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Daily Current Affairs – 2020

Topic: For Prelims and Mains

Economic capital framework / Capital buffer

Slave Trade Abolition :

(27thAugust)

Resources: The Hindu /PIB

Why in News?  The night of 22 to 23 August 1791, in Santo Domingo (today Haiti and the Dominican Republic) saw the beginning of the uprising.

  • It was against this background, the ‘International Day for the Remembrance of the Slave Trade and its Abolition’ was commemorated on 23 August each year.
  • It is to commemorate “the tragedy of the slave trade in the memory of all peoples”.
  • UNESCO also established an international, intercultural project called ‘The Slave Route’.
  • It is to document and conduct an analysis of the interactions to which it has given rise between Africa, Europe, the Americas and the Caribbean.
  • Indentured servitude from India started in 1834 and lasted up till 1922, despite having been officially banned in 1917 by British.
  • Between1830-1860, the British, French and the Portuguese during the colonisation of India, prohibited slavery.
  • In Europe in the 1820s, there was a new kind of liberal humanism where slavery was considered inhuman.
  • It was following this ideology that the colonisers stopped slavery in India.
  • But it was only to replace it with another form of bonded servitude and termed it ‘indentured labour’.
  • The British Empire was expanding to South America, Africa and Asia and they needed new labour.
  • But slavery was considered inhuman. So they developed the concept of contract labour.
  • In 2011, a plaque was unveiled at the Kidderpore docks in Kolkata in memory of indentured labourers who passed through the city’s port.
  • On the banks of the Hooghly, the Suriname Ghat is named after one of the colonies to where ships would depart from Kolkata.
  • At the Suriname Ghat, the Mai-Baap Memorial is an unassuming metal structure that was unveiled.
  • The statue is a replica of the Baba and Mai monument in Paramaribo, Suriname.
  • It marks the first Indian migrants in Suriname.

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Topic: For Prelims and Mains

Economic  Capital Framework ( ECF)  :

Why in News? The Reserve Bank of India (RBI) at its board meeting recently  decided to transfer 1.76 lakh crore to the Centre which is likely to address the precarious fiscal situation of the government to a great extent.

The 1.76 lakh crore includes the central bank’s 2018-19 surplus of 1.23 lakh crore and 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the Board meeting.

Background:

Jalan panel: 

The RBI had formed a committee chaired by former Governor Bimal Jalan to review its economic capital framework and suggest the quantum of excess provision to be transferred to the government.

Main recommendations of Bimal jalan Committee:

The panel recommended a clear distinction between the two components of economic capital – realized equity and revaluation balances.

It was recommended that realized equity could be used for meeting all risks/ losses as they were primarily built up from retained earnings, while revaluation balances could be reckoned only as risk buffers against market risks as they represented unrealized valuation gains and hence were not distributable.

What is economic capital framework?

Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The economic capital framework reflects the capital that an institution requires or needs to hold as a counter against unforeseen risks or events or losses in the future.

Why it needs a fix?

Existing economic capital framework which governs the RBI’s capital requirements and terms for the transfer of its surplus to the government is based on a conservative assessment of risk by the central bank and that a review of the framework would result in excess capital being freed, which the RBI can then share with the government.

The government believes that RBI is sitting on much higher reserves than it actually needs to tide over financial emergencies that India may face. Some central banks around the world (like US and UK) keep 13% to 14% of their assets as a reserve compared to RBI’s 27% and some (like Russia) more than that.

What is Capital buffer?

  • A capital buffer is mandatory capital that financial institutions are required to hold.
  • Capital buffers were mandated under the Basel III regulatory reforms, which were implemented following the 2007-2008 financial crisis.

 

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