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Current Affairs 31st May 2023 for UPSC Prelims Exam

Current Affairs 31st May 2023 for UPSC Prelims Exam

Participatory Notes (P-Notes)

Context:  According to recent SEBI data, the value of Participatory notes (P-notes) investments in Indian markets — equity, debt, and hybrid securities — stood at Rs 95,911 crore at the end of April as compared to Rs 88,600 crore in March-end.

About Participatory Notes (P-notes)

  • P-Notes are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI).
    • Investors save time, money and scrutiny associated with direct registration.
  • P-Notes are among the group of investments considered to be Offshore Derivative Investments (ODIs).
  • Constituents: The P-Notes include investments in equity, derivatives, debt and other hybrid instruments.
    • Majority of the investments is in the equity space.
  • Issuer: P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly
    • They, however, need to go through a due diligence process.

Advantages of Participatory Notes

  • P-notes can be easily traded in foreign countries via endorsement and delivery.
  • They are well known as investors, and hedge funds can enter Indian markets anonymously and go about their operations.
  • Some individuals and entities are investing through P-notes so that they can benefit from tax laws in particular countries.
Participatory Notes
Participatory Notes

Current Affairs 30th May 2023 for UPSC Prelims Exam


Held-to-Maturity (HTM) Securities

Context:  According to Moody’s Investors Service, banks in Bangladesh, China, India, Mongolia, the Philippines, and Taiwan, hold sizable volumes of HTM (held to maturity) securities.

About Held-to-Maturity (HTM) Securities

  • Securities that are bought by businesses with the intent to hold them until maturity are known as Held-to-Maturity (HTM) securities. They differ from trading securities or securities open for sale as they are not held until maturity.
  • Debt instruments such as corporate or government Bonds typically make up the investments.
  • The most popular HTM investment types are bonds and other debt instruments.
    • They are bought to be held until the maturity period and have predetermined payment schedules and fixed dates of maturation.
  • Stocks aren’t considered HTM securities as they lack a maturity date.

Advantages of HTM Securities

  • Holding securities until maturity has very little risk. Returns are guaranteed if the bond issuer does not Default.
  • Since the returns on a bond are predetermined at the time of purchase, they are not sensitive to news events or Industry trends (i.e., the Face Value, coupon payments, and maturity date).
  • They are lower-Beta assets, allowing investors to diversify their Portfolio risks and plan their long-term investment portfolios.

Disadvantages of HTM Securities

  • Held-to-maturity securities impact the company’s liquidity.
  • Companies cannot rely on these assets to be sold if they need cash in the short term, as they commit to holding these securities till maturity.
  • As the returns on these securities are predetermined, there is also a limited upside potential while downside protection exists.
  • The company’s returns won’t increase if financial markets rise overall.


Beluga Whale

Context: Recently, Hvaldimir, the beluga whale, was spotted off the Swedish coast.

  • It was first spotted off the coast of Norway in 2019 wearing an alleged Russian spy camera.

About Beluga whale

  • Belugas are also called white whales, and their unusual colour makes them one of the most familiar and easily distinguishable of all the whales.
  • Belugas can produce a series of chirps, clicks, whistles and squeals, which give the beluga its other name, “the canary of the sea.”
  • They can grow up to 6 m long, and are related to dolphins.
  • Distribution: These whales are common in the Arctic Ocean’s coastal waters around Greenland, Norway and Russia, though they are found in subarctic waters as well.
    • Arctic belugas migrate southward in large herds when the sea freezes over.
    • They can also be found near river mouths, and sometimes even venture up river.
  • IUCN: Near Threatened.


Evergreening of Loans

Context: RBI Governor has raised red flags against innovative methods employed by banks for evergreening of loans.

What is Evergreening of Loans?

  • Evergreening of loans is a form of zombie lending that acts as a temporary fix for the bank. It prevents an account from turning into a non-performing asset (NPA), thus impacting their profitability.
    • Banks usually dress up bad loans and provide additional funds to companies who don’t have the capacity to repay.
    • Evergreening usually takes place due to the unholy relationship between bankers and borrowers.
  • Different methods adopted:
    • Bringing together two lenders to evergreen each other’s loans through sale and buyback of loans or debt instruments.
    • Persuading good borrowers to enter into structured deals with a stressed borrower to conceal the stress;
    • Adjust borrower’s repayment obligations by using internal or office accounts.
    • Disbursing new/additional loans to the stressed entities closer to the repayment date of the earlier loans.
  • Need for evergreening:
    • Evergreening of loan accounts is done to keep the reported NPA levels low. This was encouraged between 2000 and 2014 as a form of liberal restructuring.
    • In some cases, evergreening becomes a necessity to try save a borrower from becoming NPA by extending temporary liquidity.
  • Effects of evergreening:
    • Evergreening of loans leads to crowding-out effect where credit is being diverted to weak entities without creation of any assets.
    • Good borrowers will be excluded from credit for expanding their business.
  • Preventing evergreening:
    • Regular audit must be conducted by RBI to detect such cases.
    • Imposition of penalties through cancellations of unvested stock options.
    • Withdrawal of monetary bonuses of officers involved in evergreening.


Spear Phishing

Context: Spear phishing campaigns have been initiated by hackers, targeting specific individuals or groups.

What is Spear Phishing?

  • Spear-phishing is a method of attempting to steal sensitive information such as account credentials or financial information from a specific victim.
  • Modus operandi:
    • The attackers operate by obtaining personal details on the victim such as their friends, hometown, employer, locations they visit, and what they have recently bought online.
    • The attackers use this information to disguise themselves as a trustworthy friend or entity to acquire sensitive information, either through email or other online messaging.
How Spear Phishing works
How Spear Phishing works
  • Effectiveness:
    • Since spear-phishing attacks target a particular victim, and messages are modified to specifically address that victim, to disguise it as coming from a familiar entity and containing personal information.
    • Since personal information is contained in the emails, it is more difficult to identify spear-phishing attacks than to identify generalized phishing attacks.
  • Objectives of spear phishing:
    • Attackers try to obtain as much confidential information as possible to access different websites such as banking.
    • They also trick the victim in downloading malware or malicious codes after clicking on links or open attachments.
  • Preventing spear phishing:
    • Avoid posting personal information on the internet that can be used by attackers.
    • Avoid using same passwords for multiple accounts.
    • Use anti-virus software to scan malicious emails or files.
    • Data protection programs have to be implemented in organizations.
spear phishing
spear phishing

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