6 UPSC-relevant topics from Indian Express & Social Agent · With MCQs, Mains questions & concept explanations
Direct UPSC Mains relevance for GS-II (Polity & Constitution). Supreme Court judgments on fundamental rights are core constitutional law topics frequently asked in both Prelims and Mains examinations.
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Relevant for UPSC Prelims and Mains (GS Paper III - Economy, specifically Banking and External Sector). Also relevant for GS Paper II - International Relations and Indian Diaspora.
UPSC Relevance
Relevant for UPSC Prelims and Mains (GS Paper III - Economy, specifically Banking and External Sector). Also relevant for GS Paper II - International Relations and Indian Diaspora.
What You Need to Know
Think of FCNR(B) deposits as a special savings account for NRIs that keeps their money in foreign currencies like US dollars or pounds, not rupees. Unlike a regular fixed deposit in India, the depositor doesn't face currency risk because the deposit and interest are denominated in a foreign currency. The RBI recently announced a special dispensation allowing banks to offer these deposits for 3-5 years and absorb the cost of hedging (protecting against exchange rate fluctuations) through a concessional swap facility. This is a clever, targeted policy to attract foreign capital without increasing the overall money supply in the economy.
Why It Matters for UPSC
India's external sector health depends on stable foreign capital inflows. In FY26, FCNR(B) inflows crashed by a staggering 86% to just $946 million, from $7.1 billion in FY25, as higher US interest rates made dollar deposits abroad more attractive. This scheme is designed to reverse that trend and potentially bring in an additional $50-70 billion. For the UPSC exam, this is a classic case study of how monetary policy tools (like swaps) are used to manage the Balance of Payments and shore up foreign exchange reserves without resorting to costly external commercial borrowings.
Current Relevance
The RBI's move comes at a time when the US Federal Reserve has paused its rate cuts, keeping dollar deposit rates above 4%. Indian banks currently offer FCNR(B) rates of only 3-3.65%, which is uncompetitive. The policy's success hinges on banks raising rates by at least 100 basis points to match US CD yields. This is a live, ongoing policy experiment that tests the effectiveness of RBI's 'carrot' (subsidized hedging) versus the 'stick' of market competition. For aspirants, it illustrates the delicate balancing act between attracting foreign capital and maintaining banking sector profitability.
Key Points for Revision
Prelims Practice MCQs
Statement 1 is incorrect because FCNR(B) deposits are denominated in foreign currencies like USD, GBP, EUR, etc., not in Indian rupees. Statement 2 is correct: interest earned is tax-free in India for non-resident depositors. Statement 3 is correct: the RBI's June 2026 scheme allows banks to swap FCNR(B) deposits at a concessional rate, absorbing the hedging cost.
The RBI's scheme aims to attract foreign currency deposits from NRIs by subsidizing the hedging cost for banks. This provides banks with a cheaper source of foreign capital, which can be used to meet dollar demand or bolster forex reserves, thereby helping stabilize India's Balance of Payments. Option (a) is incorrect as it doesn't directly increase money supply; option (c) is wrong because FCNR(B) deposits keep funds in foreign currency; option (d) is not the primary objective.
Highly relevant for UPSC Mains GS-III (Economy & Finance). Government economic policies, tax reforms, and fiscal measures are important current affairs topics for both Prelims and Mains.
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Strong relevance for UPSC Mains GS-III (Environment & Ecology). Environmental policies, pollution control, and sustainable development are key examination topics.
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Relevant for UPSC Mains GS-III (Environment & Disaster Management). Climate change, disaster management, and environmental resilience are important examination topics.
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Relevant for UPSC Mains GS-III (Agriculture & Rural Development). Agricultural policies and farmer welfare programs are important examination topics.
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