Daily Current Affairs MCQ: 14th November 2024 - UPSC MCQ

To determine the correct answer, let's evaluate each statement based on the provided information:

1. Statement 1: D-SIBs are required to maintain a higher Common Equity Tier 1 (CET1) capital requirement than non-D-SIBs. This statement is correct. The RBI imposes additional CET1 capital requirements on D-SIBs to ensure they have a stronger capital base to absorb potential losses and maintain stability in the financial system.

2. Statement 2: The RBI's framework for D-SIBs mandates annual disclosures since 2015. This statement is correct. The RBI introduced the framework for managing D-SIBs in July 2014, and since 2015, there have been annual disclosures regarding their classification and requirements.

3. Statement 3: Only banks with a size exceeding 2% of GDP are considered for classification as D-SIBs. This statement is correct. The RBI uses a threshold of 2% of GDP to select banks for consideration as D-SIBs, ensuring only significantly large banks are evaluated for systemic importance.

Since all three statements are correct, the correct answer is Option D.

1. State Bank of India (SBI) - Too Big To Fail: Correct. SBI is classified as a Domestic Systemically Important Bank (D-SIB) by the RBI, which implies it is considered "Too Big To Fail" due to its significance in the Indian banking sector.

2. ICICI Bank - Global Systemically Important Bank (G-SIB): Incorrect. ICICI Bank is classified as a Domestic Systemically Important Bank (D-SIB), not a Global Systemically Important Bank (G-SIB). The classification of G-SIBs is separate and applies to banks with global significance.

3. HDFC Bank - Subject to additional CET1 capital requirements: Correct. As a D-SIB, HDFC Bank is subject to additional Common Equity Tier 1 (CET1) capital requirements to ensure higher resilience and stability.

4. RBI - Regulates D-SIB framework: Correct. The Reserve Bank of India (RBI) is responsible for the regulation and supervision of the D-SIB framework in India, establishing criteria and requirements for banks classified under this category.

Thus, three pairs are correctly matched.

Statement 1 is correct. Trade wars often lead to higher consumer prices because the tariffs imposed on imported goods increase their cost, which is usually passed on to consumers. This was evident during the US-China trade war when American consumers faced higher prices on goods such as electronics and household items.

Statement 2 is incorrect. While tariffs can provide temporary protection to domestic industries by reducing foreign competition, they do not always result in long-term benefits. In some cases, domestic industries might become less competitive globally due to the lack of innovation and efficiency that competition encourages. Moreover, retaliatory tariffs by other countries can harm these industries' export markets.

Statement 3 is correct. Trade wars can indeed disrupt global supply chains. For example, the US-China trade tensions impacted global tech and automotive industries as tariffs on critical components sourced from China caused delays and inefficiencies in production.

Thus, the correct answer is Option C: 1 and 3 Only.

The RBI imposes additional Common Equity Tier 1 (CET1) capital requirements on D-SIBs according to their bucket assignments. This additional capital requirement varies based on the bucket classification of the banks, ranging from 0.20% to 0.80% of their risk-weighted assets (RWAs). This measure is aimed at ensuring that D-SIBs maintain a higher level of capital reserves to mitigate systemic risks and enhance financial stability in the banking sector.

Let's evaluate each statement:

1. SBI is categorized in bucket 4 and is subject to the highest additional CET1 capital requirement of 0.80% of its risk-weighted assets.
- This statement is correct. According to the information provided, SBI is indeed placed in bucket 4 and has an additional CET1 requirement of 0.80% of its risk-weighted assets, which is the highest among the listed banks.

2. HDFC Bank, categorized in bucket 3, has an additional CET1 capital requirement of 0.60% of its risk-weighted assets.
- This statement is incorrect. HDFC Bank is indeed in bucket 3, but its additional CET1 capital requirement is 0.40%, not 0.60%.

3. ICICI Bank, placed in bucket 1, has the lowest additional CET1 capital requirement of 0.20% of its risk-weighted assets.
- This statement is correct. ICICI Bank is in bucket 1 and has the lowest CET1 capital requirement of 0.20%.

Thus, only statements 1 and 3 are correct, making the correct answer Option C: 1 and 3 Only.

1. India ranks sixth globally for patents with over half submitted by residents.
This statement is correct. According to the WIPI 2024, India is indeed sixth in the world for patent applications, with 55.2% of these filed by residents.

2. India ranks fourth globally for trademark filings with 90% made by residents.
This statement is correct. India ranks fourth in trademark filings, and nearly 90% of these are submitted by residents.

3. The top sector for industrial design filings is Health and Cosmetics.
This statement is incorrect. The top three sectors contributing to industrial design filings in India are Textiles and Accessories, Tools and Machines, and Health and Cosmetics, but Health and Cosmetics is not the leading sector.

4. The patent-to-GDP ratio improved from 144 to 381 over the past decade.
This statement is correct. The data shows an improvement in the patent-to-GDP ratio from 144 to 381, reflecting growth in IP activities alongside economic growth.

Thus, three pairs are correctly matched.

1. Exercise Sea Vigil - Conducts training primarily for the Indian Army.
This pair is incorrectly matched. Exercise Sea Vigil is a National Level Coastal Defence Exercise aimed at maritime security involving multiple agencies, including the Indian Navy, not primarily for the Indian Army.

2. Cardiovascular Kidney Metabolic Syndrome - Associated with obesity and diabetes.
This pair is correctly matched. Cardiovascular Kidney Metabolic Syndrome involves interconnections among obesity, diabetes, chronic kidney disease (CKD), and cardiovascular disease (CVD).

3. US Tariffs on Pharmaceuticals - Pose no threat to Indian exporters.
This pair is incorrectly matched. US tariffs on sectors like pharmaceuticals could harm Indian exporters, as highlighted in the potential impact on India from US trade policies.

4. World Trade Organization (WTO) Reforms - Suggested for sustainable growth by experts.
This pair is correctly matched. Experts suggest that India should support WTO reforms and a rules-based trade order to ensure sustainable growth.

Two pairs (2 and 4) are correctly matched.

Both statements are individually correct based on the information provided. Statement-I highlights India's global ranking for patents and the significant number of applications filed, mainly by residents. Statement-II mentions the exceptional growth rate in patent applications in 2023, showcasing a consistent positive trend over the years. However, Statement-II does not directly explain Statement-I but provides additional context about the growth rate, making both statements correct but not interdependent in their explanation.

1. Walking Pneumonia - Caused primarily by a virus: This is incorrectly matched. Walking pneumonia is primarily caused by the bacterium Mycoplasma pneumoniae, not a virus. While viruses can cause atypical pneumonia, the term "walking pneumonia" is most often associated with Mycoplasma.

2. Sukhna Lake - Located in the foothills of the Aravalli hills: This is incorrectly matched. Sukhna Lake is located in the foothills of the Shivalik hills, which are part of the Himalayan range, not the Aravalli hills.

3. Eco-Sensitive Zone - Area around Sukhna Wildlife Sanctuary: This is correctly matched. The Union Ministry of Environment, Forest and Climate Change has designated an area around the Sukhna Wildlife Sanctuary as an Eco-Sensitive Zone.

4. Sukhna Wildlife Sanctuary - Habitat for migratory Siberian cranes: This is correctly matched. Sukhna Wildlife Sanctuary serves as a habitat for various exotic migratory birds, including species like the Siberian duck and cranes during the winter months.

Thus, two pairs are correctly matched: pairs 3 and 4.

The designation of Domestic Systemically Important Banks (D-SIBs) by the RBI indicates that these banks are deeply integrated into the financial system. Being classified as D-SIBs signifies their importance in the banking sector and the economy as a whole. These banks are considered crucial for the stability of the financial system, and their failure could lead to significant economic turmoil and panic. As a result, they are subject to specific regulatory requirements aimed at mitigating systemic risks and addressing moral hazard issues.