SHADOW BANKING

WHAT IS SHADOW BANKING?

The term refers to the practice of banking-like activities performed by non-banking finance companies, which are not subject to strict regulation. However, these institutions function as intermediaries between the investors and the borrowers, providing credit and generating liquidity in the system. Although these entities do not accept traditional demand deposits offered by banks, they do provide services similar to what commercial banks offer. And this was one reason why they escaped regulation abroad. The shadow banking system had overtaken the regular banking system in offering loans in US before the financial crisis erupted in 2008

.WHAT ARE THE RISKS ASSOCIATED WITH SHADOW BANKING?

The 2008 financial crisis has shown that shadow banking can be a source of systemic risk to the banking system. The risks can be transmitted directly and through the interconnectedness of partially-regulated entities with the banking system.

WHY IS RBI TIGHTENING SHADOW BANKING RULES?

The Reserve Bank is simply following the trend of global central banks increasing surveillance on shadow banking. Basel III norms require central banks to tighten supervision on shadow banks across the globe through steps such as defining minimum capital. Deputy governor Anand Sinha has expressed the need to tighten shadow banking rules on various forums. RBI's focus is on regulating the informal lending and borrowing business. Its concern stems from the interconnectedness of financial institutions.

WHAT STEPS ARE RBI TAKING?

The Usha Thorat committee has come out with draft regulations on NBFCs, such as increasing tier I capital and risk weight on certain assets. After the recommendations, smaller NBFCs with asset size of less then `25 crore are likely to go out of business.

WHAT IS THE GLOBAL SITUATION?

The size of shadow banking has reached a record $67 trillion in 2011, according to a report by the Finance Stability Board, a regulatory task force for the world's group of 20 economies. America has the biggest shadow banking system, followed by the Eurozone and the United Kingdom.

PCS MAINS 2012 EXAM LATEST UPDATE

THE HONOURABLE PUNJAB AND HARYANA HIGH COURT HAS SCHEDULED THE NEXT HEARING FOR 6TH FEBURARY 2013 in THE CASE PERTAINING TO CHALLENGE TO THE PRELIMANARIES EXAM RESULT.

BIOREMEDIATION

Bioremediation is the use of micro-organism metabolism to remove pollutants. Technologies can be generally classified as in situ or ex situ. In situ bioremediation involves treating the contaminated material at the site, whileex situ involves the removal of the contaminated material to be treated elsewhere. Some examples of bioremediation related technologies are phytoremediation, bioventing, bioleaching, landfarming, bioreactor, composting,bioaugmentation, rhizofiltration, and biostimulation.

Bioremediation can occur on its own (natural attenuation or intrinsic bioremediation) or can be spurred on via the addition of fertilizers to increase the bioavailability within the medium (biostimulation). Recent advancements have also proven successful via the addition of matched microbe strains to the medium to enhance the resident microbe population's ability to break down contaminants. Microorganisms used to perform the function of bioremediation are known as bioremediators.

Not all contaminants, however, are easily treated by bioremediation using microorganisms. For example, heavy metals such as cadmium and lead are not readily absorbed or captured by microorganisms. The assimilation of metals such as mercury into the food chain may worsen matters. Phytoremediation is useful in these circumstances because natural plants or transgenic plants are able to bioaccumulate these toxins in their above-ground parts, which are then harvested for removal.The heavy metals in the harvested biomass may be further concentrated by incineration or even recycled for industrial use.

The elimination of a wide range of pollutants and wastes from the environment requires increasing our understanding of the relative importance of different pathways and regulatory networks to carbon flux in particular environments and for particular compounds, and they will certainly accelerate the development of bioremediation technologies and biotransformation processes.

Mycoremediation

Mycoremediation is a form of bioremediation in which fungi are used to decontaminate the area. The term mycoremediation refers specifically to the use of fungal mycelia in bioremediation.

One of the primary roles of fungi in the ecosystem is decomposition, which is performed by the mycelium. The mycelium secretes extracellular enzymes and acids that break down lignin and cellulose, the two main building blocks of plant fiber. These are organic compounds composed of long chains of carbon and hydrogen, structurally similar to many organic pollutants. The key to mycoremediation is determining the right fungal species to target a specific pollutant. Certain strains have been reported to successfully degrade the nerve gases VX and sarin.

In one conducted experiment, a plot of soil contaminated with diesel oil was inoculated with mycelia of oyster mushrooms; traditional bioremediation techniques (bacteria) were used on control plots. After four weeks, more than 95% of many of the PAH (polycyclic aromatic hydrocarbons) had been reduced to non-toxic components in the mycelial-inoculated plots. It appears that the natural microbial community participates with the fungi to break down contaminants, eventually into carbon dioxide and water. Wood-degrading fungi are particularly effective in breaking down aromatic pollutants (toxic components of petroleum), as well as chlorinated compounds (certain persistent pesticides; Battelle, 2000).

Mycofiltration is a similar process, using fungal mycelia to filter toxic waste and microorganisms from water in soil.

Advantages

There are a number of cost/efficiency advantages to bioremediation, which can be employed in areas that are inaccessible without excavation. For example, hydrocarbon spills (specifically, petrol spills) or certain chlorinated solvents may contaminate groundwater, and introducing the appropriate electron acceptor or electron donor amendment, as appropriate, may significantly reduce contaminant concentrations after a long time allowing for acclimation. This is typically much less expensive than excavation followed by disposal elsewhere, incineration or other ex situ treatment strategies, and reduces or eliminates the need for "pump and treat", a practice common at sites where hydrocarbons have contaminated clean groundwater.


(For info please visit   http://www.zoologyinaction.blogspot.in)

GAAR (Latest)

What is GAAR and what does it mean when it is invoked?

These rules target any transaction or business arrangement that is entered into with the objective of avoiding tax. More and more countries are adopting these rules to check aggressive tax planning.

When GAAR is invoked, it would mean that particular transaction or arrangement would be impermissible and denied the tax benefit it has claimed.



Clarity on when GAAR will be invoked

The rules will be invoked when the main purpose of an arrangement is to obtain a tax benefit. The earlier provision said one of the main purpose. It will apply only to investments made after August 30, 2010

Will Participatory Note (P-notes) be subject to GAAR? 

GAAR will not apply to non-resident investors in FIIs. This clarifies that the tax authorities will not go behind the FIIs and apply GAAR to those who invest in India through them.

Will FIIs attract GAAR? 

GAAR will not apply to FIIs that do not claim any double taxation avoidance treaty benefit. Similarly, FIIs that pay appropriate tax will not be subject to GAAR

Will GAAR provisions override India's tax treaties? 

Clarity on When GAAR Will be Invoked If any arrangement is found to be impermissible under GAAR, it will be denied treaty benefits. This essentially means treaty benefits will be available to residents of the country and not those who use to route to save tax.

PROVISIONS TO PROTECT TAXPAYERS FROM HARASSMENT 

 Assessing officer will be required to issue a show cause notice stating reasons for invoking GAAR
 Taxpayer will have an opportunity to put its case before the officer
 The three member panel that will fi nally approve GAAR will have only one income tax official
 There will be a mechanism of obtaining advance ruling whether an arrangement is permissible or not
 Time limits will be prescribed for various authorities under GAAR
 GAAR will apply only when tax benefit exceeds Rs 3 crore
 Same income will not be taxed twice by invoking GAAR
 Where SAAR and GAAR both apply, only one will be invoked Where only a part of an arrangement impermissible GAAR will apply to only that
part

Does this mean those coming through Mauritius will be taxed?

As explained, the GAAR can over-ride bilateral tax treaties, but genuine residents can claim treaty benefits.

Government's decision on GAAR is silent on if a Mauritius investors with a tax residency certificate will be treated as a Mauritius resident.

So investors routing their investments through Mauritius to avail tax benefit will face Damocles' sword in new GAAR regime.

SIR CREEK BOUNDARY ISSUE WITH PAKISTAN

Sir Creek  is a 96 km (60 mi) strip of water that is disputed between India and Pakistan in the Rann of Kutch marshlands. The creek, which opens up into the Arabian Sea, divides the Kutch region of the Indian stateof Gujarat with the Sindh province of Pakistan. It is located at approximately 23°58′N 68°48′E. Originally and locally it is called 'Baan Ganga'. Sir Creek is named after the British representative.

The long-standing dispute hinges in the actual demarcation "from the mouth of Sir Creek to the top of Sir Creek, and from the top of Sir Creek eastward to a point on the line designated on the Western Terminus". From this point onwards, the boundary is unambiguously fixed as defined by the Tribunal Award of 1968.

The creek itself is located in the uninhabited marshlands. During the monsoon season between June and September, the creek floods its banks and envelops the low-lying salty mudflats around it. During the winter season, the area is home to flamingoes and other migratory birds.

Dispute

The dispute lies in the interpretation of the maritime boundary line between Kutch and Sindh. Before India's independence, the provincial region was a part of Bombay Presidency of British India. After India's independence in 1947, Sindh became a part of Pakistan while Kutch remained a part of India.

Pakistan lays claim to the entire creek as per paras 9 and 10 of the Bombay Government Resolution of 1914^[2] signed between the then Government of Sindh and Rao Maharaj, the ruler of the princely state of Kutch.^[3]

The Green Line is the boundary as claimed by Pakistan, the red line is the boundary as claimed by India. The black line is the undisputed section.

The resolution, which demarcated the boundaries between the two territories, included the creek as part of Sindh, thus setting the boundary as the eastern flank of the creek. The boundary line, known as the "Green Line", is disputed by India which maintains that it is an "indicative line", known as a "ribbon line" in technical jargon.^[1] India sticks to its position that the boundary lies mid-channel as depicted in another map drawn in 1925, and implemented by the installation of mid-channel pillars back in 1924.^[4]

India supports its stance by citing the Thalweg Doctrine in International Law. The law states that river boundaries between two states may be, if the two states agree, divided by the mid-channel. Though Pakistan does not dispute the 1925 map, it maintains that the Doctrine is not applicable in this case as it only applies to bodies of water that are navigable, which the Sir Creek is not. India rejects the Pakistani stance by maintaining the fact that the creek is navigable in high tide, and that fishing trawlers use it to go out to sea. Another point of concern for Pakistan is that Sir Creek has changed its course considerably over the years. If the boundary line is demarcated according to the Thalweg principle, Pakistan stands to lose a considerable portion of the territory that was historically part of the province of Sindh. Acceding to India's stance would also result in the shifting of the land/sea terminus point several kilometres to the detriment of Pakistan, leading in turn to a loss of several thousand square kilometres of its Exclusive Economic Zone under the United Nations Convention on Law of the Sea.

In April 1965, a dispute there contributed to the Indo-Pakistani War of 1965, when fighting broke out between India and Pakistan. Later the same year, British Prime Minister Harold Wilson successfully persuaded both countries to end hostilities and set up a tribunal to resolve the dispute. A verdict was reached in 1968 which saw Pakistan getting 10% of its claim of 9,000 km² (3,500 sq. miles).

Atlantique incident

This disputed region is known for the Atlantique Incident, in which a Pakistan Naval Air Arm Breguet Atlantique patrol plane, carrying 16 people on board, was shot down by Indian Air Force MiG-21 fighters for an allegedairspace violation of Indian airspace on August 10, 1999. The episode took place just a month after the Kargil War, creating a tense atmosphere between India and Pakistan.^[5]

Economic reasons

Though the creek has little military value, it holds immense economic gain. Much of the region is rich in oil and gas below the sea bed, and control over the creek would have a huge bearing on the energy potential of each nation. Also once the boundaries are defined, it would help in the determination of the maritime boundaries which are drawn as an extension of onshore reference points. Maritime boundaries also help in determining the limits of Exclusive Economic Zones (EEZs) and continental shelves. EEZs extend to 200 nautical miles (370 km) and can be subjected to commercial exploitation.

The demarcation would also prevent the inadvertent crossing over of fishermen of both nations into each other's territories.

Dispute resolution

Since 1969, there have been eight rounds of talks between the two nations, without a breakthrough. Steps to resolve the dispute include:

1. Allocation
2. Delimitation
3. Demarcation
4. AdministrationSince neither side has conceded ground, India has proposed that the maritime boundary could be demarcated first, as per the provisions of Technical Aspects of Law of Sea (TALOS).However, Pakistan has staunchly refused the proposal on the grounds that the dispute should be resolved first. Pakistan has also proposed that the two sides go in for international arbitration, which India has flatly refused. India maintains that all bilateral disputes should be resolved without the intervention of third-parties.

ACADEMY AWARDS (OSCARS)

The Academy Awards, informally known as The Oscars, are a set of awards given annually for excellence of cinematic achievements. The Oscar statuette is officially named the Academy Award of Merit and is one of nine types of Academy Awards. Organized and overseen by the Academy of Motion Picture Arts and Sciences(AMPAS), the awards are given each year at a formal ceremony. The AMPAS was originally conceived by Metro-Goldwyn-Mayer studio executive Louis B. Mayeras a professional honorary organization to help improve the film industry’s image and help mediate labor disputes. The awards itself was later initiated by the Academy as an award "of merit for distinctive achievement" in the industry.

The awards were first given in 1929 at a ceremony created for the awards, at the Hotel Roosevelt in Hollywood. Over the years that the award has been given, the categories presented have changed; currently Oscars are given in more than a dozen categories, and include films of various types. As one of the most prominent award ceremonies in the world, the Academy Awards ceremony is televised live in more than 100 countries annually. It is also the oldest award ceremony in the media; its equivalents, the Grammy Awards (for music), the Emmy Awards (for television), and the Tony Awards (for theater), are modeled after the Academy Awards.

The 84th Academy Awards were held at the Dolby Theatre on February 26, 2012; the 85th Academy Awards are scheduled to be held on February 24, 2013, in the same venue.

Right to Public Services legislation

Right to Public Services legislation in India comprises statutory laws which guarantee time bound delivery of services for various public services rendered by the Government to citizen and provides mechanism for punishing the errant public servant who is deficient in providing the service stipulated under the statute. Right to Service legislation are meant to reduce corruption among the government officials and to increase transparency and public accountability. Madhya Pradesh became the first state in India to enact Right to Service Act on 18 August 2010 and Bihar was the second to enact this bill on 25 July 2012. Several other states like Bihar, Delhi, Punjab,Rajasthan, Himachal Pradesh, Uttarakhand, Haryana, Uttar Pradesh, and Jharkhand have introduced similar legislation for effectuating the right to service to the citizen.

Framework

The common framework of the legislations in various states includes, granting of "right to public services", which are to be provided to the public by the designated official within the stipulated time frame. The public services which are to be granted as a right under the legislations are generally notified separately through Gazette notification. Some of the common public services which are to be provided within the fixed time frame as a right under the Acts, includes issuing caste, birth, marriage and domicile certificates, electric connections, voter’s card, ration cards, copies of land records, etc.

On failure to provide the service by the designated officer within the given time or rejected to provide the service, the aggrieved person can approach the First Appellate Authority. The First Appellate Authority, after making a hearing, can accept or reject the appeal by making a written order stating the reasons for the order and intimate the same to the applicant, and can order the public servant to provide the service to the applicant.

An appeal can be made from the order of the First Appellate Authority to the Second Appellate Authority, who can either accept or reject the application, by making a written order stating the reasons for the order and intimate the same to the applicant, and can order the public servant to provide the service to the applicant or can impose penalty on the designated officer for deficiency of service without any reasonable cause, which can range from Rs. 500 to Rs. 5000 or may recommend disciplinary proceedings. The applicant may be compensated out of the penalty imposed on the officer. The appellate authorities has been granted certain powers of a Civil Court while trying a suit under Code of Civil Procedure, 1908, like production of documents and issuance of summon to the Designated officers and appellants.

Implementing states

State	Act title	Status
Punjab	Right to Public Service Act, 2011	Notified
Uttarakhand	The Uttarakhand Right to Service Act, 2011	Notified
Madhya Pradesh	Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Adhiniyam, 2010	Notified
Bihar	Bihar Right to Public Services Act, 2011	Notified
Delhi	Delhi (Right of Citizen to Time Bound Delivery of Services) Act, 2011	Notified
Jharkhand	Right to Service Act, 2011	Notified]
Himachal Pradesh	Himachal Pradesh Public Services Guarantee Act, 2011	Notified
Rajasthan	Rajasthan Public Service Guarantee Act, 2011	Notified
Uttar Pradesh	Right to Service Act, 2011	Notified
Kerala	Kerala Government Service Assurance Bill, 2011	Enacted
Karnataka	The Karnataka (Right Of Citizens to Time Bound Delivery Of Services) Bill, 2011	Implemented
Chhattisgarh	Chhattisgarh Lok Seva Guarantee Bill, 2011	Notified
Jammu and Kashmir	The Jammu and Kashmir Public Services Guarantee Act, 2011	Notified
Orissa	Right to Public Services Act, 2012	Enacted
Assam	Assam Right to Public Services Act, 2012	Enacted
Central Government	The Citizens Right to Grievance Redress Bill, 2011	Proposed

Finance Commission of India

The Finance Commission of India came into existence in 1951. It was established under Article 280 of the Indian Constitution by the President of India. It was formed to define the financial relations between the centre and the state. The Finance Commission Act of 1951 states the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. As per the Constitution, the commission is appointed every five years and consists of a chairman and four other members. Since the institution of the first finance commission, stark changes have occurred in the Indian economy causing changes in the macroeconomic scenario. This has led to major changes in the Finance Commission’s recommendations over the years. Till date, Thirteen Finance Commissions have submitted their report

History: Genesis of the Finance Commission

The Indian State, like all other federations, is also ridden by the problems of Vertical and Horizontal Imbalances. Vertical Imbalances result because states are assigned responsibilities and in the process of fulfilling those, they incur expenditures disproportionate to their sources of revenue. This is because the states are able to gauge the needs and concerns of their people more effectively, and hence, are more efficient in addressing them. Factors like historical backgrounds, differences in resource endowments etc. lead to widening Horizontal Imbalances. The Constitution of India, in recognition of these two problems, has made several provisions to bridge the gap of finances between the Centre and the States. These include various articles in the constitution like Article 268, which facilitates levy of duties by the Centre but equips the states to collect and retain the same. Similarly, there areArticles 269, 270, 275, 282 and 293 all of which specify ways and means of sharing resources between Union and States. Apart from the above- mentioned provisions, The Indian Constitution provides an institutional framework to facilitate Centre- State Transfers. This body is the Finance Commission, which came into existence in 1951, under Article 280 of the Indian Constitution, which states:

1. The President will constitute a Finance Commission within two years from the commencement of the Constitution and thereafter and at the end of every fifth year or earlier, as the deemed necessary by him/her, which shall include a Chairman and four other members.
2. Parliament may by law determine the requisite qualifications for appointment as members of the Commission and the procedure of selection.
3. The Commission is constituted to make recommendations to the President about the distribution of the net proceeds of taxes between the Union and States and also the allocation of the same amongst the States themselves. It is also under the ambit of the Finance Commission to define the financial relations between the Union and the States. They also deal with devolution of non-plan revenue resources.

recently fouteenth finance is constituted under the chairmanship of y v reddy,former RBI governor.

FunctionsFunctions of the Finance Commission can be explicitly stated as:

1. Distribution of net proceeds of taxes between Centre and the States, to be divided as per their respective contributions to the taxes.
2. Determine factors governing Grants-in Aid to the states and the magnitude of the same.
3. Work with the State Finance Commissions and suggest measures to augment the Consolidated Fund of the States so as to provide additional resources to Panchayats and Municipalities in the state.

The Finance Commission (Miscellaneous Provisions) Act, 1951

With the objective of giving a structured format to the Finance Commission of India and to bring it at par with world standards, The Finance Commission (Miscellaneous Provisions) Act, 1951 was passed. It lays down rules regarding qualification and disqualification of members of the Commission, their appointment, term, eligibility and powers.

• Qualifications of the members

The Chairman of the Finance Commission is selected among people who have had the experience of public affairs. The other four other members are selected from people who:

1. Are, or have been, or are qualified, as judges of High Court, or
2. Have knowledge of Government finances or accounts, or
3. Have had experience in administration and financial expertise; or
4. Have special knowledge of economics

• Terms of Office of Members and eligibility for Reappointment

Every member will be in office for the time period as specified in the order of the President, but is eligible for reappointment provided he has, by means of a letter addressed to the President, resigned his office.

• Salaries and Allowances of the members

The members of the Commission shall provide full- time or part- time service to the Commission, as the President specifies in his order. The members shall be paid Salaries and Allowances as per the provisions made by the Central Government. So far, 13 Finance commissions(v. kelkar) have submitted their recommendations. More or less, all of them have been accepted by the Union Government.

• Major Recommendations of 13th Finance Commission

1. The share of states in the net proceeds of the shareable Central taxes should be 32%.This is 1.5% higher than the recommendation of 12th Finance Commission.
2. Revenue deficit to be progressively reduced and eliminated, followed by revenue surplus by 2013-14.
3. Fiscal deficit to be reduced to 3% of the GDP by 2014-15.
4. A target of 68% of GDP for the combined debt of centre and states.
5. The Medium Term Fiscal Plan(MTFP)should be reformed and made the statement of commitment rather than a statement of intent.
6. FRBM Act need to be amended to mention the nature of shocks which shall require targets relaxation.
7. Both centre and states should conclude 'Grand Bargain' to implement the model Goods and Services Act(GST).To incentivise the states, the commission recommended a sanction of the grant of Rs 50000 crore.
8. Initiatives to reduce the number of Central Sponsored Schemes(CSS)and to restore the predominance of formula based plan grants.
9. States need to address the problem of losses in the power sector in time bound manner.

The Central Government has recently constituted the 14 th finance commisson headed by Shri Y.V.REDDY, who was the former governor of RBI(Reserve Bank of India)

Latest Update on PCS MAINS 2012 Exam

The hearing of petition on PCS 2012 prelims result has been deffered till 17th january 2013 by Honourable  Punjab and Haryana High court. According to Ppsc sources there is no change in mains examination schedule till date and they are likely to take place as scheduled.

TRADE SETTLEMENT CYCLE

India is one of the most advanced markets when it comes to settlement of trade. The domestic market follows a T+2 settlement cycle. Let's learn a bit more about the trade cycle.

WHAT IS ROLLING SETTLEMENT?

In a rolling settlement , each trading day is considered as a trading period and trades executed during the day are settled based on net obligations for the day. In India, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day after a trade.

WHICH DAYS ARE CALCULATED FOR THE PURPOSE OF ROLLING SETTLEMENT?

For arriving at the settlement day, all intervening holidays, which include bank holidays, exchange holidays,Saturdays and Sundays, are excluded. Typically, trades taking place on Monday are settled on Wednesday, Tuesday's trades are settled on Thursday and so on.

WHEN DOES THE OPEN POSITIONS RESULT IN PAYMENT/ DELIVERY UNDER ROLLING SETTLEMENT?

Under rolling settlement, all open positions at the end of the day mandatorily result in payment/ delivery 'n' days later. Currently, trades in rolling settlement are settled on T+2 basis where T is the trade day. For example, a trade executed on Monday is mandatorily settled by Wednesday (considering two working days from the trade day).

For intraday traders, rolling settlement changes nothing. For institutional investors , who are forbidden to square off anyway, there would be no change. It is for retail investors who take leveraged positions across one night or more that rolling settlement has an impact. The funds and securities pay-in and pay-out are carried out on T+2 days .

WHAT IS PAY-IN AND PAY-OUT ?

Pay-in day is the day when the securities sold are delivered to the exchange by the sellers and funds for the securities purchased are made available to the exchange by the buyers. Pay-out day is the day the securities purchased are delivered to the buyers and the funds for the securities sold are given to the sellers by the exchange. At present, the pay-in and pay-out happens on the 2nd working day after the trade is executed on the exchange, that is settlement cycle is on T+2 rolling settlement.

WHAT IS NO-DELIVERY PERIOD?

Whenever a company announces a book closure or record date, the exchange sets up a no-delivery period for that security. During this period only trading is permitted in the security. However , these trades are settled only after the no-delivery period is over. This is done to ensure that investor's entitlement for the corporate benefit is clearly determined.

WHAT IS AN AUCTION?

On account of non-delivery of securities by the trading member on the pay-in day, securities are put up for auction by the exchange. This ensures that buying trading member receives the securities. The Exchange purchases the requisite quantity in auction market and gives them to the buying trading member.

Happy new year 2013