• The exception to the rule is full-scale FTAs, subject to some conditions.
• One rider, incorporated in Article XXIV.8 (b) of GATT, stipulates that a deal should aim to eliminate customs duties and other trade barriers on "Substantially all the trade" between the WTO member countries that are signatories to an FTA.
• For this Agreement, a free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
• It is often beneficial to negotiate the entire deal together, as an early harvest deal may reduce the incentive for one side to work towards a full FTA.
• These agreements are not just about goods and services but also issues like investment.
• If you are trying to weigh the costs and benefits, it is always better to have the larger picture in front of you.
• In the case of the early harvest agreement inked with Thailand, automobile industry associations had complained that relaxations extended to Bangkok in the early harvest had reduced the incentive for Thailand to work towards a full FTA.
• Early harvest agreements may serve the function of keeping trading partners interested as they promise some benefits without long delays, as India becomes known for long-drawn negotiations for FTAs.
• Government emphasis on interim agreements may be tactical so that a deal may be achieved with minimum commitments and would allow for contentious issues to be resolved later.

• Jallikattu, a traditional bull-taming sport deeply rooted in Tamil culture, is particularly popular in the districts of Madurai, Tiruchirappalli, Theni, Pudukkottai, and Dindigul, collectively known as the Jallikattu belt.
• Celebrated during the Tamil harvest festival, Pongal, in the second week of January, Jallikattu boasts a rich history spanning over 2,000 years.
• Beyond its competitive aspect, Jallikattu serves as a cultural event honouring bull owners who meticulously rear these animals for breeding purposes.
• The sport involves contestants attempting to tame a bull for a prize, with the bull owner emerging victorious if the contestant fails.
• While the sport's origins can be traced back to an era when agriculture was heavily reliant on animal power, the mechanization of the farm sector has diminished the monetary benefits for bull owners.
• Nonetheless, Jallikattu events continue to attract participants and spectators alike, with prizes evolving to include grinders, refrigerators, and small furniture in addition to traditional dhotis, towels, betel leaves, bananas, and a cash prize of Rs 101.

3. Significance of Jallikattu in Tamil Culture

• Jallikattu holds a pivotal role in Tamil culture, especially for the peasant community, as it serves as a traditional method to safeguard their pure-breed native bulls.
• In an era dominated by artificial processes in cattle breeding, Jallikattu emerges as a crucial means to preserve male animals that would otherwise find utility solely in meat production or ploughing.
• The native cattle breeds integral to Jallikattu, such as Kangayam, Pulikulam, Umbalachery, Barugur, and Malai Maadu, assume cultural prominence.
• These breeds not only contribute to the essence of the event but also elevate the status of their owners, who command local respect for their role in preserving these premium breeds.

• Animal rights concerns have sparked legal battles surrounding Jallikattu since the early 1990s in India.
• A 1991 notification issued by the Environment Ministry prohibited the training and exhibition of bears, monkeys, tigers, panthers, and dogs.
• This notification was challenged by the Indian Circus Organization in the Delhi High Court, leading to the exclusion of dogs from the ban in 1998.
• In 2007, Jallikattu came under legal scrutiny when the Animal Welfare Board of India and the animal rights group PETA filed petitions in the Supreme Court against Jallikattu and bullock cart races.
• However, the Tamil Nadu government managed to circumvent the ban by enacting a law in 2009, which received the Governor's approval.
• The issue resurfaced in 2011 when the central government under the UPA regime added bulls to the list of animals prohibited for training and exhibition.
• In May 2014, just days before the BJP's election victory, the Supreme Court banned Jallikattu, citing the 2011 notification.

5. The Current Legal Status of Jallikattu

• The legality of Jallikattu remains a subject of ongoing legal debate, with a case currently pending before the Supreme Court of India.
• While the Tamil Nadu government has legalized Jallikattu events within the state, this decision has been challenged in court.
• In 2017, following the death of Chief Minister J Jayalalithaa, massive protests erupted across Tamil Nadu in opposition to the Supreme Court's ban on Jallikattu.
• These protests, culminating in a 15-day-long uprising in Chennai, highlighted the cultural significance of Jallikattu for the people of Tamil Nadu.
• In response to these protests, the Tamil Nadu government issued an ordinance amending the central Act, effectively legalizing Jallikattu within the state.
• This ordinance was subsequently ratified by the President of India. However, animal rights group PETA challenged the constitutionality of the state's move, leading to the current legal impasse.
• The central question at the heart of the Jallikattu debate is whether the tradition can be protected as a fundamental cultural right under Article 29(1) of the Indian Constitution guarantees the right for any distinct group of citizens within India to conserve their language, script, or culture.
• Similar to Tamil Nadu, the state of Karnataka has also enacted legislation to legalize a comparable bull-taming sport called Kambala.
• While Maharashtra attempted to do the same, its efforts were initially challenged in court before eventually being approved as law.
• Despite these legal developments, Jallikattu remains banned in all other Indian states, including Andhra Pradesh, Punjab, and Maharashtra, due to the 2014 Supreme Court ban order.
• The ongoing legal battles surrounding Jallikattu underscore the complex interplay between cultural traditions, animal welfare concerns, and constitutional rights.

RAT HOLE MINING

• Rat hole mining, commonly seen in Meghalaya, involves extracting coal from narrow, flat layers in the ground. The term "rat hole" specifically describes these tight pits dug into the earth, usually just big enough for one person to enter and collect coal.
• After digging these pits, miners descend using ropes or bamboo ladders to access the coal layers. Using basic tools like pickaxes, shovels, and baskets, they manually extract the coal. Another method within rat-hole mining, known as box-cutting, involves creating rectangular openings ranging from 10 to 100 square meters.
• From these openings, vertical pits are dug, reaching depths of 100 to 400 feet. Once the coal seam is located, small tunnels resembling rat holes are carved horizontally to facilitate coal extraction by the workers

3. Environmental and Safety Concerns

• Rat hole mining poses significant safety and environmental hazards. The mines are typically unregulated, lacking safety measures such as proper ventilation, structural support, or safety gear for the workers.
• Additionally, the mining process can cause land degradation, deforestation, and water pollution.
• This method of mining has faced severe criticism due to its hazardous working conditions, environmental damage, and numerous accidents leading to injuries and fatalities.
• Despite attempts by authorities to regulate or ban such practices, they often persist due to economic factors and the absence of viable alternative livelihoods for the local population

4. Banning of Rat hole mining

The National Green Tribunal (NGT) banned the practice in 2014, and retained the ban in 2015. The NGT observed, “It is also informed that there are umpteen number of cases where by virtue of rat-hole mining, during the rainy season, water flooded into the mining areas resulting in death of many… individuals including employees/workers.”
The order was in connection with Meghalaya, where this remained a prevalent procedure for coal mining. The state government then appealed the order in the Supreme Court.

 

5. Way Forward

 

In contrast to Chhattisgarh and Jharkhand, the coal seams in Meghalaya are significantly thinner. This, according to miners, makes rat-hole mining a more economically feasible option compared to opencast mining.

Meghalaya possesses an estimated 576.48 million tonnes of low-ash, high-sulphur coal dating back to the Eocene epoch (33–56 million years ago). The high stakes for certain local groups have resulted in considerable pressure on the State government to enable the legal resumption of mining activities.

In May 2023, Meghalaya Chief Minister Conrad K. Sangma announced that the Coal Ministry had approved mining leases for four out of 17 applicants seeking prospective licenses. This approval is expected to pave the way for ‘scientific’ mining, characterized by environmentally sustainable and legally compliant extraction practices. However, anti-mining activists, who often face assaults by miners, argue that the term ‘scientific’ might merely serve as a superficial label in a region where profit continues to dominate coal mining activities

 

 

Source: Indianexpress

 

 

TRAI

1. Context

The Telecom Regulatory Authority of India (TRAI) will be using distributed ledger technology (DLT) to register spam preferences from customers, TRAI chairman Anil Kumar Lahoti said. Spam rules will be tightened to make commercial messages traceable, the TRAI has indicated.

2. TRAI (Telecom Regulatory Authority of India)

The Telecom Regulatory Authority of India (TRAI) is an independent regulatory body established by the Indian government in 1997. Its primary objective is to regulate the telecommunications industry in India and ensure the orderly growth and development of the sector. TRAI operates under the provisions of the Telecom Regulatory Authority of India Act, 1997.

3. Key Responsibilities and Functions of TRAI:

• Policy Formulation: TRAI plays a crucial role in formulating policies and regulations related to the telecommunications sector. It advises the government on issues pertaining to establishing and operating telecom services, licensing conditions, and promoting competition and innovation.
• Licensing and Tariff Regulation: TRAI is responsible for granting licenses to telecom service providers and regulating tariffs charged by them. It ensures that tariffs are reasonable, non-discriminatory, and transparent.
• Quality of Service: TRAI monitors the quality of telecom services provided by operators and sets quality of service standards to ensure a satisfactory experience for consumers. It also addresses consumer grievances and takes appropriate action against service providers for violations.
• Spectrum Management: TRAI plays a vital role in spectrum management, including allocating and efficiently utilizing radio frequencies. It recommends policies related to spectrum pricing, auction methodology, and efficient utilization of spectrum resources.
• Consumer Protection: TRAI works towards safeguarding consumer interests in the telecom sector. It promotes fair competition, prevents anti-competitive practices, and ensures that consumers have access to affordable and reliable telecom services.
• Net Neutrality: TRAI has actively shaped policies regarding net neutrality in India. It has laid down regulations to uphold the principle that all internet traffic should be treated equally, without any discrimination or preferential treatment by service providers.

4. India's History of Internet Shutdowns

• Internet shutdowns have been imposed in various states and districts across India on several occasions to prevent the rapid spread of provocative content during periods of communal tension.
• The Indian government views these shutdowns as a legitimate tool to maintain law and order.
• However, these shutdowns can be prolonged, severely impacting access to education, work, banking, and information.
• In certain regions like Jammu and Kashmir and Manipur, the authorities and courts have gradually eased long-term restrictions by allowing limited internet access through wired connections and limited wireless services.

5. The TRAI's Proposed Approach

• The Telecom Regulatory Authority of India (TRAI) has suggested an approach that would require cooperation between telecom operators and messaging app companies, such as WhatsApp, to block access to services during a shutdown.
• The TRAI is seeking inputs on licensing messaging apps in India, which could entail firms being subjected to surveillance and blocking requirements.

6. Previous Considerations of App Regulation by TRAI

• In the past, the TRAI conducted consultations in 2015 and 2018 regarding the regulation of messaging apps.
• These consultations resulted in comprehensive protections for net neutrality, which advocates for equal treatment of all internet traffic.
• Telecom operators had called for regulation of messaging apps, claiming that these services operated without the stringent security and surveillance regulations imposed on telecom operators.
• Telcos were also concerned about their revenues being undermined by cheaper online calls and messages. However, the Department of Telecommunication (DoT) and the TRAI rejected this argument, stating that telcos cannot discriminate between different categories of consumer data.
• The focus on regulating messaging apps shifted towards security and policing, particularly in combating communal misinformation and provocative content.
• The Ministry of Electronics and Information Technology introduced the IT Rules, 2021, which included the requirement of "traceability" to identify the original sender of a forwarded message.
• However, civil society groups and tech firms argued that meeting such requirements would require breaking end-to-end encryption, which raised concerns about privacy and feasibility.

7. Virtual Private Networks (VPNs)

Virtual Private Networks (VPNs) are secure and encrypted networks that allow users to access the internet privately and anonymously. VPNs provide a secure connection by encrypting the user's internet traffic and routing it through a server located in a different location, often in another country. This encryption and rerouting help protect the user's online privacy and security.

Key Aspects of VPNs:

• Privacy and Anonymity: VPNs create a secure tunnel between the user's device and the VPN server, effectively hiding the user's IP address and encrypting their internet traffic. This ensures that their online activities, including browsing history, downloads, and communication, are protected from eavesdropping, surveillance, and tracking by ISPs, governments, or malicious actors.
• Security and Encryption: VPNs employ robust encryption protocols to secure the user's data and communications. This encryption safeguards sensitive information, such as passwords, credit card details, and personal data, from potential interception or hacking attempts.
• Bypassing Geographical Restrictions: VPNs allow users to bypass geographical restrictions imposed by governments, organizations, or websites. By connecting to a VPN server in a different location, users can appear as if they are accessing the internet from that location. This enables them to access geo-blocked content, evade censorship, and overcome limitations on certain services or websites.
• Public Wi-Fi Security: Public Wi-Fi networks, such as those found in cafes, airports, or hotels, are often insecure and vulnerable to attacks. VPNs provide an additional layer of security when connecting to public Wi-Fi by encrypting the user's data and protecting it from potential threats or unauthorized access.

8. Concerns Regarding VPNs

• While websites and specific apps can be blocked by ordering telecom operators to do so, Virtual Private Networks (VPNs) can easily bypass these blocks.
• VPNs route a user's internet traffic through servers located in other countries and often employ encryption, making it difficult for the government to monitor these connections. This has led to a growing distrust of VPNs by the government.
• VPN services frequently change the IP addresses associated with their servers, making it challenging to block them effectively.
• Although the websites of VPN providers can be blocked, the installation files can still be found elsewhere online. Telecom operators have stated that blocking VPNs is technically unfeasible.

9.  Arguments for and against Blocking VPNs

• Internet rights activists argue that blocking VPNs would have negative implications for online privacy.
• They contend that VPNs play a crucial role in securing digital rights under the Indian Constitution, especially for journalists, whistleblowers, and activists.
• The encrypted nature of VPNs allows for the secure transfer of confidential information and safeguards the identity of users, protecting them from surveillance and censorship.

For Prelims: Telecom Regulatory Authority of India (TRAI), Internet shutdowns, Virtual Private Networks (VPNs), Net Neutrality, and Department of Telecommunication (DoT). For Mains:1. Examine the role and effectiveness of the Telecom Regulatory Authority of India (TRAI) in regulating the telecommunications industry. Discuss its impact on ensuring fair competition, protecting consumer interests, and fostering innovation in the sector. (250 Words).

 

Previous year Question 1. What is a "Virtual Private Network"? (UPSC 2011) A.  It is a private computer network of an organization where remote users can transmit encrypted information through the server of the organization B. It is a computer network across a public internet that provides users access to their organization's network while maintaining the security of the information transmitted C. It is a computer network in which users can access a shared pool of computing resources through a service provider D. None of the statements (a), (b), and (c) given above is a correct description of a Virtual Private Network Answer: B

Source: The Hindu

 

INTERNATIONAL LABOUR ORGANISATION (ILO)

 

 

 

1. Context

By addressing labour market shortages in host nations and contributing remittances to home countries, International Migrants (IM) continue to make contributions to world economic growth, the fourth edition of ‘Global Estimates on International Migrant Workers’, released by the International Labour Organization (ILO), said

 

2. What is the International Labour Organisation (ILO)?

 

• The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is one of the first and oldest specialised agencies of the UN
• The ILO has 187 member states: 186 out of 193 UN member states plus the Cook Islands. It is headquartered in Geneva, Switzerland, with around 40 field offices around the world, and employs some 3,381 staff across 107 nations, of whom 1,698 work in technical cooperation programmes and project
• Unlike other United Nations specialized agencies, the International Labour Organization (ILO) has a tripartite governing structure that brings together governments, employers, and workers of 187 member States, to set labour standards, develop policies and devise programmes promoting decent work for all women and men.
• The structure is intended to ensure the views of all three groups are reflected in ILO labour standards, policies, and programmes, though governments have twice as many representatives as the other two groups

 

3. What is the History behind the Establishment?

 

The establishment of the International Labour Organisation (ILO) in 1919 is rooted in the historical context of the early 20th century, marked by significant social, economic, and political changes.

 

Here is a detailed overview of the history behind its establishment:

• The late 18th and 19th centuries saw the rise of the Industrial Revolution, which brought about profound changes in the nature of work. While industrialization led to economic growth, it also resulted in poor working conditions, long hours, child labor, and inadequate wages for workers. The social consequences of these changes highlighted the need for labor reform.
• By the late 19th century, labor movements and social reformers across Europe and North America were advocating for better working conditions, workers' rights, and social justice. These movements were influential in shaping public opinion and policy towards labor issues.
•  Before the ILO's establishment, there were several international congresses and conferences focused on labor issues. For instance, the International Association for Labour Legislation was founded in 1900, aiming to harmonize labor laws across countries. These early efforts demonstrated a growing recognition of the need for international cooperation on labor standards.
• The First World War (1914-1918) had devastating social and economic effects, exacerbating labor issues and highlighting the interconnectedness of nations. The war underscored the importance of international cooperation in promoting peace and social stability.
• Following the end of World War I, the Versailles Peace Conference was convened in 1919 to negotiate the terms of peace and to address the causes of conflict. One of the key issues recognized was the need for improved labor conditions to ensure lasting peace.

• Treaty of Versailles: The ILO was established as part of the Treaty of Versailles, which formally ended World War I. The inclusion of labor provisions in the treaty reflected the recognition that social justice and decent working conditions were essential for international peace and stability.

• Founding Principles: The ILO's Constitution, included in the Treaty of Versailles, was based on the belief that universal peace can only be established if it is based on social justice. It set forth several key principles:

  • Labor should not be regarded merely as a commodity or article of commerce.
  • The right to association and the right to collective bargaining should be recognized.
  • Working conditions should be humane, ensuring adequate living wages, reasonable hours, and protection against sickness, disease, and injury.
  • Special protection should be afforded to children, young persons, and women.

4. What is the Organisational Structure of ILO?

 

The International Labour Organisation (ILO) has a distinctive organizational structure designed to ensure representation and participation from governments, employers, and workers. This tripartite structure is central to its functioning and decision-making processes. Here's a detailed overview of the ILO's organizational structure:

International Labour Conference (ILC)

• Role: The ILC is the ILO's supreme decision-making body, often referred to as the "world parliament of labour."
• Functions: It meets annually to set the broad policies of the ILO, adopt international labor standards (Conventions and Recommendations), and approve the ILO's work program and budget.
• Composition: The ILC is composed of representatives from each member state, with a tripartite delegation:
  • Government Delegates: Two representatives per member state.
  • Employer Delegates: One representative per member state.
  • Worker Delegates: One representative per member state.

5. What are the Functions of the ILO?

 

The International Labour Organisation (ILO) performs a wide range of functions aimed at promoting social justice and internationally recognized human and labour rights.

 

Here are the key functions of the ILO:

• The ILO develops and adopts international labour standards in the form of Conventions and Recommendations. These standards cover a wide array of labour issues, including workers' rights, working conditions, social protection, and occupational safety and health.
• Member states can ratify these Conventions, committing themselves to adhere to the standards. The ILO monitors compliance and provides guidance on implementation.
• The ILO promotes fundamental principles and rights at work, such as freedom of association, the right to collective bargaining, the elimination of forced and child labour, and the elimination of discrimination in employment.
• It provides technical assistance to countries to help them create and enforce laws and policies that uphold these rights.
• The ILO supports initiatives aimed at creating more and better jobs, especially for vulnerable groups such as youth, women, and persons with disabilities
• It promotes vocational training and skills development to enhance employability and adaptability in the labor market
• Encourages entrepreneurship and the development of small and medium-sized enterprises (SMEs) as a means to generate employment.

6.What are the Core Conventions of the ILO?

 

The International Labour Organisation (ILO) has identified eight Conventions as "fundamental" or "core" Conventions. These Conventions cover fundamental principles and rights at work and are considered crucial for ensuring decent work and social justice. The ILO's core Conventions are:

Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87)

• Adoption: 1948
• Purpose: Protects the right of workers and employers to form and join organizations of their own choosing without prior authorization.
• Key Provisions: Ensures that workers and employers can organize freely and prohibits interference by public authorities.

2Right to Organise and Collective Bargaining Convention, 1949 (No. 98)

• Adoption: 1949
• Purpose: Provides protection against anti-union discrimination and promotes collective bargaining.
• Key Provisions: Protects workers from dismissal or prejudice due to union membership and activities, and promotes voluntary negotiation between employers and workers' organizations.

Forced Labour Convention, 1930 (No. 29)

• Adoption: 1930
• Purpose: Aims to suppress the use of forced or compulsory labor in all its forms.
• Key Provisions: Requires the abolition of all forms of forced or compulsory labor, with exceptions for military service, normal civic obligations, and certain emergencies.

Abolition of Forced Labour Convention, 1957 (No. 105)

• Adoption: 1957
• Purpose: Complements Convention No. 29 by prohibiting the use of any form of forced labor as a means of political coercion, labor discipline, punishment for participation in strikes, or discrimination.
• Key Provisions: Mandates the elimination of forced labor for political purposes, economic development, labor discipline, punishment for strikes, and racial, social, national, or religious discrimination.

Minimum Age Convention, 1973 (No. 138)

• Adoption: 1973
• Purpose: Establishes a minimum age for admission to employment to ensure that children are not employed in work that is harmful to their health or development.
• Key Provisions: Sets the general minimum age for employment at not less than the age of completion of compulsory schooling and, in any case, not less than 15 years (13 for light work, 18 for hazardous work).

Worst Forms of Child Labour Convention, 1999 (No. 182)

• Adoption: 1999
• Purpose: Urges immediate and effective measures to prohibit and eliminate the worst forms of child labor.
• Key Provisions: Defines the worst forms of child labor, including slavery, trafficking, forced labor, prostitution, and involvement in armed conflict. Calls for urgent action to eliminate these practices.

Equal Remuneration Convention, 1951 (No. 100)

• Adoption: 1951
• Purpose: Promotes equal remuneration for men and women workers for work of equal value.
• Key Provisions: Mandates the principle of equal pay for equal work, requiring member states to ensure that wage discrimination based on sex is eliminated.

Discrimination (Employment and Occupation) Convention, 1958 (No. 111)

• Adoption: 1958
• Purpose: Aims to eliminate discrimination in employment and occupation.
• Key Provisions: Prohibits discrimination on the basis of race, color, sex, religion, political opinion, national extraction, or social origin, and promotes equal opportunity and treatment in employment.

 

 

For Prelims: GS III- Economy, ILO For Mains: GS-III: Economy

 

Source: Indianexpress

 

RESERVE BANK OF INDIA (RBI)

 

 

 

1. Context

 

In what appears to be a shift in strategy, the Reserve Bank of India (RBI) has seemingly relaxed its control over the rupee, allowing it to depreciate against the US dollar over the past month

 

 

2. Establishment of the Reserve Bank of India

• The Reserve Bank of India (RBI) was established on April 1, 1935, when it was established by the Reserve Bank of India Act of 1934.
• Initially based in Calcutta, it serves as the apex monetary authority, regulator, and supervisor of India's financial system, exercising control over monetary policy, managing foreign exchanges, and overseeing payment and settlement systems.
• The establishment of the RBI was influenced by Dr. B.R. Ambedkar's seminal work, "The Problem of the Rupee – Its Origin and its Solution," and was founded based on the recommendations of the Hilton Young Commission in 1926.
• Beyond its regulatory functions, the RBI also plays a developmental role, acts as the issuer of currency, and functions as the banker to the Government of India.

The significant events in the history of the Reserve Bank of India

• The British government enacted the Reserve Bank of India Act in 1934, laying the foundation for the central bank's establishment.
• On April 1st 1935, the Reserve Bank of India commenced operations in Calcutta.
• In 1937 The RBI's headquarters were permanently relocated to Mumbai, where it continues to be situated.
• 1949 Following India's independence, the RBI underwent nationalization, transitioning from private ownership to being held by the Government of India. Before this, the bank had private stakeholders.

 

3. The preamble of the RBI

The preamble of the Reserve Bank of India (RBI) outlines the fundamental objectives and functions of the central bank. The preamble of the RBI Act 1934 states

"An Act to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves to secure monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

This preamble highlights the key roles and responsibilities of the RBI, which include:

• The RBI is responsible for regulating the issuance of currency notes in India. It ensures the stability and integrity of the currency system.
• The RBI is mandated to maintain adequate reserves to support monetary stability. This includes managing foreign exchange reserves and gold reserves.
• One of the primary objectives of the RBI is to secure monetary stability in India. This involves controlling inflation, managing interest rates, and promoting economic stability.
• The RBI operates and oversees the currency and credit system of the country. It plays a crucial role in managing liquidity, credit flow, and overall financial stability.

 

4. The objectives of RBI

The objectives of the Reserve Bank of India (RBI) encompass a range of crucial functions aimed at ensuring the stability, growth, and integrity of India's financial and economic systems. These objectives include

• The RBI is tasked with overseeing and regulating the nation's currency and credit system to ensure smooth financial operations and effective credit flow throughout the economy.
• One of the primary goals of the RBI is to safeguard monetary stability in India by managing reserves effectively and implementing policies that control inflation and stabilize the value of the currency.
• The RBI holds the responsibility of issuing banknotes, maintaining their quality, and managing their circulation across the country to facilitate efficient financial transactions.
• The RBI works diligently to maintain financial stability by engaging in prudent activities and insulating itself from undue political influences. This independence allows it to make decisions based on economic considerations rather than political pressures.
• Through its policies and interventions, the RBI aims to support economic growth and contribute to the planned advancement of the country's economy, fostering a conducive environment for sustainable development.
• The RBI acts as the banker to commercial banks, providing them with essential services such as clearing and settlement. It also serves as the banker to the government, managing its accounts, facilitating transactions, and helping in debt management. Additionally, it serves as the primary authority for issuing currency notes, ensuring the smooth functioning of the monetary system.

 

5. The Structure of RBI

The structure of the Reserve Bank of India consists of various components that work together to fulfil the central bank's functions and responsibilities.

Central Board of Directors

• The Central Board of Directors is the supreme decision-making body of the RBI.
• It comprises official directors, including the Governor, Deputy Governors, and other senior officials, as well as non-official directors appointed by the Government of India.
• The Central Board oversees the overall functioning of the RBI, including formulating policies, supervising operations, and managing key functions.

Governor

• The Governor is the highest-ranking official in the RBI and is appointed by the Government of India.
• The Governor plays a crucial role in setting monetary policy, representing the RBI in various forums, and managing the day-to-day operations of the central bank.
• The Governor chairs meetings of the Central Board and is responsible for executing RBI's policies and decisions.

Deputy Governors

• The RBI typically has four Deputy Governors, each responsible for specific areas such as monetary policy, banking regulation, currency management, and internal operations.
• Deputy Governors assist the Governor in policy formulation, decision-making, and overseeing key functions of the RBI.

Departments and Wings

The RBI operates through various departments and wings, each focusing on specific functions and responsibilities. Some of the major departments include

• Monetary Policy Department Formulates and implements monetary policies, manages interest rates and monitors economic indicators.
• Department of Banking Regulation Regulates and supervises banks and financial institutions, enforces prudential norms, and ensures financial stability.
• Department of Currency Management Manages currency issuance, circulation, and coinage operations.
• Foreign Exchange Department Manages foreign exchange reserves, formulates exchange rate policies, and regulates foreign exchange transactions.
• Financial Stability Unit Monitors systemic risks, assesses financial stability, and coordinates efforts to maintain a stable financial system.
• Information Technology (IT) Department Manages IT infrastructure, digital banking initiatives, and cybersecurity measures.

These departments work in coordination to achieve the RBI's objectives related to monetary policy, financial regulation, currency management, and economic stability.

 

Regional Offices

• The RBI has regional offices located in major cities across India.
• These regional offices play a vital role in implementing RBI policies at the grassroots level, supervising regional banks, and addressing regional banking and financial issues.

Committees and Advisory Groups

• The RBI forms various committees and advisory groups to provide expert advice, conduct research, and make recommendations on specific areas such as monetary policy, financial inclusion, risk management, and regulatory reforms.
• Examples include the Monetary Policy Committee (MPC), Board for Financial Supervision (BFS), and Internal Working Groups (IWGs) on various policy matters.

Autonomous Boards and Subsidiaries

• The RBI also oversees autonomous boards and subsidiaries that focus on specialized functions such as regulation of non-banking financial companies (NBFCs), development finance, and financial inclusion.
• Examples include the National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB), and Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL).

 

6. Functions of the RBI

 

The Reserve Bank of India (RBI) performs a wide range of functions that are essential for the functioning of India's monetary and financial system. These functions can be broadly categorized into the following

Monetary Policy Formulation and Implementation

• The RBI formulates and implements monetary policy to achieve price stability and promote sustainable economic growth.
• It sets key policy rates such as the repo rate, reverse repo rate, and marginal standing facility (MSF) rate to influence liquidity conditions and interest rates in the economy.
• The RBI also conducts open market operations (OMOs) to manage liquidity in the financial system.

Currency Issuance and Management

• The RBI is responsible for issuing currency notes and coins in India. It ensures an adequate supply of currency to meet the demand for cash transactions.
• It manages the distribution, circulation, and withdrawal of currency to maintain its integrity and prevent counterfeiting.

Regulation and Supervision of Banks and Financial Institutions

• The RBI regulates and supervises banks, non-banking financial companies (NBFCs), payment banks, small finance banks, and other financial institutions.
• It sets prudential norms, capital adequacy requirements, and risk management guidelines to ensure the stability and soundness of the financial system.
• The RBI conducts regular inspections, audits, and surveillance to assess compliance with regulatory standards and address potential risks.

Foreign Exchange Management

• The RBI manages India's foreign exchange reserves to support external trade, maintain exchange rate stability, and meet international payment obligations.
• It formulates policies and regulations governing foreign exchange transactions, capital flows, and external borrowings.
• The RBI intervenes in the foreign exchange market to stabilize the rupee and prevent excessive volatility in the exchange rate.

Developmental Role

• The RBI plays a developmental role by promoting financial inclusion, expanding access to banking services, and fostering the development of the financial sector.
• It implements initiatives such as priority sector lending, microfinance, and financial literacy programs to address the needs of underserved segments of the population.
• The RBI also supports the development of financial infrastructure, including payment systems, credit information bureaus, and regulatory frameworks for emerging sectors such as fintech.

Regulation of Payment and Settlement Systems

• The RBI regulates and oversees payment and settlement systems in India to ensure efficiency, safety, and reliability in financial transactions.
• It operates and manages key payment systems such as the Real-Time Gross Settlement (RTGS) system, National Electronic Funds Transfer (NEFT), and Unified Payments Interface (UPI).
• The RBI sets standards, guidelines, and regulations for participants in payment systems and monitors their compliance to mitigate systemic risks.

Financial Stability and Systemic Risk Management

• The RBI monitors and assesses systemic risks in the financial system to maintain financial stability.
• It conducts stress tests, risk assessments, and scenario analyses to identify vulnerabilities and take preventive measures.
• The RBI collaborates with other regulatory authorities and participates in international forums to address global financial stability issues.

 

 

7. Acts Administered by the RBI

The Reserve Bank of India (RBI) administers several key acts and regulations that govern various aspects of the banking, financial, and monetary system in India.

• The Reserve Bank of India Act, 1934 establishes the RBI as India's central bank and outlines its functions, powers, and governance structure.
• Public Debt Act, 1944/Government Securities Act, 2006 regulate the issuance, management, and trading of government securities in India. They provide the legal framework for government borrowing and debt management.
• Government Securities Regulations, 2007 supplement the Government Securities Act, 2006, and provide detailed guidelines for the issuance, trading, and settlement of government securities.
• Banking Regulation Act, 1949 empowers the RBI to regulate and supervise banks and banking activities in India. It covers aspects such as licensing, operations, governance, and resolution of banking crises.
• Foreign Exchange Management Act, 1999 (FEMA) governs foreign exchange transactions, capital flows, and external trade-related payments. The RBI administers FEMA and issues regulations to manage India's foreign exchange reserves and control cross-border transactions.
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Chapter II) deals with the securitization and reconstruction of financial assets and enforcement of security interests by banks and financial institutions. The RBI oversees compliance with Chapter II of this act.
• Credit Information Companies (Regulation) Act, 2005 regulates credit information companies (CICs) that collect and disseminate credit-related information. The RBI supervises CICs and ensures compliance with data protection and consumer rights standards.
• Payment and Settlement Systems Act, 2007 provides the legal framework for regulating payment and settlement systems in India. The RBI administers and supervises payment systems to ensure their safety, efficiency, and reliability.
• Payment and Settlement Systems Regulations, 2008 regulations supplement the Payment and Settlement Systems Act, 2007, and provide detailed rules and procedures for payment system operators, participants, and settlement processes.
• Factoring Regulation Act, 2011 regulates and promotes factoring services, which involve the purchase and management of receivables or invoices. The RBI oversees compliance with the Factoring Regulation Act.

 

8. Initiatives taken by RBI

The Reserve Bank of India (RBI) undertakes various initiatives to promote financial stability, inclusion, and economic growth in India. 

Financial Inclusion

• The RBI encourages banks to provide microloans to small businesses and low-income individuals.
• Initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY) are supported to expand bank accounts and financial services in rural areas.
• The RBI simplifies regulations and promotes digital banking to make financial services more accessible.

Consumer Protection

• The RBI conducts awareness campaigns and provides resources to educate citizens about financial products and safe banking practices.
• The Integrated Ombudsman Scheme allows customers to file complaints against banks and financial institutions.
• The RBI sets guidelines for bank charges to ensure transparency and fairness for consumers.

Financial Regulation and Development

• The RBI uses monetary policy tools like interest rates to manage inflation and promote economic growth.
• Regular inspections and regulations ensure the smooth functioning and financial stability of banks.
• The RBI implements reforms to address emerging challenges and strengthen the financial system.

Digital Payments

• The RBI supports initiatives like UPI (Unified Payments Interface) to facilitate cashless transactions and financial inclusion.
• Guidelines and regulations are issued to enhance the security of digital banking platforms.
• The RBI encourages innovation in the digital payments space to improve efficiency and convenience.

Other Initiatives

• Financial Literacy Weeks-focused campaigns are organized to raise awareness on specific financial topics every year.
• The RBI takes steps to promote the development of a healthy and efficient financial market ecosystem.
• The RBI manages India's foreign exchange reserves to maintain a stable exchange rate.

 

9. Publications of RBI

The Reserve Bank of India (RBI) regularly publishes a wide range of reports, publications, and research papers covering various aspects of the economy, financial markets, banking sector, and monetary policy. 

• The RBI's Annual Report provides a comprehensive overview of the Indian economy, monetary policy developments, financial stability assessments, and the central bank's operations and initiatives throughout the year. It includes financial statements, policy reviews, and analysis of economic indicators.
• The RBI publishes bi-monthly Monetary Policy Reports, which contain detailed assessments of macroeconomic conditions, inflation projections, monetary policy decisions, and policy stance. These reports provide insights into the RBI's outlook and strategies for managing monetary policy.
• The Financial Stability Report (FSR) is published bi-annually by the RBI and assesses the overall stability of the financial system, including banking sector health, asset quality trends, risk assessments, and policy recommendations to mitigate systemic risks.
• The RBI releases various statistical publications, including the Handbook of Statistics on the Indian Economy, Monthly Bulletin, and Reports on Currency and Finance. These publications provide comprehensive data and analysis on key economic and financial indicators, monetary aggregates, and sectoral trends.
• The RBI publishes occasional papers, research studies, and working papers on topics related to monetary economics, financial markets, banking regulation, payment systems, and economic policy. These publications contribute to the central bank's research agenda and policy formulation.
• The RBI issues reports and guidelines on regulatory frameworks for banks, non-banking financial companies (NBFCs), payment systems, and other financial institutions. These include circulars, notifications, and reports on regulatory developments, prudential norms, and compliance requirements.
• The RBI Governor, Deputy Governors, and senior officials deliver speeches, addresses, and presentations at various forums, conferences, and seminars. These speeches provide insights into the RBI's policy priorities, perspectives on economic issues, and guidance on financial sector developments.
• The RBI conducts public awareness campaigns and educational initiatives to promote financial literacy, consumer protection, and awareness about banking services, digital payments, and financial products. These campaigns aim to empower individuals with knowledge and skills for informed financial decision-making.

 

10. The Way Forward

 

The RBI's future strategy should continue to prioritize financial stability, inclusive growth, technological advancements, regulatory effectiveness, and consumer welfare. Collaborative efforts with stakeholders across sectors and proactive measures in response to emerging trends and challenges will be key to achieving these objectives effectively.

 

 

For Prelims: RBI, Monetary Policy, Pradhan Mantri Jan Dhan Yojana, UPI For Mains:  1. The rise of digital payments has significantly transformed the financial landscape in India. Discuss the role of the RBI in facilitating and regulating digital payments. What are the key challenges associated with digital payments? (250 Words) 2. Analyse the relationship between the RBI and the Government of India. Discuss the importance of maintaining the central bank's independence for effective monetary policy implementation. (250 Words) 3. The RBI plays a crucial role in regulating and supervising banks and financial institutions. Explain the different functions performed by the RBI in ensuring financial stability. (250 Words)

 

 

Previous Year Questions   1. With reference to the Indian economy, consider the following statements: (UPSC 2022) 1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee. 2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness. 3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER. Which of the above statements are correct? A. 1 and 2 only     B. 2 and 3 only       C. 1 and 3 only        D. 1, 2 and 3     2. With reference to Indian economy, consider the following statements: (UPSC 2015) 1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct? (a) 1 only       (b) 2 only          (c) Both 1 and 2                (d) Neither 1 nor 2   3. Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization’? (UPSC 2023) (a) Conducting 'Open Market Operations' (b) Oversight of settlement and payment systems (c) Debt and cash management for the Central and State Governments (d) Regulating the functions of Non-banking Financial Institutions   4. In India, which one of the following is responsible for maintaining price stability by controlling inflation? (UPSC 2022) (a) Department of Consumer Affairs (b) Expenditure Management Commission (c) Financial Stability and Development Council (d) Reserve Bank of India    5. With reference to India, consider the following statements: (UPSC 2021) 1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in primary market. 2. The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India. 3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. Which of the statements given above is/are correct? (a) 1 only       (b) 1 and 2 only        (c) 3 only              (d) 2 and 3 only   6. Consider the following statements (UPSC 2021) 1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government. 2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in public interest. 3. The Governor of the RBI draws his power from the RBI Act. Which of the above statements are correct? (a) 1 and 2 only    (b) 2 and 3 only   (c) 1 and 3 only           (d) 1, 2 and 3 Answers: 1-C, 2-B 3-A, 4-A, 5-B, 6-C

 

Source: The Indian Express