this has resulted in indian ports competing for the same cargo now let us see what is the way forward first is we should make our major ports cargo specific and develop infrastructure on par with global standards and connect them with the interlands as well as international sea routes so this ensures that our ports will automatically become transshipment hubs this will also ensure that our quality products will be available in global markets at a competitive price second the author talks about sagarmala project of the government as you all know sagarmala is a port-led development program under the ministry of shipping the concept of sagarmala was approved by the union cabinet in 2015 and a national perspective plan was released in 2016 the national perspective plan aims at comprehensive development of india 7500 kilometer coastline 1500 kilometer of potential navigable waterways and maritime sector see the vision of sagarmala program is to reduce logistics cost for export import and domestic trade with minimal infrastructure investment as you can see the components of sagarmala program is given here for your reference have a look at it so in this regard the author is of the opinion that sagarmala project should be fastened this project should support shipbuilding and owning it should also include coastal communities coastal communities should be made ship owners this will initiate carriage of cargo by shallow drafted small ships through coast and inland waterways in this regard short sea and river voyages can also be encouraged this is all about this article now let us move on to the editorial troubled waters and park bay fishing conflict this editorial is with reference to the tragic death of four fishermen from Tamil Nadu near park straight on 22nd jan we had an elaborate discussion on this aspect and we have also understood the geography of park bay and park street this editorial discusses this long disputed issue between india and steelanka in recent years multiple times indian fishermen mainly from tamil nadu were either arrested or killed in border waters of india and steelanka in the recent incident while fishermen in tamil nadu say the four were killed in attack by the steelanka navy the steelanka navy maintains that they died with their trawler collided with a naval vessel while trying to avoid being caught this is at another instant of the unresolved fisheries conflict in the park bay leading to death of indian fishermen india has strongly protested with the steelankan authorities and as a result steelanka has set up a committee to find a permanent solution to the incursions by indian fishermen see it was only last month that the two countries resumed discussions through their joint working group on fisheries after a three-year gap the meeting which was held on jan 30th last year covered the entire gamut of issues related to fishermen and fishing boats while india saw the early release of fishermen arrested in steelankan waters as well as the release of boats in steelankan custody steelanka emphasized the need to curb illegal fishing steelanka is not happy with indian fishermen entering the steelankan waters for fishing activities because if they enter this will adversely affect the livelihood of its war affected fishermen that is the ltt affected areas of northern steelanka some years ago both india and steelanka agreed that there would be no violence or loss of life in the handling of this fishermen issue and that a hotline would be established between the respective coast guards hotline means a special direct telephone line that can be used for emergencies or to get information but even today this hotline is not yet operationalized and deaths continue to occur if you ask what the real issue is are fishermen enter steelankan waters to catch fishes to get good catch indian fishermen are using bottom trawlers but this fishing method is unsustainable in the long run the steelankan authorities and steelankan fishermen want indians to shift to deep sea fishing vessels because the indian fishermen have so far been using this bottom trawling method this has led to exploitation of fishery resources in the indian side now what the steelankan authorities fear is continuing this fishing method will lead to remaining fishery resources on the steelankan side also to get depleted so what the steelankan name is doing they're eithering arresting or attacking our fishermen and they're also confiscating their boats look at this picture it shows how bottom trawling is done the fishermen use the fishing net and capture entire resources that are present under the sea this will lead to faster depletion of marine resources so what is being done to solve this issue attempts were made to forge a negotiated settlement through direct talks involving fishermen from both the sides but what it has led to it has led only to a stalemate that is no decision has been made it but the point to note here is steelankan favours joint patrolling by both countries and it also warns a ban on unsustainable fishing practices by tamilado fishermen such as bottom trawling but on the other hand indian fishermen want a lengthy phase out period to remove unsustainable fishing practices because indian fishermen are telling that to shift from bottom trawling to deep sea fishing method they need some more time so far there has not been enough political resolve to end this conflict that is why this problem has extended to this much years so if you analyze why this issue has dragged so far the real reason is there has not been enough political resolve to end this conflict a comprehensive solution should include curtailing unauthorized fishing and sustainable use of resources by fishermen by both the sides this is the way forward now we'll move on to the next article let us move on to the next news article that talks about the second day of chinese incursions into the taiwan region a map by the taiwan ministry showed the chinese aircraft that flew in between the southern part of taiwan and the taiwan control pratas islands in the south china sea as per taiwan the overlays were part of china's long-standing pattern of incursions aimed at pressurizing the taiwanese government to give in for beijing's demand to recognize taiwan as a part of the chinese territory in this context let us now see in detail about taiwan and one china policy see taiwan is an island country in east asia with taipi as its capital the main island non-historically has formosa makes up 99% of the area controlled by the republic of china you might ask what is republic of china this is the official name of taiwan so what is the official name of china the official name of china is people's republic of china the official name of taiwan is republic of china so let us now see more about republic of china that is taiwan it lies across the taiwan straight from the southern eastern coast of mainland china the map of taiwan is given here for your reference have a look at it now let us see more about the geographical aspects of taiwan it lies across the taiwan straight from the south eastern coast of mainland china taiwan has got the east china to its north the philippine sea to its east the lazon straight directly to its south and the south china sea to its southwest note the taiwan straight is also known as formosa straight it is a straight that separates the island of taiwan and the continental asia the straight is currently part of the south china sea and connects the east china sea to the north it includes a number of small islands like the pengu archipelago and the kinmen and matsu islands near the chinese coast the article also mentions about the pratas islands or the donksha islands that is located in the northern part of south china sea this island comes under the jurisdiction of republic of china that is taiwan however the islands lie closer to china's mainland than to the island of taiwan so what china is really trying to do is china thinks if it can get control of this pratas islands this island could function as a gatekeeper to monitor us and other country ships and aircraft that enter the south china sea from the pacific ocean this is why china wants to have control over this pratas islands now let us see about one china policy this one china policy has its origin around the 1949 chinese civil war what happened there was a civil war in china the people who won that is the communist who won started ruling the mainland china as people's republic of china the nationalist who were defeated in the chinese civil war retreated to taiwan and started ruling it as republic of china according to this policy there is only one sovereign state under the name of china and only one chinese government and that taiwan is a part of that and that any country that wants to have diplomatic relations with mainland china should break their official ties with taipei this has resulted in the isolation of taiwan from the international community note initially many governments recognized taiwan and shined away from china and since 1970s the mutual need to develop relations with china grew and this led to countries to cut their ties with taipei in order to favor beijing so what we saw in this article we saw about taiwan its geographical aspects the chinese civil war and what is the difference between republic of china and people's republic of china and the one china policy with this we have come to the end of this article now let us move on to the last topic for the day let us now analyze the article in agree credit small farmers are still outside the fence we are all aware about the present agitation of the farmers seeking for the repeal of the three controversial farm laws in the light of the ongoing protest the author in this article talks about the agricultural credit and its ineffectiveness in causing an impact in the life of the farmers the syllabus covered in this news article is given below see the agitation among the farmers highlights that the reforms in the agriculture sector have once again gained importance in the minds of politicians and policy makers in order to improve the income of small farmers and to enable them in diversifying the crops they must be given access to credits at a reasonable rate of interest that is at an amount which they would be able to manage and the center states and the rbi also have got the same agenda unfortunately they aren't able to achieve this agenda note agricultural credit refers to a credit vehicle which is a kind of finance that is specially designed to meet the needs of farmers and it allows them to buy equipments planting harvesting and to do other things that help in improving their lives in spite of the improvement in the volume of the credit over the past decades the quality of the credit and its impact on the agricultural sector have only gone down this highlights the inefficiency of the agricultural credit in contributing to the agricultural growth also for every consecutive year you can find the central government announcing an increase in the subsidized agricultural credit limit and also you can notice the banks surpassing them when you look at the data for the year 2011 to 12 the target of agricultural credit was said to rupees 4.75 lakh crore and this target kept growing every year and last year that is 2020 to 21 the agricultural credit had reached the target of rupees 15 lakh crore with rupees 21175 crore allocated as subsidy on seeing this data you can find that in the last 10 years the target limit for agricultural credit has increased by 500 percent among which not even 20 percent has reached the small and marginal farmers this becomes evident in the fact that around 95 percent of the tractors and other kinds of agricultural implements that were sold in the country were financed by NVFCs at an interest rate of 18 and if it was long-term loans it was financed at 11 percent as per 2015-2016 agricultural census the total number of small and marginal households in India ranges around 12.56 crore which makes to 86.1 percent of the total agricultural households and as per the situation assessment survey of agricultural households by NSSO the amount of institutional loans get more with the amount of land possessed that is a major part of the agricultural subsidy is enjoyed by big farmers and agricultural business companies in comparison with small and marginal farmers and this denotes the lack of proper understanding about agricultural credit facility see the RBI has imposed a cap on the overall allotted net bank credit that is 18 percent of it should go to the agricultural sector under which eight percent should reach small and medium farmers and 4.5 percent should be allotted as indirect loans however the advances given by the bank kept breaching this limit note that in the year 2017 among the agricultural credit provided by the NABAD in Maharashtra around 53 percent was found to be allocated to Mumbai city and Suburbans where there are only agribusinesses and no agriculturalist it is also found that the credit was given as indirect loans to sellers and dealers of fertilizers pesticides seeds and agricultural implements undertaking work for farmers having seen the agricultural data let us now move on to the irregularities in the system and find why the credit is not reaching the farmers effectively the internal group of RBI in its 2019 review has mentioned various inconsistencies related to inefficiency of the agri credit we'll see about it in detail now in some states the credit that was spent on the farm sector was found to be higher than their GDP and also the ratio between the crop loans spent and the input requirement was found to be distributed in an uneven manner this shows that the credit is being diverted for non-agricultural purposes when you look into the reason behind such diversion you can find that the subsidized credit which are given at a rate of 4 to 7 percent is being refinanced again to small farmers and also at the open market for a rate of interest of up to 36 percent and also the subsidized credit which had to be the cause for a viable agriculture as unfortunately failed to aid the growth of agricultural sector with the so far received credit and sadly even the new formulas have failed to address their issues or the reforms in the agricultural credit system with this information let us see what can be done in the future one of the measures that has to be adopted in the future is to empower the small and medium farmers by giving them direct income support on the basis of per hectare instead of a hugely subsidized credit importantly the agricultural credit system should also be made more effective and efficient to facilitate the high amount of crop loans to fpo's of small farmers against the commodity stocks in order to achieve an incentive in agriculture and also the mobile phone technology can be used as a solution in the future since 89.1 percent of rural households are found to be using mobile phones which is a high rate that is efforts can be taken to improve institutional credit delivery by means of technological driven solutions as a measure to reduce the extent of financial exclusion of agricultural households because such initiatives will enable farmers to avail loan for themselves through mobile phone apps moreover these apps have got the potential to use satellite imagery reports that are able to capture the extent of land owned by farmers and also they can produce details of the crops they grow which may help in extending the Kisan credit card loans digitally such measures if adopted will help the farmers in a considerable way since otherwise farmers have to produce the certified land record copy from the revenue department which is much time consuming apart from this other measures shall be to bring in reforms in the field of land leasing and then to establish a national level agency in order to build consensus among the states and the center related to agricultural credit reforms this will enable agro credit reaching out to the most number of small and marginal farmers as possible with this we have come to the end of the news discussion for the day let us now move on to practice question discussion let us see the first question consider the following statements with reference to nbfcs the institutions whose principal business is agriculture and industrial activity is not registered as nbfc the second statement is the deposits in nbfcs are insured by the di cgc third statement they form a part of the payment and settlement system if you look at this question you can arrive at the answer by just eliminating one option for example the second statement you know it is incorrect because deposits in nbfcs are not insured so if you eliminate one option you will arrive at the correct answer which is option a let us move on to the next question consider the following statements with reference to one china policy it is different from the one china principle which insists that both taiwan and mainland china are inalienable parts of a single china second option any country wishing to establish diplomatic relations with beijing must acknowledge there is only one china and severe all formal ties with taiwan which of the statement given above is or are incorrect so the question is asking which is incorrect so the answer is option d neither one nor two because both the statements are correct let us move on to the next question which is a main question the growing importance of shipping as a mode of transport is evident from the fact that the important export of goods on the scale necessary for the modern world would not be possible without shipping in this context analyze the constraints faced by india shipping sector and prescribe the way forward so that india shipping sector can become competitive in world market so it is a 15 marker so come up with 15 points next question every year many indian fishermen are either being killed or arrested by the steel uncle navy critically examine the measures taken by both sides to prevent such steps it's a 10 marker so give 10 points but what is very important is draw a map of Tamil Nadu and steel uncle and mark the places around this will fit you extra marks let us now see the last question in spite of the consecutive increase in the amount of agricultural credit the income of farmer remains stagnant over the years discuss so you can write answers for these questions and post it in the comments section with this we have come to the end of the day's analysis if you appreciate our work please do like comment and share our analysis 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