INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) KEY (25/08/2025)

INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY

 
 
 
 
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Wastewater Surveillance and Unmanned Aerial Vehicles (UAVs) and its significance for the UPSC Exam? Why are topics like Deputy Speaker,  Caste Count, Trademark  important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for August 25, 2025

 
 
 
 
For Preliminary Examination:  Current events of national and international Significance
 
For Mains Examination: GS III - Disaster Management
 
Context:
 
The Indian Council of Medical Research (ICMR) will initiate wastewater surveillance for 10 viruses across 50 cities over the next six months. Currently, five cities are being monitored. The move is aimed at identifying any increase in virus growth trend at the earliest, said ICMR head Rajiv Bahl.
 
Read about:
 
What is National Disaster Management Authority (NDMA)?
 
Indian Council of Medical Research (ICMR)
 
 
Key takeaways:
 

Why is wastewater surveillance important?

  • The Indian Council of Medical Research (ICMR) highlights that, like the rest of the world, India is facing a surge in new and recurring pathogens—ranging from viral and bacterial to zoonotic diseases. This rise is driven by factors such as population pressure, rapid urban growth, environmental shifts, and closer human–animal contact.
  • After the COVID-19 pandemic, Wastewater-Based Epidemiology (WBE) has gained prominence as a tool for early outbreak detection. Experts note that WBE can act as a predictive system, offering community-level pathogen tracking in near real-time.
  • Remarkably, it can signal possible pandemics before clinical cases are officially recorded.
  • This approach is cost-effective, non-invasive, and population-wide, capturing infection trends—including cases in asymptomatic and pre-symptomatic individuals—and supporting timely public health interventions.
  • A recent article on Integrated Environmental Surveillance underlined its key benefits: monitoring large populations, identifying transmission hotspots, and helping authorities allocate resources effectively

How does it work?

  • The U.S. Centers for Disease Control and Prevention (CDC) explains that individuals infected with certain pathogens (like COVID-19) can shed viral or bacterial fragments while using the toilet, washing hands, showering, or even doing laundry—regardless of whether they show symptoms. These fragments enter the sewage system through drains.
  • Before wastewater undergoes treatment, operators collect samples, which are then tested in laboratories to identify circulating pathogens. Within five to seven days, data from these tests can reveal infection patterns in communities. Public health agencies use these insights to issue advisories, scale up testing, or expand vaccination drives.

Wider applications

  • Beyond disease surveillance, wastewater monitoring can help track pollution from land-based sources and support the protection of freshwater and marine ecosystems. It also aids in safeguarding ecosystem services.
  • According to the UN Environment Programme, this trend is a positive sign for both public health and environmental management, but greater investment and broader adoption are essential. The World Health Organization (WHO) too is focusing on strengthening global capacity in wastewater and environmental monitoring
 
Follow Up Question
 
1.Select the correct statement about the Sendai framework (MPSC 2019)
1. This framework is passed by United Nations organisations conference at Sendai (Japan) on 18th March 2015
2. This framework is regarding measures for Disaster Risk Reduction
3. This is an onward step of the Hyogo Framework about disaster management
4. The provisions in this framework are binding on member countries
Select the correct code
A. 1 and 2     
B. 2 and 3         
C. 1, 2, 3       
D. All the above
 
Answer (C)
 
  1. ✅ Correct – The Sendai Framework for Disaster Risk Reduction (2015–2030) was adopted at the 3rd UN World Conference on Disaster Risk Reduction held in Sendai, Japan on 18th March 2015.

  2. ✅ Correct – It is specifically about Disaster Risk Reduction (DRR).

  3. ✅ Correct – It succeeds the Hyogo Framework for Action (2005–2015).

  4. ❌ Incorrect – The framework is not legally binding. It provides guidelines and voluntary commitments for member states, but compliance is not mandatory.

👉 Therefore, the correct code is C. 1, 2, 3.

 
 
 

 

How drones are the new face of warfare?

For Preliminary Examination:  Current events of national and international significance

For Mains Examination: GS III - Defence Acquisition

Context:

India’s Operation Sindoor in the wake of the Pahalgam terror attack has marked a notable shift in the country’s adoption of Unmanned Aerial Vehicles (UAVs) in combat. In combination with standoff weapons, India’s use of UAVs in active combat represents a tactical shift in military doctrine — part of a global playbook

 

Read about:

Unmanned Aerial Vehicles (UAVs)

Artificial Intelligence (AI)

 

Key takeaways:

 

India’s Evolving Use of UAVs in Warfare

India’s Operation Sindoor, initiated after the Pahalgam terror attack, highlights a significant shift in the country’s military strategy with the deployment of Unmanned Aerial Vehicles (UAVs) in combat scenarios. This operation, which involved the use of drones alongside standoff weaponry, reflects an evolution in India’s tactical approach, aligning with a broader global trend. Similarly, Ukraine’s Operation Spider Web showcases how cost-effective, makeshift UAVs can achieve notable strategic outcomes.

Global Trends in Drone Warfare

  • Drones are increasingly seen as key instruments in modern warfare, bridging the gap between traditional military hardware and commercial technology. Their adaptability and scalability make them effective force multipliers. To remain competitive, India must focus on producing modular and redundant drones on a large scale and support a responsive domestic defence industry.
  • A pivotal example came during the 2020 Nagorno-Karabakh conflict, where Azerbaijan leveraged loitering munitions, such as Israeli-made Harop drones, to dismantle enemy air defences.
  • In Ukraine, drones have become central to warfare innovation, with a wide range of models deployed and rapid adaptation becoming the norm. Myanmar’s insurgents have also begun using 3D-printed drones against a more advanced military, narrowing the technological disparity.
  • India must draw key lessons from these conflicts as it continues to modernize its armed forces. China, with its vast and varied UAV arsenal, and Pakistan, which is enhancing its drone capabilities through collaborations with China and Türkiye, pose growing threats, particularly along the Line of Actual Control (LAC).

Building Resilience and Counter-Drone Capabilities

  • Although drones are transformative, they remain susceptible to countermeasures such as jamming, interception, and anti-aircraft systems. Their success hinges on the ability to either bypass or overwhelm these defences. However, even air defence systems have limitations and can be compromised through evolving tactics and technologies.
  • India has developed a layered counter-drone infrastructure, featuring both homegrown soft-kill and hard-kill systems, which were instrumental in neutralizing recent threats from Pakistan.
  • Enhancing drone survivability requires advanced capabilities like autonomous route correction, AI-based navigation, and signal frequency hopping. Ukraine has pioneered the use of machine vision and pre-loaded terrain data to circumvent air defences, while operating drones at low altitudes to avoid radar detection.
  • Some UAVs are now equipped with their own electronic warfare suites, enabling them to disrupt enemy communications and radars. Ukraine has even used fibre-optic tethering to guide drones effectively and securely.
  • Mass deployment of drones and decoys is another effective method, as seen in Russia’s drone offensives that aim to saturate Ukrainian air defence systems. This creates challenges in resource allocation and opens pathways for precision attacks.
  • India’s Integrated Air Command and Control System (IACCS) demonstrated robust performance in countering recent drone and missile strikes.
  • Nonetheless, ensuring sustained capability in prolonged engagements will require increasing the production and procurement of air defence munitions like the S-400, MR-SAM, and Akash systems. On the offensive side, considering the high attrition rate of drones, India must build capacity in both numbers and diversity of loitering munitions.

Strategic Outlook for India

  • The increasing use of UAVs signals a broader transformation in military planning and execution. India’s integration of drones with standoff weaponry during Operation Sindoor has introduced a level of ambiguity in its response strategy, broadening its options below the threshold of full-scale conventional or nuclear conflict. At the same time, China’s provision of drone technology to Pakistan introduces an added layer of strategic concern.
  • China continues to expand its drone capabilities, investing heavily in a range of UAVs — from long-range reconnaissance platforms like the Soaring Dragon and Wing Loong II to swarming kamikaze drones such as the CH-901. These developments amplify the threat along India's borders.
  • For India, drones serve as a complementary asset within its defence framework and can help offset disparities in conventional strength through asymmetric strategies. However, the lessons from Ukraine, Nagorno-Karabakh, and Myanmar stress the importance of developing an affordable, large-scale drone production capacity.
  • A crucial insight from the Ukraine conflict is the need for a strong, agile defence manufacturing ecosystem capable of scaling operations during high-intensity warfare. To fully harness the potential of drones, India’s Ministry of Defence must support the growth of its defence industry, ensuring rapid production, replenishment, and upgrade of drones, loitering munitions, and missile systems — a critical step toward operational resilience in modern conflict scenarios

 

Follow Up Question

 

1.Consider the following statements: (UPSC CSE Prelims 2023)

  1. Ballistic missiles are jet-propelled at subsonic speeds throughout their flights, while cruise missiles are rocket-powered only in the initial phase of flight.
  2. Agni-V is a medium-range supersonic cruise missile, while BrahMos is a solid-fuelled intercontinental ballistic missile.

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

 

Answer (d)
 

"Ballistic missiles are jet-propelled at subsonic speeds throughout their flights, while cruise missiles are rocket-powered only in the initial phase of flight."

  • Incorrect:

    • Ballistic missiles are rocket-propelled (not jet-propelled) and typically travel at supersonic or even hypersonic speeds, not subsonic.

    • Cruise missiles are usually jet-powered and fly at subsonic or supersonic speeds throughout their flight. Some may use rockets for launch but rely mainly on jet engines (like turbojets or ramjets) for sustained flight

"Agni-V is a medium-range supersonic cruise missile, while BrahMos is a solid-fuelled intercontinental ballistic missile."

  • Incorrect:

    • Agni-V is an intercontinental ballistic missile (ICBM) with a range of over 5,000 km and is rocket-propelled, not a cruise missile.

    • BrahMos is a supersonic cruise missile, jointly developed by India and Russia, and is not an ICBM. It uses a ramjet engine for sustained supersonic flight

 
 

 

The importance of the Deputy Speaker

For Preliminary Examination:  Current events of national and international significance

For Mains Examination: GS II - Indian Polity & Governance

Context:

The position of the Deputy Speaker has been lying vacant for the last six years raising questions on constitutional adherence and democratic resilience. The position goes beyond ceremonial significance and is indispensable to parliamentary democracy

 

Read about:

Deputy Speaker

Parliamentary Committees

 

Key takeaways:

 

Vacancy of Deputy Speaker: A Constitutional and Democratic Concern

  • The post of Deputy Speaker in the Lok Sabha has remained unfilled for over six years, raising serious concerns about constitutional compliance and the health of India’s parliamentary democracy.
  • Far from being symbolic, this role is fundamental to the functioning of the legislature. The persistent vacancy necessitates a closer examination of key constitutional principles. India’s founding fathers chose the parliamentary form of governance to ensure meaningful representation of its citizens.
  • This vision is undermined if institutional mechanisms do not operate effectively and seamlessly. Meaningful dialogue between the ruling party and the Opposition is essential for accountability and the preservation of democratic checks and balances.
  • Allegations have surfaced that the present ruling party has deliberately withheld the Deputy Speaker’s position from the Opposition, contravening the spirit of power-sharing—an essential feature of any thriving parliamentary democracy.
  • It's worth noting that constitutional conventions, though unwritten, often carry the force of law when statutory provisions are silent.

The Importance of the Deputy Speaker’s Role

  • The Deputy Speaker is far more than just a backup for the Speaker; he or she ensures legislative continuity and presides over significant parliamentary activities, including debates, the scrutiny of private member’s bills, and the Budget Committee.
  • The office is established under Article 93 of the Constitution, which employs the phrase “as soon as” in reference to electing both the Speaker and Deputy Speaker—indicating urgency, not discretion.
  • Article 94 also underlines that the Deputy Speaker holds office until resignation, removal, or disqualification, reinforcing the role’s continuity.
  • Traditionally, while the Speaker is chosen from the ruling party, the Deputy Speaker’s post is informally offered to the Opposition as a goodwill gesture, fostering cooperation between both sides of the aisle and facilitating smoother parliamentary functioning.

Implications of a Prolonged Vacancy

  • No Deputy Speaker was appointed during the 17th Lok Sabha (2019–2024), and there seems to be little indication that this will change in the 18th Lok Sabha. The government and the Opposition’s inability to reach a consensus—likely due to the ruling party’s unwillingness to concede the position to the Opposition—is troubling.
  • According to Rule 8 of the Lok Sabha's Rules of Procedure (1952), the Speaker is responsible for setting a date for the Deputy Speaker’s election, which is held through a formal motion. When presiding over the House, the Deputy Speaker holds the same powers as the Speaker.
  • Furthermore, under Article 180, the Deputy Speaker assumes the Speaker’s responsibilities when the chair is vacant. Hence, the continued vacancy violates not only Articles 93, 94, and 180 of the Constitution but also disregards procedural rules.

Constitutional and Democratic Consequences

  • Though Article 93 mandates the election of a Deputy Speaker “as soon as may be,” its lack of a defined timeframe has enabled potential misuse, leading to extended delays and undermining constitutional intent.
  • Traditionally, this position has been held by an Opposition member, helping to balance power. Its current vacancy centralizes authority in the Speaker, who is often from the ruling party, thereby disrupting the intended democratic balance.
  • Constitutional conventions are meant to uphold a healthy equilibrium between the government and the Opposition, ensuring robust debate and effective legislative functioning, in line with the Westminster model. In the event of the Speaker’s resignation or incapacity, the absence of a Deputy Speaker could trigger a constitutional crisis with serious implications for governance

 

Follow Up Question

 

1.Which of the following statements regarding the Deputy Speaker of the Lok Sabha is/are correct?

  1. The Deputy Speaker is elected by the members of the Lok Sabha from amongst themselves.

  2. As per the Constitution, the Deputy Speaker must belong to the Opposition party.

  3. In the absence of the Speaker, the Deputy Speaker performs all the duties of the Speaker.

  4. The Constitution prescribes a fixed time frame for the election of the Deputy Speaker.

Select the correct answer using the code below:

(a) 1 and 3 only
(b) 1, 2 and 3 only
(c) 2 and 4 only
(d) 1, 2, 3 and 4

Answer (a)
 
  • Statement 1: Correct. Article 93 of the Constitution provides that the Lok Sabha shall choose two of its members to be the Speaker and the Deputy Speaker.

  • Statement 2: Incorrect. There is no constitutional requirement that the Deputy Speaker must be from the Opposition. It is a convention, not a constitutional mandate.

  • Statement 3: Correct. Under Article 180 of the Constitution, the Deputy Speaker performs the duties of the Speaker when the office is vacant or the Speaker is absent.

  • Statement 4: Incorrect. The Constitution uses the phrase “as soon as may be” but does not prescribe a fixed timeline for the election.

 
 

 

What are the key objectives of caste count?

For Preliminary Examination: Current events of national and international Significance

For Mains Examination: GS II - Indian Polity & Governance

Context:

The Union Cabinet has decided that the next Census will include questions on caste to its enumeration of India’s population, for the first time in almost a century. The decision, a reversal of the ruling Bharatiya Janata Party’s (BJP) stance so far, comes ahead of the crucial Bihar elections, and throws up myriad challenges.

 

Read about:

Caste Census

Benefits of Caste census

 

Key takeaways:

 

Has India Ever Collected Caste Data?

  • Yes, caste has been part of population enumeration in India in the past. When the British began the decennial census in 1881, caste details were included. For the next fifty years, this data was regularly collected, with the 1931 Census being the last time caste-wise information was officially published.
  • That census documented 4,147 distinct castes and sub-castes. Although the 1941 Census also gathered such data, it was never made public, likely due to disruptions caused by World War II. After gaining Independence, India chose to omit caste-based data from the census, restricting its scope to include only Scheduled Castes (SCs) and Scheduled Tribes (STs).
  • J.H. Hutton, Census Commissioner for the 1931 census, argued against the notion that collecting caste or religion data would intensify social divisions. He emphasized the need for the census to reflect societal realities, not avoid them.
  • While he rejected older British efforts to classify castes in a ranked hierarchy, he opted to categorise them based on occupation. However, this approach overlooked the complexity and evolving nature of caste identities across regions and over time.
  • Interestingly, this very 1931 data later became the foundation for reservation policies, including the Mandal Commission's recommendation of a 27% quota for OBCs, based on the census finding that 52% of India’s population fell under the Other Backward Classes category.
  • In 2011, the Ministry of Rural Development initiated a Socio-Economic and Caste Census (SECC), intended to guide policy decisions and welfare schemes. Though partial data was released in 2016, raw caste-wise population figures were not disclosed. Because the caste field was left open-ended, respondents often entered surnames rather than standardized caste names, resulting in the enumeration of over 46 lakh unique caste entries.

Have States Conducted Their Own Caste Surveys?

  • Yes, several Indian states have taken the initiative to conduct state-level caste surveys. In 2023, Bihar completed a caste survey under Chief Minister Nitish Kumar, revealing that OBCs and EBCs together made up over 63% of the state's population. This led to renewed demands for greater political and social representation for these communities.
  • In Telangana, the Congress Party fulfilled its pre-election promise by conducting a caste survey in 2024, which showed that Backward Classes constituted over 56% of the population. Meanwhile, Karnataka had begun its own caste survey in 2015, during CM Siddaramaiah’s earlier tenure, but the results were only released ten years later, indicating that nearly 70% of the population fell under the OBC category.

How Might This Data Be Used?

  • While caste data can certainly support academic research and public policy, its primary political and social implication lies in how it might influence reservation and affirmative action policies. The existing 27% OBC quota is based on projections from the outdated 1931 census. Fresh data could significantly reshape this framework.
  • For example, in Karnataka, following the revelation that the OBC population is much larger than earlier believed, there are calls to raise their reservation quota from 32% to 51%. Such developments could lead to challenges to the Supreme Court-imposed 50% ceiling on total reservation, as demands for expanded quotas grow louder across states

 

 Follow Up Question

1.Consider the following statements about Particularly Vulnerable Tribal Groups (PVTGs) in India: (UPSC CSE 2019)

1. PVTGs reside in 18 states and one Union Territory.

2. A stagnant or declining population is one of the criteria for determining PVTG status.

3. There are 95 PVTGs officially notified in the country so far.

4. Irular and Konda Reddi tribes are included in the list of PVTGs.

Which of the statements given above are correct?

(a) 1, 2 and 3

(b) 2, 3 and 4

(c) 1, 2 and 4

(d) 1, 3 and 4

 

Answer (c)
 
  • PVTGs reside in 18 states and 1 Union Territory –  Correct
    PVTGs are found across 18 states and 1 Union Territory (Andaman & Nicobar Islands).

  • A stagnant or declining population is a criterion for determining PVTG status –  Correct
    This is one of the key criteria used for identifying PVTGs, along with pre-agricultural level of technology, low literacy, and economic backwardness.

  • There are 95 PVTGs officially notified in the country –  Incorrect
    As of now, 75 PVTGs have been officially identified in India, not 95.

  • Irular and Konda Reddi tribes are included in the list of PVTGs –  Correct
    Both Irular (in Tamil Nadu) and Konda Reddi (in Andhra Pradesh) are among the listed PVTGs.

 

 
 
For Preliminary Examination:  Current events of national and international Significance
 
For Mains Examination:  General Studies III: Issues relating to intellectual property rights.
 
Context:
 
THE DELHI High Court Tuesday directed Baba Ramdev’s Patanjali to immediately pull down all its advertisements allegedly referring to Hamdard’s popular drink Rooh Afza as “Sharbat Jihad,” saying they “shocked the conscience of the court”. “I couldn’t believe my eyes and ears,” Justice Amit Bansal, who was hearing the case, said about Patanjali’s videos
 
Read about:
 

What do you understand by the term ‘trademark’?

What is the infringement of trademark?

 

Key takeaways:

 

• As per the World Intellectual Property Organization (WIPO), Intellectual Property (IP) encompasses mental creations such as technological inventions, artistic and literary works, unique designs, as well as symbols, logos, and brand identifiers used in trade. Legal instruments like patents, copyrights, and trademarks safeguard IP, enabling individuals to gain recognition or financial rewards from their innovations. The IP regime seeks to maintain a balance between the rights of creators and public interest, promoting an atmosphere that nurtures innovation and creativity.

• The Hamdard National Foundation India, the charitable arm of Hamdard, has initiated legal proceedings against Patanjali Foods Limited and Baba Ramdev, alleging trademark violation, disparagement, and defamation. This action is in response to a video in which Ramdev reportedly stated that the earnings of a rival brand were being used to fund “masjids and madrasas,” whereas Patanjali’s revenue from its rose-flavored drink was being utilized for establishing “gurukuls, acharyakulams, and Patanjali University.” He further remarked, “Just like love jihad and vote jihad, there is sharbat jihad.”

• In the legal petition, Hamdard is pursuing a permanent injunction to prevent Patanjali from any further trademark misuse or derogatory remarks, demanding damages up to ₹2 crore, along with a formal apology and retraction. Additionally, the company seeks the court’s directive for the Ministry of Electronics and Information Technology and the Department of Telecommunications (DoT) to remove the offensive content from online platforms. Senior advocate Rajiv Nayar, representing Patanjali, assured the court that the contentious videos would be taken down.

• During the initial court hearing, Justice Bansal expressed strong disapproval, describing the content as “shocking” and stated that it offended the court's conscience. He warned that unless immediate action was taken, the court might pass a severe order.

• Along with monetary and injunctive relief, Hamdard reiterated its request to have the disputed content removed and a public apology issued. Senior advocate Mukul Rohatgi, appearing on behalf of Hamdard, read out excerpts from the video and tweets where Ramdev allegedly referred to Rooh Afza by implication

 

Follow Up Question

1.In order to comply with TRIPS Agreement, India enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999. The difference/differences between a “Trade Mark” and a Geographical Indications is/are (2010)
1. A Trade Mark is an individual or company’s right whereas a Geographical Indication is a community’s right.
2. A Trade Mark can be licensed whereas a Geographical Indication cannot be licensed.
3. A Trade Mark is assigned to the manufactured goods whereas the Geographical Indication is assigned to the agricultural goods/products and handicrafts only.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer (a)
 

1. A Trade Mark is an individual or company’s right whereas a Geographical Indication is a community’s right.
Correct.

  • A Trademark identifies the goods or services of a particular company or individual.

  • A Geographical Indication (GI) identifies goods as originating in a specific location, where a given quality, reputation or other characteristic is essentially attributable to its geographical origin. It is collectively owned by all producers from that region.

2. A Trade Mark can be licensed whereas a Geographical Indication cannot be licensed.
Incorrect.

  • While trademarks can be licensed, GIs cannot be assigned, licensed, or transmitted like trademarks. However, authorized users can use a GI under specific conditions laid down in the law, which is slightly different from licensing in the trademark sense but is sometimes loosely referred to in that manner

3. A Trade Mark is assigned to the manufactured goods whereas the Geographical Indication is assigned to the agricultural goods/products and handicrafts only.
Incorrect.

  • Trademarks can be applied to any goods or services, not just manufactured ones.

  • GIs can be applied to agricultural products, foodstuffs, wine and spirit drinks, handicrafts, and industrial products, not just agricultural goods and handicrafts

 
 

 

RBI cuts repo rate by 0.25%, trims GDP growth forecast

For Preliminary Examination:  Current events of national and international Significance

For Mains Examination: GS III - Economy

Context:

The Reserve Bank of India slashed the repo rate by 25 basis points to 6% on Wednesday, with its Monetary Policy Committee (MPC) voting unanimously to reduce the policy rate in a bid to support growth and bring down the interest burden on home, auto, and other loan borrowers. However, this will also reduce the interest earned on savings by depositors.

 

Read about:

Monetary Policy Committee (MPC)

Reverse repo rate

 

Key takeaways:

 

The Repo Rate and Reverse Repo Rate are key monetary policy tools used by central banks (like the Reserve Bank of India - RBI) to control liquidity and inflation in the economy. Here's a breakdown:

1. Repo Rate (Repurchase Rate)

  • Definition: The rate at which the central bank (RBI) lends money to commercial banks for short-term needs (against government securities as collateral).

  • Purpose: Controls inflation and boosts economic growth.

    • If inflation is high, RBI increases the repo rate → borrowing becomes costlier → reduces money supply → lowers inflation.

    • If growth is slow, RBI decreases the repo rate → cheaper loans → more spending & investment → boosts growth.

  • Current Repo Rate (as of RBI's latest policy, June 2024)6.50% (unchanged since February 2023).

2. Reverse Repo Rate

  • Definition: The rate at which the central bank borrows money from commercial banks (banks park excess funds with RBI and earn interest).

  • Purpose: Manages liquidity in the banking system.

    • A higher reverse repo rate encourages banks to deposit more funds with RBI → reduces money supply.

    • A lower reverse repo rate discourages banks from parking money with RBI → increases lending in the market.

  • Current Reverse Repo Rate3.35% (since the RBI merged it with the Standing Deposit Facility - SDF rate).

Key Differences

Feature Repo Rate Reverse Repo Rate
Transaction RBI lends to banks RBI borrows from banks
Collateral Banks pledge securities No collateral (now part of SDF)
Impact Controls inflation & growth Controls excess liquidity
Current Rate 6.50% 3.35% (SDF rate)

 

Cash Reserve Ratio (CRR) Rate

 

  • The Cash Reserve Ratio (CRR) is an important monetary policy tool used by the Reserve Bank of India (RBI) to regulate liquidity in the banking system. CRR refers to the minimum percentage of a commercial bank’s total net demand and time liabilities (NDTL) that must be maintained in the form of cash reserves with the RBI.
  • This means that a portion of the bank's deposits cannot be used for lending, investment, or any other commercial activity. It is kept with the RBI to ensure that banks always have a certain level of liquidity.
  • The primary objective of maintaining CRR is to control the money supply, ensure liquidity, and safeguard the banking system. By adjusting the CRR, the RBI can influence the amount of funds banks have at their disposal.
  • For instance, when the RBI increases the CRR, banks are required to deposit a higher portion of their funds with the central bank. This leads to a reduction in the available funds for lending or investment, effectively reducing liquidity in the economy. Such a measure is usually adopted to curb inflationary pressures.
  • On the other hand, when the RBI lowers the CRR, it releases more funds into the banking system, increasing liquidity. Banks then have more capital to extend as credit to businesses and consumers, thereby stimulating economic activity. Hence, CRR acts as a powerful tool to manage both inflation and economic growth.
  • It is important to distinguish CRR from another similar regulatory requirement, the Statutory Liquidity Ratio (SLR).
  • While CRR requires banks to hold cash reserves with the RBI, SLR mandates banks to maintain a certain proportion of their NDTL in the form of liquid assets like cash, gold, or approved government securities, but these are kept with the banks themselves, not with the RBI.
  • Both tools are used for different aspects of financial regulation—CRR primarily for monetary control, and SLR for ensuring solvency and credit discipline.
  • As of April 2024, the current Cash Reserve Ratio stands at 4.50%, indicating that commercial banks must park 4.5% of their total deposits in cash with the RBI

 

Follow Up Question

1.Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 

1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

A. 1 only     

B.  1 and 2 only     

C. 3 only     

D. 2 and 3 only

Answer (A)
 
Statement 1: It decides the RBI's benchmark interest rates.
Correct.
The Monetary Policy Committee (MPC) is responsible for setting the repo rate, which is the benchmark interest rate in India. This is the rate at which the RBI lends to commercial banks. The MPC meets at least four times a year to review and set the policy rate to achieve the inflation target set by the government

Statement 2: It is a 12-member body including the Governor of RBI and is reconstituted every year.
Incorrect.
The MPC is a 6-member committee, not 12. It comprises:

  • 3 members from the RBI (including the Governor as Chairperson, the Deputy Governor in charge of monetary policy, and one RBI officer nominated by the Central Board),

  • 3 external members appointed by the Government of India.

Also, it is not reconstituted every year; the external members have a four-year term and are not eligible for reappointment

Statement 3: It functions under the chairmanship of the Union Finance Minister.
Incorrect.
The MPC is headed by the Governor of the RBI, not the Finance Minister. The Finance Ministry has no direct role in the MPC’s decision-making process to ensure its independence

 

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