31st May 2025 – Current Affairs

1. India Needs a Comprehensive Crypto Strategy – InternationaI Relations

Why in News?

• Pakistan’s Crypto Council signed an MoU with World Liberty Financial Inc. (WLFI), a Trump-family linked company, aiming to:
  • Promote financial inclusion through blockchain.
  • Monetize national assets like rare earth minerals via cryptocurrencies.
  • Establish Pakistan as a regional cryptocurrency hub.
• Raises concerns for India’s security and economic interests.
• Indian Supreme Court, in Shailesh Bhatt’s bail hearing (early 2025), highlighted regulatory gaps in India’s crypto framework—urging a comprehensive strategy.

Key Takeaways & Explanations

1. Pakistan’s Crypto Push – What, Why, How?

• Financial Inclusion via Blockchain:
  • Blockchain allows transparent, secure, low-cost transactions, even for the unbanked.
  • Pakistan aims to expand access to financial services amidst economic challenges.
• Monetizing National Assets (e.g., Rare Earth Minerals):
  • Cryptocurrencies offer global access to markets.
  • By tokenizing minerals, Pakistan hopes to attract foreign investment.
• Crypto Hub Ambitions:
  • Pakistan’s MoU includes plans to launch stablecoins—cryptocurrencies pegged to assets like the US dollar—facilitating trade and remittances.
  • Targets diaspora engagement, foreign investors, and regional market leadership.

2. Trump’s Support for Crypto – Global Context

• The Trump administration is:
  • Advocating blockchain innovation.
  • Reducing regulatory barriers in the U.S. to lead the digital assets market.

3. Concerns for India – Strategic & Security Implications

4.India’s Regulatory Vacuum

• Supreme Court flagged:
  • Inconsistent taxation of crypto without a legal framework.
  • Need for:
    • Clear regulations: Investor protection, innovation, risk management.
    • International cooperation: Combat illicit use of crypto globally.
• Current Indian policy: Cautious stance with high tax rates (30%) but no full regulatory clarity.

Broader Context & Implications

• Cryptocurrencies = double-edged sword:
  • Opportunities: Innovation, financial inclusion, global competitiveness.
  • Risks: Terrorism financing, capital flight, regulatory challenges.
• Pakistan’s push shows how countries can:
  • Use crypto to circumvent traditional systems.
  • Engage geopolitically via crypto diplomacy.
• For India:
  • Urgent need for a comprehensive crypto policy balancing:
    • Innovation vs. Security.
    • Investor protection vs. Global competitiveness.
  • Must prepare for cross-border crypto dynamics in South Asia.

Summary

• Pakistan is pursuing a crypto-led strategy to boost its economy, financial inclusion, and geopolitical influence, partnering with WLFI (linked to the Trump family). This includes leveraging blockchain for trade, diaspora engagement, and monetizing resources like rare earth minerals.
• India’s lack of a regulatory framework for cryptocurrencies poses security, economic, and competitive risks—highlighted by the Supreme Court’s concerns.
• India must urgently create a clear, balanced, and forward-looking crypto policy to:
  • Foster innovation.
  • Mitigate risks (terror financing, illicit flows).
  • Enhance global partnerships for crypto regulation.
  • Retain regional leadership in digital finance.

Exam Connect – Possible Questions

Prelims

1.Which of the following is NOT a feature of blockchain technology?
A. Decentralization
B.Immutability
C. Centralized ledger control
D. Transparency
Answer: C. Centralized ledger control

2. The term “Stablecoin” refers to:
A. A cryptocurrency with highly volatile value
B. A cryptocurrency pegged to a stable asset like fiat currency
C. A government-issued digital currency
D. None of the above
Answer: B. A cryptocurrency pegged to a stable asset like fiat currency

3. Which of the following countries recently signed an MoU to promote blockchain-based financial services and aims to become a regional crypto hub?
A. India
B. Pakistan
C. Bangladesh
D.Nepal
Answer: B. Pakistan

Mains

`1. Discuss the potential impact of Pakistan’s emerging crypto strategy on India’s economic and security interests.

2.Critically analyze the need for a comprehensive cryptocurrency policy in India. What key aspects should such a policy cover to ensure innovation while mitigating risks?

3. How can India balance promoting innovation in the crypto space with concerns related to terrorism financing and illicit activities? Suggest a roadmap for effective regulation.

2. Surge in Bank Fraud Value Despite Decline in Cases: RBI – Economy

Why in News?

• According to the RBI’s Annual Report for FY25:
  • Number of bank fraud cases declined by 34% in FY25.
  • But the total value involved surged by nearly three times (194% increase) compared to FY24.
  • Significant rise in digital payment fraud cases, though most cases had lower monetary value.

Key Takeaways & Explanations

1. Fraud Cases vs. Fraud Value: A Contradiction

• Fewer frauds, but bigger amounts → Suggests larger, more sophisticated frauds even as routine fraud detection improves.

2. Nature & Sectoral Distribution of Frauds

• 92% of total fraud value (₹33,148 crore) was related to advances (loans), highlighting weaknesses in lending practices:
  • Poor credit appraisal.
  • Lax monitoring of loans.
  • Possible collusion or negligence.
• Digital Payment Frauds:
  • Accounted for majority of cases (13,516 cases).
  • But low total value (₹520 crore) → Suggests small-ticket frauds but high frequency.
• Bank-wise Distribution:
  • Public Sector Banks (PSBs):
    • Fewer cases, but higher value: ₹25,667 crore.
  • Private Sector Banks:
    • 59.4% of total cases, but lower total value → Indicates better control over high-value loans but vulnerability in routine operations.

3. Reclassification of Old Cases

• 122 old fraud cases (₹18,674 crore) were reclassified after a Supreme Court judgment.
• This significantly affected the reported figures for FY25.

4.RBI & Government Response

• RBI Measures:
  • Enhanced supervision of private sector banks.
  • Liquidity stress testing to assess bank resilience.
  • Digital forensic readiness to trace frauds in real time.
• Government Measures:
  • Central Fraud Registry: Database of frauds for early detection.
  • Fugitive Economic Offenders Act, 2018: Allows confiscation of properties of economic offenders who flee the country.

Broader Implications

• Financial Stability Risk: Large-value frauds, even if fewer in number, threaten banking sector health.
• Trust in Digital Economy: Rise in digital payment frauds could undermine trust in digital platforms and financial inclusion goals.
• Need for Robust Systems:
  • Loan appraisal & monitoring must improve.
  • Cybersecurity and fraud detection systems need strengthening, especially in the digital space.
• Balance Between Innovation & Regulation: As India promotes digital banking, fraud mitigation strategies must evolve alongside.

Summary

The RBI’s Annual Report for FY25 reveals a paradox: while the number of reported bank fraud cases declined by 34%, the total amount involved surged nearly threefold, to ₹36,014 crore. The majority of fraud cases arose from digital payment systems but involved lower amounts, while advances (loans) accounted for over 92% of the total value. Public sector banks faced higher fraud value losses, while private banks reported more cases. The RBI and the Government of India have responded with enhanced regulatory and monitoring frameworks, but the data underscores persistent vulnerabilities in India’s banking system, especially in loan disbursals and the digital ecosystem.

Exam Connect – Possible Questions

Prelims

1. According to the RBI Annual Report for FY25, which type of fraud accounted for the majority of the total fraud amount?
A. Digital payment frauds
B. Credit card frauds
C. Advances-related frauds
D. Insurance frauds
Answer: C. Advances-related frauds


2. The Fugitive Economic Offenders Act, 2018 empowers authorities to:
A. Regulate cryptocurrency transactions
B.Confiscate properties of economic offenders who flee the country
C. Penalize digital payment platforms for data breaches
D. Ban high-value cash transactions in India
Answer: B. Confiscate properties of economic offenders who flee the country

3. Which of the following statements is correct about the trends in bank frauds in FY25?
A.The total number of fraud cases increased while the total value decreased.
B. The total number of fraud cases decreased, but the total value increased significantly.
C.Both the total number of fraud cases and the total value decreased.
D. Both the total number of fraud cases and the total value increased.
Answer: B. The total number of fraud cases decreased, but the total value increased significantly.

Mains

1. Discuss the reasons behind the surge in the monetary value of bank frauds despite a decline in the total number of cases in FY25. Suggest measures to strengthen the Indian banking system against large-value frauds.

2.Examine the vulnerabilities in India’s digital payments ecosystem highlighted by the RBI’s Annual Report. How can regulatory frameworks ensure both security and trust in digital financial services?

3.Critically analyze the role of the Central Fraud Registry and the Fugitive Economic Offenders Act, 2018 in combating bank frauds in India. How can their effectiveness be improved?

3. Modified Interest Subvention Scheme (MISS) – Economy

Why in News?

• The Union Cabinet has approved the continuation of the Interest Subvention (IS) component under the Modified Interest Subvention Scheme (MISS) for FY 2025-26.
• Objective: To support farmers with low-interest loans for agricultural and allied activities.

Key Takeaways & Explanations

1. What is the Modified Interest Subvention Scheme (MISS)?

• A government scheme providing interest subvention (subsidy) on short-term crop loans through Kisan Credit Card (KCC).
• Farmers can borrow up to ₹3 lakh at 7% interest.
• Additional incentives:
  • 1.5% interest subvention to banks (government reimburses banks).
  • 3% Prompt Repayment Incentive (PRI) for farmers → Effective interest rate reduced to 4% for timely repayments.

2. Target Sectors & Loan Coverage

• Crops: Loans for inputs, seeds, fertilizers, pesticides, etc.
• Livestock & Fisheries: Farmers in animal husbandry and fisheries also eligible for loans up to ₹3 lakh under MISS.

3. Implementation & Monitoring

4. Kisan Credit Card (KCC) – Back to Basics

Benefits & Broader Impact

• Reduces farmers’ dependency on moneylenders → Supports financial inclusion.
• Encourages timely loan repayment → Promotes credit discipline.
• Supports livelihood diversification via coverage of animal husbandry & fisheries.
• Digital monitoring via KRP → Improves transparency and accountability.

Summary

The Union Cabinet has approved the continuation of the Interest Subvention (IS) component under the Modified Interest Subvention Scheme (MISS) for FY 2025-26. The scheme facilitates low-interest short-term loans to farmers via the Kisan Credit Card (KCC) system, with an effective interest rate of 4% for timely repayments. It covers loans up to ₹3 lakh for both crop and allied sectors, including livestock and fisheries. The scheme is implemented by banks and monitored by RBI and NABARD, with the Kisan Rin Portal (KRP) enhancing transparency. The continuation of MISS aims to reduce rural indebtedness, promote financial inclusion, and support farmers’ resilience.

Exam Connect – Possible Questions

Prelims

1.Under the Modified Interest Subvention Scheme (MISS), the effective interest rate for farmers who repay on time is:
A. 7%
B. 4%
C. 6%
D. 3%
Answer: B. 4%

2.The Kisan Credit Card (KCC) scheme was launched based on the recommendations of which committee?
A. R.V. Gupta Committee
B. Narsimham Committee
C. Bimal Jalan Committee
D. Deepak Mohanty Committee
Answer: A. R.V. Gupta Committee

3.The Kisan Rin Portal, launched in 2023, primarily aims to:
A. Provide crop insurance to farmers
B. Monitor and track the disbursement of agricultural loans
C. Replace the Kisan Credit Card system
D. Digitize land records for farmers
Answer: B. Monitor and track the disbursement of agricultural loans

Mains

1.Discuss the key features and objectives of the Modified Interest Subvention Scheme (MISS). How does it contribute to financial inclusion and credit access for farmers in India?

2.The Kisan Credit Card (KCC) scheme has been a major initiative for agricultural credit in India. Critically evaluate its impact on rural livelihoods and the challenges it faces in effective implementation.

3.Examine the role of digital platforms like the Kisan Rin Portal in enhancing transparency and efficiency in agricultural credit disbursement. What challenges might arise in its effective use?

4. Government Tightens Norms for CSS and CS Schemes – Governance

Why in News?

• As India prepares for the 16th Finance Commission cycle (2026–2031), the Union Government has mandated:
  • Third-party evaluations for all Centrally Sponsored Schemes (CSS) and Central Sector (CS) schemes to be eligible for continuation beyond March 31, 2026.
• This move affects 54 CSSs and 260 CS schemes that have approval validity only up to March 31, 2026.

Key Takeaways & Explanations

1.What are CSS and CS Schemes?

2.Why the Need for Third-Party Evaluations?

• To ensure fiscal prudence and evidence-based policymaking.
• To justify scheme continuation:
  • Prove positive outcomes.
  • Show alignment with national priorities.
  • Avoid wasteful expenditure and inefficient schemes.
• Past evaluations have helped the Government:
  • Rationalize funding.
  • Redirect resources to capital expenditure → Budgeted at ₹1.21 lakh crore for FY 2025–26.

3. Implementation Process & Deadlines

4.Fiscal Discipline & Reform Focus

• Move towards performance-based funding → Prioritize schemes that deliver measurable outcomes.
• Aligns with global best practices in public finance management:
  • Outcome budgeting.
  • Rationalization of government schemes.
  • Efficient allocation of scarce resources.

Implications

• For Ministries:
  • Pressure to show results → Schemes must demonstrate impact, efficiency, and necessity.
  • No more automatic renewals → Each scheme must justify its continuation.
• For Fiscal Policy:
  • Promotes fiscal discipline → Controls revenue and expenditure mismatches.
  • Helps curb ballooning subsidies or ineffective programs.
• For Governance:
  • Strengthens transparency and accountability.
  • Pushes India towards evidence-based, data-driven policymaking.

Summary

The Union Government has made third-party evaluations mandatory for all Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CS) seeking continuation beyond March 31, 2026. This affects 54 CSSs and 260 CS schemes as India moves into the 16th Finance Commission cycle (2026–31). The policy emphasizes fiscal prudence, performance-based funding, and the rationalization of public expenditure. Ministries must complete evaluations by July 2025, ensuring schemes demonstrate positive outcomes, efficiency, and alignment with national goals. This marks a major step towards evidence-based governance and fiscal responsibility.

Exam Connect – Possible Questions

Prelims

1.The Union Government has mandated third-party evaluations for which of the following schemes before their continuation beyond March 31, 2026?
A. Only Centrally Sponsored Schemes
B. Only Central Sector Schemes
C. Both Centrally Sponsored and Central Sector Schemes
D. Only flagship welfare schemes
Answer: C. Both Centrally Sponsored and Central Sector Schemes


2. Which of the following statements is/are correct about the 16th Finance Commission cycle?
1.It will cover the period from 2026 to 2031.
2.Funding for ministries will be based on a 10× multiplier of average expenditure from 2021–22 to 2025–26.
Select the correct answer:
A.1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: A. 1 only


3. The Kisan Credit Card (KCC) scheme is an example of which type of scheme?
A. Central Sector Scheme
B. Centrally Sponsored Scheme
C.State Scheme
D. None of the above
Answer: B. Centrally Sponsored Scheme

Mains

1. Explain the rationale behind the Government of India’s decision to mandate third-party evaluations for the continuation of CSS and CS schemes beyond 2026. What benefits and challenges might arise from this approach?

2.Discuss the significance of performance-based funding in the context of Centrally Sponsored and Central Sector schemes. How can this shift contribute to better governance and fiscal management in India?

3. The 16th Finance Commission will play a pivotal role in India’s fiscal federal framework. Examine how the re-evaluation of CSS and CS schemes aligns with the broader goals of fiscal federalism and public finance reform.

5. Autonomous Warfare in Operation Sindoor – Defence & Security

Why in News?

• Operation Sindoor (May 2023) marked the first direct drone-led conflict between India and Pakistan, following the April 22 Pahalgam terror attack.
• Significance: Demonstrates a shift towards Autonomous Warfare—using Unmanned Aerial Systems (UAS) for precise, cross-border strikes below the threshold of full-scale war.

Key Takeaways & Explanations

1. Operation Sindoor – A Paradigm Shift

2.What is Autonomous Warfare?

• Definition: Use of AI-powered systems and autonomous platforms (like drones) to carry out military operations without direct human control during critical mission phases.
• Key Features in Operation Sindoor:
  • Algorithm-driven targeting.
  • Autonomous decision loops in drone swarms.
  • Reduced human risk → “Risk-removed” precision strikes.

3. India’s Air Defence Ecosystem

4.Strategic Implications for South Asia

• New Model of Deterrence: Autonomous warfare allows low-risk, high-impact strikes without crossing into full-scale war.
• Regional Aerial Power Shift: India’s technological edge in AI-enabled drones and ISR systems.
• Future Warfare Outlook:
  • Algorithmic Conflict: Wars may begin with silent, autonomous drone deployments.
  • Psychological impact: Unpredictability and constant surveillance pressure.

Broader Context: Autonomous Warfare & Global Trends

• Part of a global shift in military doctrine:
  • Loitering munitions: E.g., Nagastra-1, Harop.
  • Swarm drones: Potential future capability.
  • AI-driven decision-making: Reduces human error, speeds up engagement.
• Challenges:
  • Ethical dilemmas: Machine-led targeting.
  • Risk of escalation: Blurred lines between limited engagement and full-scale conflict.
  • Civilian harm: Dual-use nature of drone technologies.

Summary

Operation Sindoor (May 2023) marked a watershed moment in South Asian military dynamics, representing the first drone-led, autonomous warfare engagement between India and Pakistan. India’s use of indigenous and imported drone technologies, sequenced strikes, and ISR capabilities highlighted a shift towards algorithm-driven, low-risk precision strikes. The operation demonstrated India’s evolving layered air defence capabilities through the IACCS, S-400, and SPYDER systems. It signifies a future where autonomous drones and AI could define the early stages of conflicts, transforming both military strategy and the psychology of warfare in the region.

Exam Connect – Possible Questions

Prelims

1. Which of the following best describes a “loitering munition”?
   A. A missile designed to intercept enemy aircraft at high altitudes.
   B. A drone that loiters over a target area and strikes autonomously.
   C. A manned aircraft used for long-range surveillance.
   D.A naval mine designed to detect and destroy enemy submarines.
   Answer: B. A drone that loiters over a target area and strikes autonomously.
   
   
2. The Integrated Air Command and Control System (IACCS) of India primarily serves to:
   A. Manage naval fleet deployments.
   B.Integrate air defence sensors and enable real-time aerial threat response.
   C. Operate unmanned underwater vehicles.
   D. Coordinate satellite launches for space exploration.
   Answer: B. Integrate air defence sensors and enable real-time aerial threat response.
   
   
3. In Operation Sindoor, India reportedly used which indigenous loitering munition?
   A. Akash
   B. Astra
   C.Nagastra-1
   D. Pinaka
   Answer: C.Nagastra-1

Mains

1. Explain the concept of autonomous warfare with reference to Operation Sindoor. Discuss how the use of drones and AI-powered systems is transforming the nature of military conflict in South Asia.

2.Operation Sindoor is seen as a turning point in India’s military capabilities. Critically examine the role of layered air defence systems and integrated command structures in safeguarding India’s airspace.

3.What are the strategic and ethical challenges posed by the use of autonomous weapons in modern warfare? Suggest policy measures India can adopt to balance innovation with responsibility.

6. Culling of Vermins – Environment

Why in News?

• The Kerala Cabinet is considering introducing a state bill for the scientific and regulated culling of wild animals, particularly targeting feral boars.
• This raises questions on the legal framework and the concept of vermin classification under the Wildlife Protection Act, 1972.

Key Takeaways & Explanations

1.What are Vermins?

• Vermins can cause:
  • Crop destruction (e.g., feral boars, nilgai).
  • Livestock harm.
  • Threats to human life/property.

2.Legal Framework: Wildlife Protection Act (WPA), 1972

3.How is an Animal Declared Vermin?

Important: Animals in Schedule I (e.g., tigers, elephants) cannot be declared vermin.

4.Examples of Declared Vermins in India

Why Culling Vermins?

Broader Policy Context

• Balancing biodiversity conservation with human-wildlife conflict mitigation.
• Need for:
  • Scientific management plans.
  • Ecosystem-based approaches (habitat restoration, fencing, compensation schemes).
• Sustainable wildlife management is key, especially with growing human-wildlife interface.

Summary

The culling of vermins refers to the regulated elimination of specific animals deemed harmful to crops, livestock, or human life. Under the Wildlife Protection Act, 1972, the Central Government (under Section 62) can declare certain species as vermin for specific areas and periods, thereby removing their legal protection. The Wildlife Protection (Amendment) Act, 2022 streamlines this process by removing Schedule V and empowering the Centre to directly notify species as vermin (excluding Schedule I animals). While culling helps manage human-wildlife conflicts, it also raises concerns about ecological balance and ethical considerations.

Exam Connect – Possible Questions

Prelims

1.Under the Wildlife Protection (Amendment) Act, 2022, the power to declare an animal as vermin lies with:
A. State Government
B.Ministry of Environment, Forest and Climate Change (MoEFCC)
C.National Biodiversity Authority
D. Supreme Court of India
Answer: B. Ministry of Environment, Forest and Climate Change (MoEFCC)

2.Which of the following animals cannot be declared as vermin under the Wildlife Protection Act?
A. Nilgai
B. Wild boar
C. Tiger
D.Rhesus monkey
Answer: C. Tiger

3.The removal of Schedule V from the Wildlife Protection Act implies:
A. All wild animals are now protected under Schedule I.
B. The Centre can directly declare any species as vermin, except Schedule I species.
C. State Governments have sole authority over vermin declarations.
D. Hunting of all animals is now legal.
Answer: B. The Centre can directly declare any species as vermin, except Schedule I species.

Mains

1.Discuss the legal framework governing the classification of vermins in India. How does the Wildlife Protection (Amendment) Act, 2022 alter the process of declaring animals as vermin?


2. Culling of vermins is often seen as a solution to human-wildlife conflict. Critically examine the ecological, ethical, and socio-economic implications of such measures, with recent examples.


3. Evaluate the effectiveness of culling as a long-term strategy for managing human-wildlife conflicts in India. Suggest alternative or complementary approaches.

7. Quality Council of India (QCI) – Polity

Why in News?

• The Minister of State for Commerce and Industry inaugurated the new unified headquarters of the Quality Council of India (QCI) at the World Trade Centre, New Delhi.
• This event highlights QCI’s central role in India’s quality ecosystem and its expanding national footprint.

Key Takeaways & Explanations

1.What is the Quality Council of India (QCI)?

2.Functions & Roles

3.Significance of QCI

• Assures consumer safety & product reliability.
• Strengthens India’s competitiveness in global markets.
• Facilitates Ease of Doing Business by standardizing quality frameworks.
• Supports Make in India by promoting quality manufacturing.
• Enhances citizen well-being by ensuring quality in healthcare, education, environment, etc.

4.Examples of QCI’s Work

Summary

The Quality Council of India (QCI), established in 1997, is a non-profit autonomous body under the Ministry of Commerce and Industry. Formed through a public-private partnership (Government + industry associations like ASSOCHAM, CII, and FICCI), QCI functions as India’s national accreditation body. It promotes quality standards across various sectors, ensures adherence to international best practices, and supports India’s global trade ambitions. QCI is integral to India’s nationwide quality movement, enhancing consumer protection, industrial competitiveness, and public welfare.

Exam Connect – Possible Questions

Prelims

1. The Quality Council of India (QCI) was established through a partnership between the Government of India and which of the following industry associations?
A.CII
B. FICCI
C. ASSOCHAM
D.All of the above
Answer: D. All of the above

2. Which Ministry has administrative control over the Quality Council of India (QCI)?
A. Ministry of Micro, Small and Medium Enterprises
B. Ministry of Consumer Affairs
C. Ministry of Commerce and Industry
D. Ministry of Corporate Affairs
Answer: C. Ministry of Commerce and Industry


3.Which of the following standards is promoted by the Quality Council of India for Food Safety Management?
A. ISO 9001
B. ISO 22000
C. ISO 14001
D.ISO 50001
Answer: B. ISO 22000

Mains

1.Discuss the role of the Quality Council of India in promoting quality standards across sectors in India. How does its work contribute to India’s economic growth and consumer welfare?

2.Explain the significance of public-private partnership in the establishment and functioning of the Quality Council of India. What challenges does QCI face in ensuring quality compliance across diverse sectors?