Context:  Nepal and India to establish a sister city relationship between Janakpur and Ayodhya.

Historic Agreement: Janakpur and Ayodhya to Become Twin Cities

• In a program organised by the Chamber of India,  hosted by the Nepal Embassy, Janakpur Mayor expressed his desire to establish a sister city relationship between Janakpur and Ayodhya.
• In  2014, an agreement was signed between the two countries for the development of Janakpur and Ayodhya as twin cities.
• The Ministry of Road Transport and Highways announced the construction of “Ram Janaki Marg” to link Janakpur and Ayodhya for which the government of India allocated IRs. 2,000 crore in 2015

What is a Sister City?

• A sister city connection is an extensive, long-term collaboration between two towns in different nations. 
• Once the top elected official from each nation signs a declaration to become sister cities, a relationship is formally acknowledged. 
• Every sister city organization is autonomous and focuses on the significant themes and activities to them and their community, such as projects and exchanges in government, business, trade, education, and culture.

Janakpur- Ayodhya

• Birthplace:  Janakpur(capital of Mithila) is regarded as the birthplace of Goddess Sita while Ayodhya(capital of Koshal) is the birthplace of Lord Ram.
• Significance: 
  • Basis of Nepal- India ties: The marriage ties between Goddess Sita and Lord Ram in Janakpur during the Ramayana period is the foundation of the relationship in the present time too.
  • Holiest pilgrimage sites for Hindus.

Must Read: Punaura Dham Development Plan

News source: The Economic Times

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Context: France President Emanuel Macron will attend the 75th Republic Day celebration 2024 as a chief guest.

Republic Day Chief Guest Protocol

• Ceremonial honor for the head of state, considered the highest accorded by a country to another in terms of protocol.
• Chief Guest’s Itinerary: 
  • They are presented with a  ceremonial guard of honour at Rashtrapati Bhavan. 
  • They lay a wreath at Rajghat to honour Mahatma Gandhi. There is a banquet in their honour, a lunch hosted by the Prime Minister, followed by a reception hosted by the President of India in the evening. 
• Planing: 
  • Initiated six months in advance.
  • Involves coordination between the Government of India, relevant state governments, and the invitee country’s government.

Republic Day Chief Guest: Significance

• A tradition: The presence of a republic day chief guest annually has become an essential part of the event and the run-up to it.
• Symbolism: The presence of the heads of the governments of the 2 countries on the same platform reflects the friendship between the two peoples of the respective countries and is a marker for the ultimate sign of friendship
• Strengthening and accelerating of ties: Ministry of External Affairs rise to the occasion to strengthen ties with the country of the invitee in all the aspects of  Political, commercial, military and economic interests of India through the signing of various MoUs and agreements during the visit.
• Showcase India’s hospitality: Professional conduct of the ceremonies and the protocols  accorded to the guest reflects  India’s traditions, culture, and history and puts the global gaze on India.

India-France Relations: Bilateral, Strategic, Defence, Trade 

• Strategic Partnership: India and France will complete 25 years of strategic partnership relationship in 2023 with relations spanning across various domains, including defence, space, civil nuclear, blue economy, trade, investment, education, culture, and people-to-people ties.
• Significance of the India-France Relations: 
  • Defence: France is the second-largest defence supplier to India with 29% of its arms supplies.Examples:  French Scorpene submarines, Rafale fighter jets
    • Joint military exercises: Varuna, Garuda, and Shakti
  • Trade and commerce: France emerged as a key trading partner for India with annual trade volume reaching $12.42 billion in 2021-22, and France is the  11th largest foreign investor in India.
  • Indo-Pacific strategy:  France is the only EU state with territories in the Indo-Pacific and is part of three regional networks — the Indian Ocean Commission, the Indian Ocean Naval Symposium,  and the Indian Ocean Rim Association.

Continue Reading: India-France Relationship 

News source: The Indian Express

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Context: New species of bacteria discovered by Visva- Bharati researchers being named after Nobel Laureate Rabindranath Tagore as “Pantoea Tagorei”.

Pantoea Tagorei: New Species Of Bacteria 

• The research was conducted on soil samples from the  Jharia coal mines. 
• Published:  In the Indian Journal of Microbiology.
• It is for the first time that any living organism is named after Rabindranath Tagore.

About Pantoea Tagorei

• Analysis on the samples suggest discovery of  a new species of bacteria.
• Characteristics: The bacteria solubilizes potassium and phosphorus and replenishes nitrogen exhibiting properties of aiding in enhanced plant growth.
• Field analysis: The bacteria has been introduced  to farmers in and around the coal mines and they have  expressed satisfaction with the positive results.
• Application:
  •  A significant stride toward fostering environmentally friendly and sustainable  agricultural methods.
  • Can help revive degraded lands.
  • Promote organic farming.

Also Read: New Marine Amphipod Species Found In Chilika Lake

News Source: The Economic Times

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Context: The Indian Government has issued the benchmark prices for non-torrefied biomass pellets to ensure faster procurement of biomass pellets for co-firing with coal in thermal power plants.  

Fixed Benchmark Prices Boost Renewable Market Equity

• The benchmark prices have been fixed as Rs 2.32, Rs 2.27, and Rs 2.24 per 1000 kcal for the National Capital Region (NCR), Northern (excluding NCR) Region, and Western Region respectively.
• Impact: This will create a conducive environment for sustainable energy growth, and develop a sustainable supply chain and an equitable renewable market in the country.

What are Biomass Pellets?

• Biomass pellets are solid cylindrical sticks made from biomass like wood residue, that can burn and generate energy. 
• Raw Material for Bio-pellets
  • Agricultural Waste: crop stalk and straw material, rice husk,  coconut shell, sugarcane bagasse, etc.
  • Forestry Residue: sawmill residue, branches, bark, leaves, etc.
  • Solid Waste: junk paper, waste plastic, cardboard, etc.
• Types: 
  • Torrefied: Biomass processed at 250-350°C in the absence of oxygen. 
  • Non-torrefied pellets: biomass is shredded and sent to a pellet reactor, where it is compressed and bonded.
• Advantage: By compressing the waste products into pellets, they become more energy dense and have high combustion efficiency. 
  • Wood pellets have an energy density of 11 gigajoules/m3, compared to 3 gigajoules/m3 from fresh wood or wood chips (IRENA).
• Process to Manufacture: Biomass pellets are made at a pelletisation plant.
  • Pelletisation is the process where the raw materials are processed, converted to powder and then compressed into short solid dense biomass pellets. 
• Clean Energy: Biomass pellets produce 80% less CO2 emissions when combusted than coal, as well as lower levels of sulphur, chlorine, nitrogen.

Biomass Co-firing

• About: Biomass co-firing is the practice of replacing a portion of the coal with biomass at coal thermal plants.
  • For co-firing, the existing coal power plant equipment has to be partly reconstructed and retrofitted.
• Advantages: 
  • It is an option to convert biomass into clean electricity, 
  • It also reduces Greenhouse Gas emissions of the power plant.
  • It can also be an effective solution to pollution due to the open burning of crop residue. 

Other Steps taken by the government for Renewable Energy:  

• Waiver of Inter-State Transmission (ISTS) charges to promote the addition of renewable energy capacity in the country.   
• Any new coal/lignite-based thermal generating station must establish renewable energy generating capacity equivalent to 40% of its thermal capacity. 
• The government has introduced the Real-Time Market (RTM), Green Term Ahead Market (GTAM), and Green Day Ahead Market (GDAM) to promote competition and deepen the electricity markets.

Must Read: Renewable Energy Intermittency

Source: PIB

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Context: India has voted in favour of another resolution at the UN General Assembly this week that backs the right of the Palestinian people to self determination.

India Voted for Palestinian Right to Self Determination

• Resolution: At a session of UNGA the Assembly adopted a resolution on the right of the Palestinian people to self-determination (document A/78/479). 
• Voting: In the recorded vote of 172 in favor to 4 against (Israel, Micronesia, Nauru, and the United States), with 10 abstentions (Cameroon, Guatemala, Kiribati, Palau, Papua New Guinea, Paraguay, South Sudan, Togo, Tonga, and Tuvalu), India voted in support. 
  • While the resolution is non-binding, it serves as an indicator of global opinion.
  • While the UNGA does not have the power to enforce its resolutions as the UNSC does,
• Objective: The resolution was about the Right to self-determination and stressed the urgency of ending the Israeli occupation to achieve a lasting peace settlement 
  • Right to Self Determination is a basic right of people to determine their own future, political status, and independence, without any external duress, compulsion or coercion.  
• India’s Voting Trend: 
  • One week ago, for the first time, India voted in favor of a UNGA draft resolution that demanded an immediate humanitarian ceasefire in the Israel-Hamas conflict as well as the unconditional release of all hostages.
  • India had abstained from voting in all previous UNGA resolutions that had called for an immediate ceasefire. 
  • India’s voting pattern at the UN since last week has been able to balance the relations with the Arab world, which felt that India has tilted more towards Israel.
• Indian Ideology: India has been maintaining for a long that no durable peace is possible in the region without a two-state solution.

Also Read: Understanding The Israel Palestine Conflict

What is the United Nations General Assembly (UNGA)?

• UNGA is one of the principal six organs of the UN organization. 
• Nature: The General Assembly is the primary deliberative and policymaking body of the UN, representing all 193 member states.
• Objective: It addresses various global issues, from development goals to budgetary matters, and offers a platform for diplomatic discussions and resolutions.
  • It elects the non-permanent members of the Security Council and approves the UN Budget.
• Vote: It is the only organ of the UN in which all 193 members of the United Nations have an equal vote.

Source: Economic Times

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Context: External affairs ministry has announced that India extended 308 lines of credit to partner countries amounting to $32.02 billion over the years as part of its development assistance programme. 

More on News: 

• Breakdown of the credit : 
• • About $17.06 billion to Asian countries 
  • $12.15 billion to African countries 
  • $2.81 billion to other countries
• Mechanism: Development assistance (concessional LOCs) is extended under the Indian Development and Economic Assistance Scheme (IDEAS) through the Exim Bank of India.
  • EXIM Bank was established in 1982 as a specialized financial institution to finance, facilitate and promote India’s international trade.
• Nature of Projects: About 600 projects including infrastructure, power, connectivity, agriculture, education and health 
• Neighbourhood First Policy: The LoC are concentrated primarily in India’s neighborhood in Afghanistan, Bangladesh, Maldives, Myanmar, Nepal, Sri Lanka and Bhutan.
  • Prominent examples– Parliament building in Afghanistan, Supreme Court Building in Maldives etc. 
  • Bangladesh has received the largest concessional credit given by India to any single country. 
• Global South: India provides capacity building assistance under the Indian Technical and Economic Cooperation Programme (ITEC) to partners in the global south.
  • Africa: The previous Pan Africa e-Network Project, has been replaced by e-VidyaBharati and e-AarogyaBharati Network Project, for  tele-education and tele-medicine services.
• International Collaboration: India also works with international organizations (UNDP, ASEAN, etc.) to finance joint projects and capacity building programmes. 

What is ITEC: 

• ITEC or Indian Technical and Economic Cooperation Programme is a bilateral assistance programme, established in 1964, to meet the needs of developing countries, through technological cooperation.
• ITEC is administered by the Ministry of External Affairs.
• India recently announced the Sagar Amrut scholarship for Pacific Island Countries under ITEC. 

What is Line of Credit: 

• Definition: A line of credit (LOC) is a borrowing limit that can be used whenever needed. As money is repaid, it can be borrowed again in the case of an open line of credit.
• Examples: 
  • Recently, India extended a $250 million line of credit for Kenya to modernize farming. 
  • Reconstruction of Sri Lankan Railways after the civil war has been done primarily through Indian LOCs

Source: Economic Times

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Context: Kempegowda International Airport (KIA) Terminal 2, Bengaluru wins the UNESCO’s 2023 Prix Versailles award.

Kempegowda International Airport Terminal 2 Wins UNESCO’s 2023 Prix Versailles

• T2 of KIA is awarded with the world’s special prize for interiors at UNESCO’s  Prix Versailles award.
• The World Judges Panel for the Prix Versailles 2023 is  chaired by Elie Saab,  a famous fashion designer.

About Prix Versailles

• The Prix Versailles awards were first conceptualized in 2015 and are presented by UNESCO  annually to honour the best achievements in the field of architecture and designs worldwide.
• Purpose: It seeks to promote architectural production as a cultural driver for intelligent sustainable development and focuses on acknowledging innovation and creativity along with a reflection of local heritage in the designs to promote ecological efficiency and values of social interaction.

Terminal 2 or T2 of KIA

• About: Recently inaugurated in 2022, T2 is also known as  Terminal in a Garden and is now recognized as one of the world’s most beautiful airport terminals.
• Area: built over an area of 255,661 square meters
• Foundational pillars: The airport’s conceptualization is visioned on 4 pillars of,
  • Technological leadership: Embraced in engineered bamboo, the terminal’s interiors offer a blend of functionality with aesthetic appeal.
  • Terminal in a garden:  The terminal’s niche is that it features a spacious indoor garden with rammed-earth walls and waterfalls, as well as hanging planted bells appearing as a garden.
  •  Environmental and ecological stewardship: T2 has the distinction of becoming the world’s largest terminal pre-certified with a Platinum LEED rating by the US Green Building Council before the formal commencement of the airport and also garnered the  Platinum certification under the IGBC Green New Building rating system.
  • Celebration of Karnataka’s rich heritage and culture: As a part of BIAL’s Art Programme T2 possesses interiors that have an insightfully curated art and décor elements which showcase Karnataka’s culture and heritage.

News source: The Hindu

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Context: Every year, on December 22nd, the birth anniversary of legendary mathematician Srinivasa Ramanujan (1887-1920), is celebrated as National Mathematics Day.

• In 2012, then Prime Minister Manmohan Singh declared December 22 as National Mathematics Day in honor of the great man.

About Srinivasa Ramanujan

• Birth: He was born on 22nd December, 1887 in the town of Erode in Madras Presidency (now Tamil Nadu), to a Brahmin Iyengar family.
• Excelled in Mathematical Aptitude: By the age of 14, he was completing mathematics examinations in half the allotted time, and exploring complex topics way beyond the capability of an average 14-year old.

Srinivasa Ramanujan: A Chronology of his Achievements

• In 1904: After finishing secondary school, he received a scholarship at the Government Arts College, Kumbakonam. 
• By 1910: He was gaining popularity in Madras’ mathematical circles. 
• In 1911: He published the first of his papers in the Journal of the Indian Mathematical Society. 
• In 1912: V Ramaswamy Iyer, founder of the Indian Mathematical Society, helped him get a clerical position at the Madras Port Trust. 
• In 1913: Impressed with his’s theorems and work related to infinite series, the Cambridge-based GH Hardy called him to London.
• In 1914: He traveled to England and with Hardy’s help, got enrolled in Trinity College, Cambridge, where Hardy tutored him and collaborated with him in some research.
• In 1917: He was elected to be a member of the London Mathematical Society. 
• In 1918: He was elected to the prestigious Royal Society for his research on Elliptic Functions and theory of numbers, becoming one of the youngest to ever achieve the feat.
  • He was also the first Indian to be elected a Fellow of the Trinity College.

Ramanujan: His Major Contributions to Mathematics

• Infinite Series for pi: In 1914, Ramanujan found a formula for infinite series for pi. Finding an accurate approximation of π (pi) has been one of the most important challenges in the history of mathematics.
• Game Theory: His contribution to game theory is purely based on intuition and natural talent and is unmatched to this day.
• Mock Theta Function: He elaborated on the mock theta function, a concept in the field of modular forms of mathematics.
• Ramanujan Number: 1729 is known as the Ramanujan number which is the sum of the cubes of two numbers 10 and 9.
• Circle Method: Ramanujan, along with GH Hardy, invented the circle method which gave the first approximations of the partition of numbers beyond 200. 
  • This method contributed significantly to solving the notorious complex problems of the 20th century, such as Waring’s conjecture and other additional questions.
• Theta Function: It is a special function of several complex variables. 
  • German mathematician Carl Gustav Jacob Jacobi invented several closely related theta functions known as Jacobi theta functions. 
  • Theta function was studied extensively by Ramanujan who came up with the Ramanujan theta function, which is used to determine the critical dimensions in Bosonic string theory, superstring theory, and M-theory.
• His Significant Contributions: Mathematical fields such as complex analysis, number theory, infinite series, continued fractions, Riemann series, elliptic integrals, hypergeometric series, and the functional equations of the zeta function.
  • He discovered his own theorems and independently compiled 3,900 results.

His Later Stage

• In 1919: Ramanujan returned to India from England. 
  • He spent his last year producing some of his most profound mathematics. 
• In 1920: At just 32 years of age, he breathed his last owing to deteriorating health. 
  • After his death, Ramanujan left behind three notebooks and some pages containing unpublished results, on which mathematicians continued to work for many years.

News Source: The Indian Express

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Context: Recently, the Lok Sabha passed the Press and Registration of Periodicals Bill 2023, which has already been passed by Rajya Sabha in the previous session. 

• It repealed the colonial era law of the Press and Registration of Books Act 1867.

Key Features of the Press and Registration of Periodicals Bill 2023

• No Requirement of Physical Interface on Grant of Title Allotment and Certificate of Registration Periodicals: It provides a simple online mechanism to apply for title verification and grant of certificate of registration by the Press Registrar General.
  • Significance: It would enable the PRG to fast-track the process. 
• Limited Role of Local Authorities/District Magistrate (DM): Publishers and Printing Presses are not required to furnish any declaration or its authentication before the local authority.
  • Need for Online Intimation: Printing Presses need to furnish an online intimation only to the Press Registrar General (PRG) and the local authority.
  • Time Framework on receipt of Application: The DM is expected to provide its comments/NOC to the PRG within 60 days. Thereafter, the PRG will take the decision to grant registration.
• Ban on Periodicals: A person who has been convicted by any court for an offense involving a terrorist act or unlawful activity, or having done anything against the security of the State shall not be permitted to bring out a periodical.
• On Facsimile/Reprint Edition of a Foreign Periodical: Its printing would require a prior approval of the Central Government and its registration with the Press Registrar General.
• A Credible Appellate Board: The Bill has been provided a credible appellate mechanism, which would be headed by the Chairperson, Press Council of India.  

How the Press and Registration of Periodicals Bill 2023 differs from the Press and Registration of Books Act 1867?

• On Administration: Books which were part of the PRB Act 1867 have been taken away as books as a subject are administered by the Ministry of HRD/Education.
• Online Facility: Now only an online intimation has to be filed by the Printing presses before the PRG and the DM unlike earlier to file any declaration before the DM. 
• On Punishment: The PRB Act 1867 which had severe penalties leading to conviction and imprisonment of up to 6 months for various violations of the Act. However, the 2023 Bill provides punishment of jail up to six months only in extreme cases.
  • For Example: If a periodical is published without a Certificate of Registration and the publisher continues the printing of such publication even after six months of direction has been issued to that effect by the PRG.
  • For certain violations, financial penalties have been proposed instead of conviction as earlier. On 
• Power to Suspend/Cancel the Certificate of Registration: In the 1867 Act, only the DM could cancel the declaration of a periodical, but the new Bill empowers the PRG to suspend/cancel the Certificate of Registration.

Must Read: The Lok Sabha Passed The Post Office Bill 2023

News Source: PIB

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Context: The Ministry of Youth Affairs & Sports announced the National Sports Awards 2023.

More on News:

• The awardees will receive their awards from the President of India at a specially organized function at Rashtrapati Bhavan.

National Sports Awards 2023 Winners List

• These are given every year to recognize and reward excellence in sports. 
• Allocation: Awards are allocated annually by India’s Ministry of Youth Affairs and Sports. Nominated sportspersons receive their awards from the President of India at the Presidential Palace. 
• Categories of Awards: Considered the pinnacle of sporting honours in India, the National Sports Awards are a collection of six different awards given out to sportspersons, coaches or organisations for their achievements and contribution towards the growth of Indian sports. 
• Major Dhyan Chand Khel Ratna Award 2023: It is given for the spectacular and most outstanding performance in the field of sports by a sportsperson over the period of the previous four years.
  • Shri Chirag Chandrashekhar Shetty and Shri Rankireddy Satwik Sai Raj are selected for 2023.

• Arjuna Awards 2023: It is given for good performance over a period of the previous four years and for showing qualities of leadership, sportsmanship and a sense of discipline.
  • Shri Mohammed Shami for Cricket, Ms Diksha Dagar for Golf etc. are selected for 2023.
• Dronacharya Award 2023: It is given to coaches for doing outstanding and meritorious work on a consistent basis and for enabling sportspersons to excel in International events, in two categories:
  • Dronacharya Award (regular category) for outstanding coaches: Shri Lalit Kumar for Wrestling, Shri R. B. Ramesh for Chess, and Shri Mahaveer Prasad Saini for Para Athletics etc. are selected for 2023.

• Dronacharya Award 2023 (lifetime category) for outstanding coaches: Shri Jaskirat Singh Grewal for Golf and Shri Bhaskaran E for Kabaddi etc. are selected for 2023.
• Dhyan Chand Award 2023 for lifetime achievement in Sports and Game: It is given to honour sportspersons who have contributed to sports by their performance and who continue to contribute to the promotion of sports events after their retirement. Shri Vineet Kumar Sharma for Hockey and Ms Kavitha Selvaraj for Kabaddi are selected for 2023.
• Maulana Abul Kalam Azad Trophy 2023: It is given to honour the overall top performing university in inter-university tournaments.Guru Nanak Dev University, Amritsar as Overall winner university, and Lovely Professional University, Punjab as 1st runner up University are selected for 2023.
• Rashtriya Khel Protsahan Puruskar (National Sports Incentive Award): Awarded to organisations and individuals for playing a role in the area of sports promotion and development over the last three years.

News Source: PIB

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Context: The International Organisation for Migration (IOM) launched Project PRAYAS (Promoting Regular & Assisted Migration for Youth and Skilled Professionals).

About Project PRAYAS

• The Project Prayas is a joint collaboration between the IOM India and the Indian Council of World Affairs (ICWA)
• Project Goal: To facilitate safe, orderly, and regular migration for Indian workers and students.
  • It will strengthen international migration governance.
  • Status of Indian Diaspora Worldwide: More than 32 million Indians and people of Indian origin residing abroad.
• Improved Coordination: The Project Prayas envisages the development of a roadmap for improved coordination between Central and State Governments to encourage the sharing of best practices between States.
• Consolidation of Initiatives: It will consolidate all the state-level initiatives for safe, orderly, and well-managed international migration.
  •  It will lead to enhanced engagement with the MEA on matters related to the international migration cycle. 
• Alignment with SDG: Project Prayas with Goal 10.7 of the 2030 Agenda for Sustainable Development Goals (SDGs) to facilitate orderly, safe, regular, and responsible migration and mobility of people. 
• Adherence to GCM and MiGOF: The project also adheres to the objectives of the Global Compact for Safe, Orderly, and Regular Migration (GCM) and the Migration Governance Framework (MiGOF).

Must Read: International Migration Outlook 2023

News Source: Economic Times

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Context:  This article is based on the news “Why has the Indian government criticised the methodologies of global credit rating agencies?” which was published in the Indian Express. The Finance Ministry released a document titled “Re-examining Narratives: A Collection of Essays,” to present alternative perspectives on various aspects of economic policy.

Reforming Sovereign Credit Rating Process Need of the Hour

• Objective: The essay seeks to highlight concerns with the methodologies employed by the 3 main global credit rating agencies.
  •  It also tries to illustrate the adverse impact of these issues on India.
• Need to reform: The Chief Economic Adviser of the government emphasized on the need for credit rating agencies (CRA) to reform their sovereign rating process. 
  • This reform is essential to accurately represent the default risk of developing economies.
• India’s Rating: India, currently holds the lowest investment grade and has witnessed substantial improvements in its economic metrics since the onset of the pandemic.
• Thus, any enhancements in macroeconomic indicators may have minimal impact on a credit rating if qualitative parameters are deemed to require improvement. 
• This holds significant consequences for the access of developing sovereigns to capital markets and their ability to borrow at reasonable rates.

About Credit Rating Agencies (CRAs)

• Credit Rating Agencies: They are rating agencies that assess the financial strength of companies and government entities, especially their ability to meet principal and interest payments on their debts.
• Functions of Credit Rating Agencies:
  • Credit rating agencies give investors information about bond and debt instrument issuers.
  • Agencies provide information about countries’ sovereign debt.
• 
  Credit Rating Agencies in India:  Currently there are seven registered Credit rating agencies in India viz. CRISIL, CARE. ICRA, SMREA, Brickwork rating, India rating, and research Pvt. Ltd. 
• Global Credit Rating Industry: It is highly concentrated, with three leading agencies viz. Moody’s, Standard & Poor’s, and Fitch.
• Different Credit Rating Scales:
  • Credit ratings use alphabetical symbols (AAA, AA, A, B, etc.) to assess the creditworthiness of corporate financial instruments. 
  • Higher ratings suggest a lower risk of default, with AAA being highly favourable, indicating strong financial capability. 
  • Ratings below BB are considered indicative of poor creditworthiness.

SEBI Regulations, 1999

• Regulation of Functioning: In India, the Securities and Exchange Board of India (SEBI) primarily regulates credit rating agencies and their functioning according to SEBI Regulations, 1999 of the SEBI Act, 1992. 
  • However, certain other regulatory agencies, such as the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority also regulate certain aspects of credit rating agencies under their respective sectoral jurisdiction.
• Disclosure-based Regulatory Regime: The SEBI (Credit Rating Agencies) Regulations, 1999 provide for a disclosure-based regulatory regime, where the agencies are required to disclose their rating criteria, methodology, default recognition policy, and guidelines on dealing with conflict of interest. 

Also Read: SEBI To Introduce T+0 Trading Settlement System, here.

Significance of Credit Rating Agencies

• Assessment of Creditworthiness: Sovereign credit rating agencies assess the creditworthiness of governments, serving as an indicator for global investors regarding the ability and willingness of governments to repay debt.
• Impact on Borrowing Capacity: Sovereign ratings impact a country’s capacity to borrow funds from international investors.
  • Governments with lower sovereign ratings have to pay higher interest rates when they borrow.
• Impact on Businesses: It is significant not only for the government but also for all businesses operating within a country. 
  • When a country’s government has a low sovereign rating, businesses in that country have to pay an increased interest rate when seeking loans from global investors.
  • A poor sovereign rating inhibits the ability of poor countries to borrow money from rich investors.

Issues with the methodologies used by the rating agencies

• Discrimination against Developing Nations: As per the government, these assessments discriminate against developing countries, where the banking sector is primarily run by the public sector. 
  • The evaluations overlook the welfare and development functions of public sector banks in a developing country.
• Lack of Transparency in Assigning Weights: The rating agencies do not transparently communicate the specified weights assigned to each parameter under consideration. 
  • Although Fitch provides numerical weights for each parameter, it explicitly mentions that these weights are intended solely for illustrative purposes.
  • The  opaqueness in credit rating methodologies makes it challenging to quantify the impact of qualitative factors on credit ratings.

• Non-Transparent Selection of Experts for Assessment: The experts consulted for rating assessments are generally chosen in a non-transparent manner.
• Over Reliance on Subjective Assessments: Sovereign Risk Judgement by Fitch includes an excessive reliance on the World Bank’s Worldwide Governance Indicators (WGI); and the inclusion of Qualitative Overlay.
  • The overreliance on qualitative factors in credit rating methodologies gives rise to cascading effects and cognitive biases reflected in various studies raising concerns about the credibility of credit ratings.
    •  Over half the credit ratings are determined by the qualitative component.
• Dominance of Perceived Institutional Strength: The impact of composite governance indicators and perceived institutional strength outweighs the combined impact of other macroeconomic fundamentals in determining an upgrade for developing economies.
• One-size-fits-all Approach: Achieving a credit rating upgrade for developing economies requires progress along subjective indicators derived from a collection of one-size-fits-all perception-based surveys.

Other Challenges Faced by Credit Rating Agencies

• Excess Competition: Globally, the credit rating industry is controlled by three agencies commanding 95 percent of the business. 
  • They are Moody’s Investor Services (Indian ICRA’s parent), Standard and Poor’s (S&P, which owns the majority of Indian agency Crisil), and Fitch Group, whose Indian subsidiary is Ind-Ra or India Ratings and Research.
  • However, in India, there are a number of agencies competing with each other Ex- Brickwork, CARE, and SME Rating Agency of India. 
  • The competition between them has led to a decline in transparency and quality of product delivered.

• Communication of Fraudulent Data by Companies: Companies furnish fraudulent data to rating agencies due to which certain malpractices escape detection leading to the dissemination of inaccurate information.
  • Ex- Grant Thornton’s forensic audit report revealed that favors and gifts provided to rating agency officials resulted in favorable ratings provided to IL&FS group.
• Concerns with Issuer Pays Model: Under this, a company getting rated pays the Rating Agency: This incentivizes the agency to ignore debtor’s capacity to repay debt. 
  • It also leads to a ‘conflict of interest‘ resulting in compromising the quality of analysis or the objectivity of the ratings assigned by the agencies.

Way Forward

• Improving Transparency in Working of Rating Agencies: While the government is obligated to maintain complete transparency, achieving a set of obligations, rating agencies need to disclose their processes transparently and refrain from making indefensible judgments.
  • Credit Rating Agencies possess a comprehensive database of global best practices that they use to inform their evaluations. 
  • This knowledge should be shared with the countries they assess, enabling nations to take appropriate measures to enhance their creditworthiness.
• Regulatory Strengthening: The system needs to be revamped and a dedicated regulator needs to be established for rating agencies, especially with the current emphasis on revitalizing the corporate bond market.
  • The regulator can be a specialist division of RBI or SEBI as well as a third party can be involved for monitoring the rating and routing payments to the agencies. 
• Rotation of CRA: Under the current framework, there is no provision for the rotation of credit rating agencies.  
  • Mandatory rotation of rating agencies should be explored as it would aid in avoiding negative consequences of long-term associations between the issuer and the credit rating agency. 
• Strict Penalties: There should be penalties for those involved in giving wrong ratings to AAA’.
  • The highest rating has been given by agencies even a day before a company files for bankruptcy.
  •  Ex- The Securities and Exchange Board of India (SEBI) banned Rajesh Mokashi, the managing director of CARE Ratings Limited (CARE) for influencing the rating process for Dewan Housing Finance Limited (DHFL). 
    • It led to delays in the rating actions and was not disclosed to investors.
• Alternative Payment Models: SEBI, in consultation with RBI and credit rating agencies should determine the suitable rating fee structure payable by the issuer.
  • There is a necessity to ensure that the entity being rated does not pay the rating agency. 

Conclusion

The Indian government criticizes global credit rating agencies for biased methodologies, urging reforms and transparency to accurately assess developing economies and prevent conflicts of interest.

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Context:  Recently, the RBI Governor announced a proposal to establish data storage or Cloud Computing facilities for financial institutions in India. 

Cloud Computing Facilities for Financial Institutions: RBI

• RBI is working on establishing a cloud facility for the financial sector in India.
• Banks and financial entities are maintaining an ever-increasing volume of data with many of them utilizing various public and private cloud facilities for this purpose.
  • According to the RBI, cloud facilities for financial institutions will enhance data security and privacy.
• The proposed facility is expected to enhance the security, integrity, and privacy of financial sector data. 
• The cloud facility will be set up and initially operated by Indian Financial Technology & Allied Services (IFTAS), a wholly-owned subsidiary of RBI.

About Cloud Computing

• Cloud Computing: It is defined as the use of hosted services, such as data storage, servers, databases, networking, and software over the internet. 
  • It is on-demand access to computing resources via the internet, hosted at a remote data center managed by a cloud services provider (or CSP). 

• Cloud Computing Deployment Model: Cloud Computing doesn’t work on a one-size-fits-all policy. Depending on one’s requirements, it can be broken down into four categories:
  • Public Cloud: Third-party cloud service providers manage and own public clouds. Their servers and storage facilities are used by the general public and delivered online.
  • Private Cloud: Companies, universities, etc. can host clouds privately, either at an on-site data center or some other distant location. And the infrastructure accompanying the cloud is owned by the organization hiring the service.
  • Hybrid Cloud: Hybrid clouds combine public and private clouds and offer the best attributes of each. Data and applications are shared between them with the help of technology.
  • Multi-Cloud: Using the services of a multitude of cloud providers gives rise to a multi-cloud. In this, users can choose the features from each provider and put them together to make a customized cloud. 

Must Read: RBI’s Direction To Credit Information Companies

Significance of Cloud Computing

• Cost Management: Using cloud infrastructure can reduce capital costs, as organizations don’t have to spend on buying and maintaining equipment. 
  • Additionally, companies don’t need large IT teams to handle cloud data center operations because they can rely on the expertise of their cloud providers’ teams. 
• Data and Workload Mobility: Users can access information stored on the cloud from anywhere with any device with just an internet connection. End users can easily process, store, retrieve, and recover resources in the cloud. In addition, cloud vendors provide all the upgrades and updates automatically, saving time and effort.
  • For example, Zoom is a cloud-based software platform for video and audio conferencing that records meetings and saves them to the cloud, enabling users to access them anywhere and at any time. 
• Business Continuity and Disaster Recovery (BCDR): With cloud-based services, organizations can quickly recover their data in the event of emergencies, such as natural disasters or power outages. 
  • For example, users can save and access data on Google Docs and Microsoft 365 through the internet, ensuring business continuity and data safety.
• On-Demand Scalability: Cloud services provide the ability to scale resources up or down based on demand. This elasticity is particularly advantageous for businesses with fluctuating workloads.
  • For example, AWS Lambda enables developers to run back-end services without having to manage servers with the pay-as-you-go model.
• Environmental Impact: Cloud providers often operate highly efficient data centers, leading to energy savings compared to traditional on-premises infrastructure. Further, cloud computing promotes resource sharing, which can contribute to a more sustainable use of computing resources.

Challenges Associated with Cloud Computing

• Cloud Security: When relying on the cloud, organizations risk data breaches, hacking of APIs and interfaces, compromised credentials, and authentication issues. 
  • For instance, according to the Thales Cloud Security Study 2023, more than 35% of respondents in India have experienced a data breach in their cloud environment.

• Cost unpredictability: Cloud costs are also frequently interdependent, with one cloud service often utilizing one or more other cloud services, all of which can create additional unplanned cloud costs.
  • For instance, using pay-as-you-go subscription models along with scaling resources to accommodate fluctuating workload demands, can make it tough to define and predict final costs. 
• Lack of Capability and Expertise: With cloud-supporting technologies rapidly advancing, organizations are struggling to keep up with the growing demand for tools and employees with the proper skill sets and knowledge needed to architect, deploy, and manage workloads and data in a cloud.
  • For instance, according to Niti Aayog Advisor, 98% of organizations are using some form of cloud computing, up from 91% in 2020. However, with this increasing demand, there is a rising burden on the existing infrastructure of cloud service providers.
• Privacy Issues: Organizations often navigate through various data protection and privacy laws when storing and processing data in the cloud, due to which businesses may feel a loss of control over their data when it’s stored on third-party servers.
  • For instance, according to the Thales 2023 study, more sensitive data is moving to the cloud with 68% of businesses in India saying that more than 40% of data stored in the cloud is sensitive.
• Multi-Cloud Causing Operational Complexity: The adoption of multi-cloud continues to surge globally, with around 79% of organisations having more than one cloud provider. 44% of Indian organizations that responded to the Thales survey, expressed that managing data in the cloud is more complex than in on-premises environments. 

Way Forward 

• Integration with Edge Computing: There is a growing trend toward integrating edge computing with cloud services to enable processing closer to the source of data generation. 
  • Edge computing is a distributed computing framework that brings enterprise applications closer to data sources such as local edge servers. 
  • This is important for applications requiring low latency, such as Internet of Things (IoT) devices.
• Advanced Security Measures: Implementing zero-trust security architectures is gaining prominence to mitigate the evolving threat landscape. This involves continuous verification of user identity and device security.
  • The use of advanced encryption techniques and confidential computing can further help ensure the safety of financial institutions. 

• Artificial Intelligence (AI) and Machine Learning Integration: Offering more AI and machine learning services would make it easier for organizations to integrate advanced analytics and AI capabilities into their applications.
• Data Governance and Compliance: There is a need to enhance data governance as data privacy regulations become more stringent, to help organizations meet regulatory requirements.

Conclusion

The RBI’s initiative to establish cloud computing facilities for financial institutions in India presents opportunities for enhanced data security, but challenges such as competition, security risks, and operational complexities need to be addressed through advanced security measures, integration with edge computing, and a focus on data governance and compliance.

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