UPSC Key: Attaining Criticality, Custodial Deaths and 16th Finance Commission

Key Points to Ponder:

• Map Work-Mark Nuclear power plants in India including Kalpakkam nuclear power plant

• India’s three-stage nuclear programme-why it is called three stage?

• What are the three distinct, sequential stages in three-stage nuclear programme?

• What is criticality in nuclear reactor?

• Attaining criticality is a key milestone-why?

• What is core loading?

• What is the civil nuclear programme?

• Can a private company open a nuclear power plant?

• What are the salient features of the Atomic Energy Act 1962?

• What is the civil liability of nuclear damage?

• What is Nuclear Energy?

• Why do we need nuclear energy?

• What are the types of nuclear reactor?

• What is the current Status of Nuclear Energy and Nuclear power plants in India?

Key Takeaways:

• Prime Minister Narendra Modi, in a post on X, called it a “defining step” in advancing the country’s civil nuclear programme and said the indigenously designed and built reactor reflects “the depth of our scientific capability and the strength of our engineering enterprise” which, he said, is a key step towards harnessing India’s thorium reserves under the third stage of the programme.

• In 2003, when Atal Bihari Vajpayee was Prime Minister, the Bharatiya Nabhikiya Vidyut Nigam Ltd or BHAVINI was incorporated to build and operate India’s most advanced nuclear reactor, the PFBR. The project was expected to be completed by September 2010, but was delayed due to technological challenges. The last set of approvals had revised the completion target to October 2022.

Do You Know:

• Attaining criticality is a key milestone before full power generation, indicating that the reactor core is functioning as designed and that each fission event in the core now releases a sufficient number of neutrons to sustain an ongoing series of reactions.

• The completion of ‘core loading’, or the process of placing nuclear fuel assemblies inside the core of a nuclear reactor, was wrapped up in March 2024 for the FBR. This reactor will initially use uranium-plutonium mixed oxide (MOX) fuel, with a Uranium 238 (U238) ‘blanket’ around the fuel core that will undergo nuclear transmutation to produce more fuel – therefore, the name ‘breeder’.

• Nuclear transmutation involves the conversion of a chemical element or isotope into another chemical element, with the numbers of protons or neutrons in the nucleus of the atom undergoing a change.

• Efforts to build an FBR were initiated two decades ago, and successive governments have nurtured the project as a step towards India developing comprehensive capabilities that span the entire nuclear fuel cycle, by which electricity is produced from uranium in nuclear power reactors.

• Once commissioned, India will be the second country after Russia to have a commercial operating FBR. China has a small programme on fast breeders; programmes in countries such as Japan, France, and the United States were shut down amid safety concerns.

• The first stage entails the setting up of Pressurised Heavy Water Reactors (PHWRs) and associated fuel cycle facilities, which is currently in progress. PHWRs are reactors that use natural uranium as fuel and heavy water (deuterium oxide) as coolant and moderator, which form the bulk of India’s installed atomic power capacity of 8,180 MWe.

• The FBR is the vital second stage in the DAE’s three-stage power programme which envisages a pathway to utilising India’s abundant thorium reserves – found in coastal and inland placer sands on the beaches of Kerala, Tamil Nadu, Odisha, Andhra Pradesh, Maharashtra and Gujarat, and in the inland riverine sands of Jharkhand and West Bengal — to generate electricity.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: India’s three-stage nuclear programme — A must-know for UPSC exams

📍Explained: India’s first indigenous Fast Breeder Reactor begins ‘core loading’, why it matters

Previous year UPSC Prelims Question Covering similar theme:
1) In India, why are some nuclear reactors kept under “IAEA safeguards” while others are not? (UPSC CSE, 2020)
(a) Some use uranium and others use thorium
(b) Some use imported uranium and others use domestic supplies
(c) Some are operated by foreign enterprises and others are operated by domestic enterprises
(d) Some are State-owned and others are privately owned

Dhaka reaches out to Delhi, Foreign Minister arrives today for talks

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies I: India and its neighbourhood- relations.

What’s the ongoing story: In the first high-level political outreach to Delhi by the new government in Dhaka, Bangladesh Foreign Minister Khalilur Rahman will travel to India Tuesday on a two-day visit.

Key Points to Ponder:

• India- Bangladesh bilateral relations-Know the historical background

• India-Bangladesh (under Awami League) and India-Bangladesh (under BNP)-compare and contrast

• How internal political turmoil in Bangladesh influences India’s strategic and diplomatic priorities in the region?

• What are the areas of cooperation between India and Bangladesh?

• Know bone of contention between India and Bangladesh

• India’s take on long-standing territorial dispute with Bangladesh-Know the background

• Why engagement with Bangladesh is of the immense benefits of deeper economic for the India’s north-eastern states?

• Know in detail about India’s Water Disputes or rather India’s water issues with Bangladesh

• What was the Ganga water treaty between India and Bangladesh?

• According to many experts, the Teesta river remained the most contentious issue between two India and Bangladesh-Can you elaborate further on this?

Key Takeaways:

• The BNP led by Tarique Rahman, now Prime Minister, was swept to power in February this year, 18 months after the ouster of the Sheikh Hasina government.

• Khalilur Rahman, who was NSA in the interim government led by Muhammad Yunus, will reach Delhi Tuesday afternoon and meet NSA Ajit Doval in the evening — the two had met last November when Rahman visited Delhi as NSA.

Do You Know:

• The energy crisis in Bangladesh, due to the war in West Asia, and supply of oil and gas are expected to be a major part of the discussions.

• Besides, the two sides will want to move forward on the issues of cooperation in counter-terrorism and security, border management, river water sharing including the Ganga water-sharing treaty’s renewal, and projects that had been stalled after the fall of the Hasina government in August 2024.

• From Dhaka’s perspective, lifting the restrictions on trade placed by the Indian government in the last year or so will be one of the major requests, as the two sides work towards normalising and stabilising the relationship.

• From Delhi’s perspective, security in the India-Bangladesh border areas and effective border management will be an important point of the agenda.

• The two sides will be discussing the Ganga water treaty, which is set to expire in December this year, and will look to renew the pact. Dhaka will also press India on concluding the Teesta water-sharing pact, which has been stalled by the West Bengal government led by Chief Minister Mamata Banerjee for the last 14 years.

Other Important Articles Covering the same topic:

📍UPSC Issue at a Glance | Bangladesh Crisis and India: 4 Key Questions You Must Know for Prelims and Mains

Previous year UPSC Prelims Question Covering similar theme:
2) Consider the following statements: (UPSC CSE, 2020)
1. The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2. “Textile and textile articles” constitute an important item of trade between India and Bangladesh.
3. In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3

3) With reference to river Teesta, consider the following statements: (UPSC CSE, 2017)
1. The source of river Teesta is the same as that of Brahmaputra but it flows through Sikkim.
2. River Rangeet originates in Sikkim and it is a tributary of river Teesta.
3. River Teesta flows into Bay of Bengal on the border of India and Bangladesh.
Which of the statements given above is/are correct?
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Nation

Custodial deaths in 2020: Death penalty for 9 TN cops

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Main Examination: General Studies II: Important aspects of governance, transparency and accountability

What’s the ongoing story: All nine police personnel convicted in the 2020 custodial deaths case, in which trader P Jayaraj, 58, and his son J Benicks, 31, died after being severely assaulted in police custody in the southern Tamil Nadu town of Sattankulam, were sentenced to death by the First Additional District and Sessions Court in Madurai on Monday.

Key Points to Ponder:

• What is custodial death?

• How many custodial deaths in India-Know the data’s and statistics

• What are the constitutional provisions to prevent custodial death?

• Article 22 grants protection to persons who are arrested or detained-know them in detail

• Detention is of two types, namely, punitive and preventive-Know them in detail

• Punitive Detention and Preventive Detention-Compare and Contrast

• Article 22 confers certain rights on a person who is arrested or detained under an ordinary law-What are they?

• What is the law on custodial death in India?

• What was the Supreme Court’s guidelines in DK Basu vs State of West Bengal?

• What was the Nilabati Behera vs the State of Orissa (1993) case?

• The Supreme Court of India has the power to protect the fundamental rights of the people-Attest this with the court’s order in the Nilabati Behera vs. State of Orissa (1993) case.

Key Takeaways:

• Judge G Muthukumaran imposed the death penalty on all nine convicted policemen, then inspector S Sridhar; sub-inspectors K Balakrishnan and P Raghu Ganesh; head constables S Murugan and A Samadurai; and constables M Muthuraja, S Chelladurai, X Thomas Francis and S Vailmuthu.

• The 10th accused, then special sub-inspector Paldurai, who had also been arrested in the case, died of Covid-19 in August 2020.

• Nearly six years after the father and son were tortured and killed in custody at Sathankulam police station, the court had, on March 23, found all nine policemen guilty of the double murder.

Do You Know:
Prakash Singh Writes:

• Torture has been defined in the UN Convention (1984) as “any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person for such purposes as obtaining from him or a third person information or a confession, punishing him for an act he or a third person has committed or is suspected of having committed, or intimidating or coercing him or a third person, or for any reason based on discrimination of any kind when such pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity.”

• India signed the UN Convention against Torture (UNCAT) in 1997 but has not ratified it, which means it is legally not binding on India. The report brings out that 20 per cent of the police personnel feel that it is “very important” for the police to use “tough methods” to create fear amongst the public and another 35 per cent think it is “somewhat important.”

• In other words, 55 per cent of police personnel favour tough methods to some degree. Significantly, they have not talked of torture. What these tough methods are and at what stage they assume the dimensions of torture have not been clarified in the report.

• In cases involving sexual harassment and child lifting, one in four police personnel justify mob violence, implying that they do not mind mobs acting as the judge, jury and executioner in such cases.

• Custodial deaths showed discrepancies in figures furnished by different agencies. Thus, in the year 2020, the National Crime Records Bureau (NCRB) reported 76 cases, while the National Human Rights Commission reported 70 cases. The National Campaign Against Torture (NCAT), a civil society initiative, documented 111 cases. It was a shocking revelation that during 2018-22 there were zero convictions for deaths in police custody.

Other Important Articles Covering the same topic:

📍Torture, an issue ignored

Previous year UPSC Prelims Question Covering similar theme:
4) With reference to India, consider the following statements: (UPSC CSE, 2020)
1. Judicial custody means an accused is in the custody of the magistrate concerned and such an accused is locked up in a police station, not in jail.
2. During judicial custody, the police officer in charge of the case is not allowed to interrogate the suspect without the approval of the court.
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

Previous Year UPSC Mains Question Covering similar theme:
📍Though the Human Rights Commissions have contributed immensely to the protection of human rights in India, yet they have failed to assert themselves against the mighty and powerful. Analysing their structural and practical limitations, suggest remedial measures. (2021)
📍National Human Rights Commission (NHRC) in India can be most effective when its tasks are adequately supported by other mechanisms that ensure the accountability of a government. In light of above observation assess the role of NHRC as an effective complement to the judiciary and other institutions in promoting and protecting human rights standards. (2014)

The Editorial Page

Finance commission strengthens local bodies, but at the cost of states

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies II: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies.

What’s the ongoing story: Haseeb A Drabu Writes-The Sixteenth FC’s changes in the horizontal criteria, discontinuation of statutory grants, and tacit approval to the shrinking of the divisible pool have tilted the scales toward greater central leverage through discretionary transfers.

Key Points to Ponder:

• What is the Finance Commission?

• What are the functions of the Finance Commission?

• Who appoints the Finance Commission and what are the qualifications for Members?

• Article 280 of the Constitution says what?

• How are the recommendations of Finance Commission implemented?

• Sixteenth Finance Commission-What you know about this?

• What are the changes in fiscal federalism in India subsequent to the implementation of the Goods and Services Tax (GST)?

• “The 122nd Constitutional Amendment of 2016 giving the Union and states concurrent powers of indirect taxation has been the most far-reaching change from a fiscal standpoint, since the setting up of the First Finance Commission in 1951”-Analyse the statement

• What do you understand by both vertical and horizontal devolution?

• What changes the 16th Finance Commission should implement?

• Article 275 and Article 282-Compare

Key Takeaways:
Haseeb A Drabu Writes-

• The recommendations of the Sixteenth Finance Commission (SFC) for the period 2026-31, which have been accepted by the Union government, have raised serious concerns about the future of federal balance.

• The changes in the horizontal criteria, discontinuation of statutory grants, and tacit approval to the shrinking of the divisible pool have tilted the scales toward greater central leverage through discretionary transfers.

• Even though the SFC retained the share of states at 41 per cent, it has overseen a reduction in their effective share from around 36 per cent to around 32 per cent. Further, by tweaking the devolution formula, 14 states, mostly the smaller states, have got a lower share in taxes than in the previous commission. The share in tax devolution, for example, of all northeastern states is 15.5 per cent lower than under the Fifteenth FC. This could have a crippling effect on the region.

Do You Know:

• The Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the states themselves. The Commission’s work involves redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the Centre and the States respectively and equalisation of all public services across the states.

• The 16th Finance Commission, which covers the period from 2026 to 2031, has kept the vertical devolution intact, retaining the states’ share in the divisible pool at 41 per cent. But, in determining the horizontal devolution, it has deviated from the previous Commission on the criteria and weights to be used.

Other Important Articles Covering the same topic:

📍Knowledge Nugget |16th Finance Commission Report: Key highlights for UPSC and other competitive exams

Previous year UPSC Prelims Question Covering similar theme:
5) Consider the following: (UPSC CSE 2023)
1. Demographic performance
2. Forest and ecology
3. Governance reforms
4. Stable government
5. Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?
(a) Only two
(b) Only three
(c) Only four
(d) All five

Previous year UPSC Mains Question Covering similar theme:
📍Discuss the recommendations of the 13th Finance Commission which have been a departure from the previous commissions for strengthening the local government finances. (2013)

Explained

For China, trade risks spur larger diplomatic role

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Effect of policies and politics of developed and developing countries on India’s interests

What’s the ongoing story: G Venkat Raman, a professor at IIM Indore, a Fulbright and Institute of Chinese Studies fellow, explains some of the major issues concerning China’s stakes and motivations, as well as the wider implications for global trade and geopolitics.

Key Points to Ponder:

• What does the China-Pakistan peace plan propose?

• What is its geopolitical significance?

• What are China’s stakes in West Asia?

• How has it used diplomacy in the region?

• Why might China have chosen to step in with this plan now?

• Beyond Hormuz, why are concerns being raised about the Bab el-Mandeb Strait?

• What lessons might China be drawing from Hormuz?

Key Takeaways:

• Amid the West Asia conflict disrupting key maritime routes and energy flows, China and Pakistan have proposed a joint peace initiative — calling for a ceasefire, protection of commercial shipping, and dialogue through multilateral platforms.

• Announced earlier this week, it marks a shift in Beijing’s diplomatic posture. While China has so far limited itself to statements and selective engagement on the events unfolding in Iran, the proposal signals a more active, though cautious, role in crisis management.

• The joint proposal outlines a five-point broad framework for de-escalation, including humanitarian access and dialogue through multilateral platforms, particularly the United Nations, and emphasises sovereignty.

• While details remain limited, the plan focuses on stabilising maritime routes and preventing further escalation rather than offering a detailed political settlement, making it more a mechanism for crisis management than conflict resolution.

• The initiative reflects an attempt to expand the role of non-Western actors in managing regional crises. It signals a move toward Global South-led diplomacy, with China bringing institutional weight, including its position on the UN Security Council, and Pakistan offering regional access and political channels in the Islamic world.

• It is also tied to China’s economic and connectivity interests, particularly routes linking western China to the Arabian Sea and West Asia through the Gwadar port in Pakistan’s Balochistan.

Do You Know:

• China’s West Asia engagement has evolved from a largely economic presence to a more active diplomatic role in recent years, driven by its dependence on regional stability. It is a major importer of energy from both Iran and Saudi Arabia, and disruptions in chokepoints such as the Strait of Hormuz directly affect its growth and connectivity ambitions.

• Diplomatically, China has deepened ties with Iran through a long-term strategic cooperation agreement signed in 2021. Its credentials as a mediator were highlighted in 2023, when it facilitated the restoration of diplomatic ties between Iran and Saudi Arabia.

• For China, the current events have parallels to a core vulnerability, or the “Malacca dilemma,” as coined by then Chinese President Hu Jintao in 2003. It concerns the Strait of Malacca, one of the world’s most critical maritime chokepoints, located near Malaysia and Indonesia and carrying a large share of global trade between the Indian and Pacific Oceans.

• A significant portion of China’s energy imports and trade flows — and about a quarter of global trade — passes through it. In a potential crisis over the control of Taiwan, which China claims as its own territory, Beijing would face risks to its sea lines of communication, including external pressure that could affect trade and energy flows.

Other Important Articles Covering the same topic:

📍China, Pakistan propose 5-point peace plan to end Middle East war

Previous year UPSC Prelims Question Covering similar theme:
6) Belt and Road Initiative’ is sometimes mentioned in the news in the context of the affairs of (UPSC CSE, 2016)
(a) African Union
(b) Brazil
(c) European Union
(d) China

Karnataka law affirms absolute right of adults to choose partners

Preliminary Examination: Indian Polity and Governance

Mains Examination: General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

What’s the ongoing story: On December 21, 2025, 19-year-old Manya Patil, who was seven months pregnant, was beaten to death in Karnataka’s Dharwad district by her father and other relatives for having married a Dalit boy against their wishes. The incident shook the state, prompting the state government to come up with a landmark legislation: The Freedom of Choice in Marriage and Prevention and Prohibition of Crimes in the Name of Honour and Tradition Bill, 2026 (Eva Nammava Eva Nammava Bill) to curb honour killings.

Key Points to Ponder:

• What is Honour Killings?

• The Freedom of Choice in Marriage and Prevention and Prohibition of Crimes in the Name of Honour and Tradition Bill, 2026 (Eva Nammava Eva Nammava Bill)-know its key provisions

• What motivates honour killings in India?

• How does the caste system affect marriage in India?

• What steps has been taken to combat honour killings?

Key Takeaways:

• Passed during the state legislature’s recently concluded Budget session, the Bill now awaits the Governor’s assent.

• Prominent among the features of the Bill, also known as the Eva Nammava Eva Nammava (“They are our own people”) Bill, is the freedom of choice in marriage.

• The Bill makes it clear that consent of parents, family, caste, or clan is not required once two adults decide to marry. It criminalises acts of violence, intimidation, or harassment committed against the couple, and imposes various penalties for the same. It also provides legal support for such couples to pursue their relationship.

• In short, the legislation affirms that adults have the absolute right to choose their partners.

• The Bill stipulates the formation of Eva Nammava Vedike, a district-level body comprising officials and experts to help solemnise inter-caste marriages. It will be headed by the Deputy Commissioner and will offer counseling services for the couple. The Bill also provides for the establishment of special fast-track courts to try cases pertaining to such crimes.

Do You Know:

• Caste remains a dominant factor in several parts of Karnataka. Several villages remain divided along caste lines, especially in the state’s backward regions.

• According to data, around 15 cases of honour killings were reported in Karnataka over the past five years. While there have been sporadic instances of violence against inter-faith couples — perpetrated by dominant communities such as the Vokkaligas and the Lingayats — three cases were reported in 2025.

Other Important Articles Covering the same topic:

📍Beyond Trending: What is honour? 

Previous year UPSC Prelims Question Covering similar theme:
📍Caste system is assuming new identities and associational forms. Hence, caste system cannot be eradicated in India.” Comment. (2018)

Economy

Why RBI is likely to keep rates steady and revise inflation, growth forecasts

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: As Reserve Bank of India Governor Sanjay Malhotra prepares to announce the monetary policy on Wednesday (April 8), the economic backdrop has shifted dramatically since the February 2026 review: the West Asia conflict has clouded the economic horizon.

Key Points to Ponder:

• What are the instruments of monetary policy?

• Will RBI change repo rate in the upcoming policy?

• Will there be a change in monetary policy stance?

• Will RBI revise inflation and GDP projections?

• What happens to lending rates if repo rate is left steady?

• When is RBI expected to cut repo rate?

• What happens when repo rate is increased?

• Repo rate is the rate at which central bank of a country (in our case Reserve Bank of India) lends money to whom?

• In reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from whom?

• If Repo Rate is increased or say decreased then it impacts common people?

• Who decides the repo rate and reverse repo rate?

• How repo rate and reverse repo rate are decided?

• What is the difference between repo rate and interest rate?

• If repo rate or reverse repo rate is increased or decreased, then how it impacts savings?

• What Marginal Standing Facility?

Key Takeaways:

• Given the uncertain economic situation, the Monetary Policy Committee (MPC) of the RBI is expected to keep interest rates unchanged for now, analysts say. It will likely take a cautious approach and wait for more data before making any big decisions. However, it may revise its outlook by lowering growth expectations and raising its inflation forecast due to ongoing price pressures and supply issues.

• Analysts and economists do not expect the MPC to hike the Repo rate as retail inflation is still under control. A status quo on the policy rate would provide a major relief to borrowers as their equated monthly instalments (EMIs) on home, vehicle, personal corporate and small business loans are unlikely to change.

• After the 25 basis points cut in December, the MPC unanimously decided to hold the repo rate – the key policy rate – unchanged at 5.25 per cent in the February policy review.

• The spike in oil prices has led to stress in the financial markets, rise in bond yields and a 2.34 per cent currency depreciation since the war started. Reflecting these risks, implied rates have risen sharply as investors factor in the risk of a tighter policy stance.

Do You Know:

• Monetary policy essentially deals with the supply and cost (interest rates) of money in an economy. The RBI’s MPC meets every two months to assess the state of monetary activities, and may tweak the repo rate — the interest rate at which the RBI lends to commercial banks — in a manner that reduces price fluctuations in the economy while keeping the inflation rate (the rate at which the general price level in the economy grows) at a reasonable level. According to RBI, there are several direct and indirect instruments that are used for implementing monetary policy:
—Repo Rate: The interest rate at which the Reserve Bank provides liquidity under the liquidity adjustment facility (LAF) to all LAF participants against the collateral of government and other approved securities.
—Standing Deposit Facility (SDF) Rate: The rate at which the Reserve Bank accepts uncollateralised deposits, on an overnight basis, from all LAF participants. The SDF is also a financial stability tool in addition to its role in liquidity management. The SDF rate is placed at 25 basis points below the policy repo rate. With introduction of SDF in April 2022, the SDF rate replaced the fixed reverse repo rate as the floor of the LAF corridor.
—Marginal Standing Facility (MSF) Rate: The penal rate at which banks can borrow, on an overnight basis, from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a predefined limit (2 per cent). This provides a safety valve against unanticipated liquidity shocks to the banking system. The MSF rate is placed at 25 basis points above the policy repo rate.
—Liquidity Adjustment Facility (LAF): The LAF refers to the Reserve Bank’s operations through which it injects/absorbs liquidity into/from the banking system. It consists of overnight as well as term repo/reverse repos (fixed as well as variable rates), SDF and MSF. Apart from LAF, instruments of liquidity management include outright open market operations (OMOs), forex swaps and market stabilisation scheme (MSS).
—Reverse Repo Rate: The interest rate at which the Reserve Bank absorbs liquidity from banks against the collateral of eligible government securities under the LAF. Following the introduction of SDF, the fixed rate reverse repo operations will be at the discretion of the RBI for purposes specified from time to time.
—Bank Rate: The rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. The Bank Rate acts as the penal rate charged on banks for shortfalls in meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio). The Bank Rate is published under Section 49 of the RBI Act, 1934. This rate has been aligned with the MSF rate and, changes automatically as and when the MSF rate changes alongside policy repo rate changes.
—Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with the Reserve Bank as a per cent of its net demand and time liabilities (NDTL) as on the last Friday of the second preceding fortnight that the Reserve Bank may notify from time to time in the Official Gazette.
—Statutory Liquidity Ratio (SLR): Every bank shall maintain in India assets, the value of which shall not be less than such percentage of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight, as the Reserve Bank may, by notification in the Official Gazette, specify from time to time and such assets shall be maintained as may be specified in such notification (typically in unencumbered government securities, cash and gold).
—Open Market Operations (OMOs): These include outright purchase/sale of government securities by the Reserve Bank for injection/absorption of durable liquidity in the banking system.

Other Important Articles Covering the same topic:

📍RBI’s Monetary Policy: Why the MPC is likely to maintain status quo

Previous year UPSC Prelims Question Covering similar theme:
7) Consider the following statements: (UPSC CSE, 2023)
Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-1
(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-1
(c) Statement-I is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct

 

PRELIMS ANSWER KEY

1.(b)  2.(b)  3.(b)  4.(b)  5.(b) 6.(d) 7.(a)

  

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