Daily Current Affairs for 25th July 2020

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India, Sri Lanka seek to reset ties in the time of polls and pandemic


Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Why in News:

According to experts, amidst the pandemic and time for polls in Sri Lanka, both India and China have diverse avenues to deepen.

Recent Developments:

  • Despite having watched the India-China stand-off at Galwan Valley closely because two of its closest partners were on either side of the tension, Sri Lanka did not comment on the development.
  • Subsequently, the controversy around the East Container Terminal (ECT) in Colombo came to the surface. Read More about the issue covered in 3rdJuly 2020 CNA.
  • Around the same time, India was holding close and constructive discussions with Sri Lanka, on Colombo’s pending request for a debt totalling $960 million freeze, and for swapping currency under bilateral and SAARC arrangements.
  • The Reserve Bank of India has agreed to a $400 million currency swap facility for Sri Lanka till November 2022.
  • The Central Bank of Sri Lanka had sought swap facility to strengthen its foreign exchange reserves.
  • Sri Lanka owes $960 million to India.

Way forward – In strengthening India – Sri Lanka ties:

  • The close but complex bilateral ties between India and Sri Lanka have both history and baggage.
  • India’s attitude and relationship with her immediate neighbours depend on their appreciation of India’s regional security concerns; they would serve as buffer states in the event of an extra-regional threat and not proxies of the outside powers. Sri Lanka must not forget this guidance in dealing with India.
  • Examples of Singapore-Malaysia and New Zealand-Australia indicate that a smaller country’s economic success is tied to having a strong or at least stable relationship with its larger neighbour.
  • The bilateral relationship between India and Sri Lanka will always be an important cornerstone of a peaceful and prosperous South Asia.
  • Both India and Sri Lanka should focus on increasing the volume and quality of people-to-people links, without assuming they will naturally result from geographical proximity.

Nearly 28 lakh people affected by Assam floods, toll rises to 93


Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in News:

Floods have devastated Assam, inundating the Kaziranga National Park and Tiger Reserve (KNPTR), putting the lives of several endangered species under threat, besides affecting about 28 lakh people.


  • Large swathes of East Siang and other districts along the flow of river Siang in Arunachal Pradesh have also been affected.
  • Siang is one of the three rivers that form the Brahmaputra in Assam downstream.
  • Goalpara continued to be the worst-affected district.
  • River Brahmaputra takes a sharp turn at Goalpara village, causing maximum red alerts and flooding in that area.

Role of floods in Kaziranga’s ecosystem:

  • Assam is traditionally flood-prone. KNPTR, sandwiched between the Brahmaputra river and the Karbi Anglong Hills, is no exception.
  • Floods are considered necessary for Kaziranga as it is a riverine ecosystem.
  • The entire area of Kaziranga, formed by alluvial deposits from the Brahmaputra and its tributaries is centred around the river.
  • The regenerative nature of floods helps replenish Kaziranga’s water bodies and maintain its landscape, a mix of wetlands, grasslands and semi-evergreen deciduous forests.
  • It helps get rid of unwanted plants, such as water hyacinth, which collect in huge masses in the landscape.
  • Animals adapt naturally to floods but when the waters hit a certain level, they gravitate towards safer, higher ground in the Karbi Anglong hills.

Way forward:

  • Over the years, artificial highlands (111 in the nineties, 33 in 2016-17) have been built inside the park for wild animals to take refuge in during floods.
  • Emphasis is needed to secure animal corridors and ensuring a safe passage to the Karbi hills.
  • In April 2019, the Supreme Court banned all types of mining and related activities along the park’s southern boundary and in the entire catchment area of the rivers that originate in the Karbi Anglong hill ranges and flow into Kaziranga, as well as new construction activities in private lands on nine animal corridors.

India invites Israeli defence companies to strengthen ties


Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Why in News:

India has invited greater participation from Israeli defence companies under the new liberalised foreign direct investment (FDI) regime in defence manufacturing.

Key Details:

  • In May 2020, the government increased the limit for FDI in defence through the automatic route from 49% to 74%.
  • Indian Armed Forces are undertaking a series of emergency defence purchases, including from Israel, amid ongoing tensions with China.
  • The decision has been taken by the Army to order another batch of 12 launchers and around 250 missiles of Spike Anti-Tank Guided Missiles (ATGM) and additional Heron Undermanned Aerial Vehicles (UAV), among others, from Israel through the emergency procurement route.

Banks’ gross NPAs may climb to as much as 14.7% by March: RBI


Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news:

Reserve Bank of India’s observation on gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs).

Key Details:

  • RBI has observed that the GNPA ratio of SCBs may escalate to 14.7% under a very severely stressed scenario, which assumes hypothetically that GDP would suffer a contraction of 8.9% in 2020-21.
  • Earlier in its Financial Stability Report, RBI had predicted that the GNPA ratio of all SCBs may increase to 12.5% by March 2021.
  • On the assessment of systemic risk, the RBI said in its report that the Indian financial system remained stable, notwithstanding the significant downside risks to economic prospects.

Gross Non-Performing Assets:

  • Gross NPA is the summation of all loan assets that are classified as NPA as per RBI guidelines.
  • Gross NPA consists of Substandard Assets, Doubtful Assets and Loss Assets.

Net Non-Performing Asset:

  • For precautions and to meet unforeseen losses, banks are required to make provisions as per RBI guidelines. RBI issues guidelines on Income Recognition, Asset Classification and Provisioning.
  • From the gross NPA, provisions provided are netted to arrive at Net NPA.
  • Net non-performing assets = Gross NPAs – Provisions.

Impact of High NPAs on Banks:

  • NPA is an important financial component that is considered while analyzing a bank. It indicates the asset quality of banks.
  • Banks with high NPAs have lesser funds to advance because of the higher provisioning that they have to provide.
  • Lesser lending would mean lesser interest income, impacting the profitability of the banks.
  • Banks would have to face difficulty maintaining capital adequacy ratio.

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