Daily Current Affairs (MCQ's) | 18-05-2023

Q1. Consider the following statements with respect to the London Interbank Offered Rate (LIBOR) benchmark

1. LIBOR is a global benchmark interest rate

2. It is used as a benchmark to settle trades in futures, options, swaps and other derivative financial instruments in over-the-counter markets

Which of the above statements is/are correct?

a. 1 only

b. 2 only

c. Both 1 and 2

d. Neither 1 nor 2

Answer (c)

Explanation:

Why are financial regulators transitioning from LIBOR?

• On May 12, the RBI stated that some banks and financial institutions were yet to facilitate an absolute transition away from the London Interbank Offered Rate (LIBOR) benchmark.

• They had not inserted fallback clauses into all their financial contracts that reference U.S.$ LIBOR or the corresponding domestic Mumbai Interbank Forward Outright Rate (MIFOR). Both LIBOR and MIFOR would cease to be a representative benchmark from June 30 this year.

What is LIBOR?

• LIBOR is a global benchmark interest rate that combines individual rates at which banks opine they may borrow from each other (for a particular period of time) at the London interbank market.

• It is used as a benchmark to settle trades in futures, options, swaps and other derivative financial instruments in over-the-counter markets (participants engaging directly without using an exchange) and on exchanges globally.

• Further, consumer lending products including mortgages, credit cards and student loans, among others, too use it as a benchmark rate.

• Every business day before 11 a.m. (London time), banks on the LIBOR panel make their submissions to news and financial data company Thomson Reuters. The panel consists of commercial bankers such as

J.P. Morgan Chase (London branch), Lloyds Bank, Bank of America (London branch), Royal Bank of Canada and UBS AG, among others.

• Following the submission, the contributed rates are ranked. Extreme quartiles, on the top and bottom, are excluded and the middle quartiles are averaged to derive the LIBOR. The idea is to be as close to the median as possible.

What was the controversy around it?

• The central flaw in the mechanism was that it relied heavily on banks to be honest with their reporting disregarding their commercial interests.

• It must be noted that the rates were made public. Therefore, it would not be particularly useful to impress upon potential and current customers the various disadvantages in obtaining funds.

• The phenomenon was particularly on display during the 2008 financial crisis when submissions were artificially lowered (amid the crisis). In 2012, Barclays admitted to the misconduct and agreed to pay $160 million in penalties to the U.S. Dept of Justice.

• The Wall Street Journal too had studied in May 2008 that several panelists were paying “significantly lower borrowing costs” than what other market measures were suggesting. Another observed

phenomenon was the tendency to alter (higher or lower) the submission as per the entities’ trading units’ derivative positions to acquire more profits.

Do we have an alternative in place?

• Yes, in 2017, the U.S. Federal Reserve announced the Secured Overnight Financing Rate (SOFR) as a preferred alternative. Accordingly, in India, new transactions were to be undertaken using the SOFR and the Modified Mumbai Interbank Forward Outright Rate (MMIFOR), replacing MIFOR.

• As stated by the International Finance Corporation (IFC), it is based on observable repo rates, or the cost of borrowing cash overnight, which is collateralised by U.S. Treasury securities. Thus, making it a prevailing transaction-based rate and drifting away from the requirement of an expertise judgement as in LIBOR. This would make it potentially less prone to market manipulation.

How are we responding to the regime change?

• The RBI had stated in its November 2020 bulletin that, in India, exposures to LIBOR are from loan contracts linked to it and Foreign Currency Non-Resident Accounts (FCNR-B) deposits with floating rates of interest and derivatives.

• In August the same year, the banking regulator had asked banks to assess their LIBOR exposures and prepare for the adoption of alternative references rates. Contracts entered after (or before, if possible) December 31, 2021, were not to use the LIBOR as reference rate.

• More importantly, contracts entered before the date were to have fallback clauses, that is, an agreement for revised considerations when the reference rate is no more published — important for transparency and consistency.

Q2. Consider the following statements with respect to the Methanol

1. Methanol has several industrial applications, including as a precursor to acetic acid, formaldehyde, and aromatic hydrocarbons.

2. It is also used as a solvent and as antifreeze.

3. Methanol-poisoning can also cause cerebral edema, haemorrhage, and death.

4. The human body can not tolerate any amount of methanol

Which of the above statements is/are correct?

a. 1 and 2 only

b. 3 and 4 only

c. 1, 2 and 3 only

d. 1, 2, 3 and 4

Answer (c)

Explanation:

What is methanol?

The methanol molecule (CH3OH) consists of one carbon atom bonded with three hydrogen atoms and one hydroxyl group.

Schedule I of the Manufacture, Storage and Import of Hazardous Chemical Rules 1989 includes methanol. The Indian Standard IS 517 applies to how the quality of methanol is to be ascertained, and together with the Tamil Nadu Denatured Spirit, Methyl Alcohol, and Varnish (French Polish) Rules 1959, what signage, methanol packaging should carry. The most common way to produce methanol is to combine carbon monoxide and hydrogen in the presence of copper and zinc oxides as catalysts at 50-100 atm of pressure and 250°C. In the pre-industrial era, going back to ancient Egypt, people also made methanol (together with several other byproducts) by heating wood to a very high temperature.

Methanol has several industrial applications, including as a precursor to acetic acid, formaldehyde, and aromatic hydrocarbons. It is also used as a solvent and as antifreeze. In Tamil Nadu, the manufacture, export, import, storage, and sale of methanol requires licenses under the 1959 Rules.

How does spurious liquor kill?

The deadliness of spurious liquor arises from methanol.

According to James Manor, emeritus professor of Commonwealth Studies at the University of London, “In every hooch tragedy in the history of India

— and of the world since 1945 — the poison has been methanol.” The human body contains infinitesimal quantities of methanol (4.5 ppm in the breath of healthy individuals, per a 2006 study) as a result of eating some fruits. But even for an adult, more than 0.1 ml of pure methanol per kilogram of body-weight can be devastating.

Once ingested, methanol is metabolized in the liver by ADH enzymes to form formaldehyde (H-CHO). Then ALDH enzymes convert formaldehyde to formic acid (HCOOH). The accumulation of formic acid over time leads to a baneful condition called metabolic acidosis. Acidosis can lead to acidemia, a condition wherein the blood’s pH drops below its normal value of 7.35, becoming increasingly acidic. The blood’s pH is normally maintained by a balance between an acid, like carbon dioxide, and a base, like the bicarbonate ion (HCO3–). As methanol is metabolized, the concentration of the bicarbonate ion drops, leading to the acid gaining the upper hand. Formic acid also interferes with an enzyme called cytochrome oxidase, which in turn disrupts cells’ ability to use oxygen and leads to the build-up of lactic acid, contributing to acidosis.

According to a paper published by Archives of Toxicology in January 2022, consuming methanol also leads to “methanol-induced optic neuropathy …, a serious condition that may result in long-term or irreversible visual impairment or even blindness [due to] damage and loss of function of the optic nerve and retina”.

Methanol-poisoning can also cause cerebral edema, hemorrhage, and death.

How can such poisoning be treated?

Once methanol is ingested, the body takes some time to completely eliminate it. One estimate suggests that as much as 33% is still left behind after 48 hours. It is completely absorbed via the gastrointestinal tract and the blood-methanol level can reach its maximum value within 90 minutes. There are two immediate ways to treat methanol poisoning. One is to administer ethanol (of a pharmaceutical grade, by healthcare workers). This may sound counter-intuitive but ethanol competes very well with methanol for the ADH enzymes. As a result, the methanol is kept from being metabolised to formaldehyde.

The other option is to administer an antidote called fomepizole, which has a similar mechanism — it slows the action of the ADH enzymes, causing the body to produce formaldehyde at a rate that the body can quickly excrete, preventing the deadlier effects from kicking in. Both courses of action are limited by the availability of their characteristic compounds. Fomepizole is expensive whereas pharmaceutical-grade ethanol needs to be administered under supervision.

Healthcare workers may also have the individual undertake a dialysis to remove methanol and formic acid salts from the blood, and mitigate damage to the kidneys and retina. They may also administer folinic acid, which encourages the formic acid to break up into carbon dioxide and water. Both fomepizole and folinic acid are in the WHO’s list of essential medicines.

The formic acid would have begun accumulating in dangerous amounts around 18-24 hours after ingestion, affecting the optic nerve, kidneys, the heart, and the brain. Ophthalmic effects have been observed in 50% of those who have consumed methanol, and they become apparent within 24 hours.

If the individual consumed ethanol along with the methanol, the damage may not be evident until after a few days, further delaying treatment and increasing mortality.

Q3. Consider the following statements

1. Both diethylene glycol and ethylene glycol are illegal adulterants that may be used as solvents in liquid medication.

2. Common solvents such as glycerine (also known as glycerol) and propylene glycol are used in cough syrups

Which of the above is/are correct?

a. 1 only

b. 2 only

c. Both 1 and 2

d. Neither 1 nor 2

Answer (c)

Explanation:

What are the toxic chemicals found in samples tested by the WHO? According to the WHO, diethylene glycol and ethylene glycol are toxic to humans when consumed and can prove to be fatal. The agency’s alert listed the toxic effects of the two chemicals as pain, vomiting, diarrhoea, inability to pass urine, headache, altered mental state, and acute kidney injury which could lead death.

Both diethylene glycol and ethylene glycol are illegal adulterants that may be used as solvents in liquid medication. Common solvents such as glycerine (also known as glycerol) and propylene glycol are used in cough syrups to provide a liquid base to non-water-soluble paracetamol or acetaminophen; these solvents also act as preservatives, thickeners, sweeteners, and antimicrobial agents, according to the United States National Center for Biotechnology Information (NCBI).

Medical experts say that in order to cut expenses and due to the solubility of compounds like diethylene glycol and ethylene glycol, manufacturers may sometimes substitute it for nontoxic solvents such as glycerine or propylene glycol or comparatively cheaper commercial grade versions of these solvents which may contain diethylene glycol and ethylene glycol, potentially resulting in contamination.

Dr. Pawan Kumar, a paediatrician at the Madhukar Rainbow Children’s Hospital, told The Hindu: “Because of its toxicity, it (diethylene glycol) is not allowed in food or drugs. But because of its solubility, some drug makers have inappropriately substituted it for nontoxic ingredients such as glycerine in pharmaceuticals such as cough syrups and acetaminophen. Acute kidney failure is the number one cause of death in poisoning cases, and it starts between 8 to 24 hours after exposure to lethal doses of substance. If people don’t get treatment, symptoms progress to multi-organ failure in two to seven days.”

Instances of contamination and deaths linked to diethylene glycol, however, are not new. Such cases have been reported before in India, the United States, Bangladesh, Panama, and Nigeria.

In 2007, the U.S. Food and Drug Administration (FDA) issued a guidance to pharmacy compounders, repackers, and suppliers about a potential public hazard— glycerin(e) contaminated with diethylene glycol (DEG), calling DEG a “poison”. The FDA’s advisory followed reports of fatal DEG poisoning of consumers who ingested medicinal syrups, such as cough syrup or acetaminophen syrup.

Last year, 12 children died in Udhampur district of Jammu due to contaminated cough syrup called Coldbest-PC, manufactured by a company in Himachal Pradesh. These deaths were also linked to the presence of high levels of diethylene glycol in the cough syrup. The State’s administration later ordered the withdrawal of the drug from all the other States where it was marketed.

Q4. Consider the following statements with regard to El Nino

1. El Nino can cause global warming

2. El Nino is the large-scale warming of surface temperatures in the central and eastern equatorial Pacific Ocean

Which of the above is/are correct?

a. 1 only

b. 2 only

c. Both 1 and 2

d. Neither 1 nor 2

Answer (c)

Explanation:

Key climate threshold likely to be breached in 5 years: UN

• It is near-certain that 2023-2027 will be the warmest five-year period ever recorded, the United Nations warned on Wednesday as greenhouse gases and El Nino combine to send temperatures soaring.

• There is a two-thirds chance that at least one of the next five years will see global temperatures exceed the more ambitious target set out in the Paris accords on limiting climate change, the UN’s World Meteorological Organization (WMO) said.

• The hottest eight years ever recorded were all between 2015 and 2022, with 2016 the warmest — but temperatures are forecast to increase further as climate change accelerates.

• “There is a 98% likelihood that at least one of the next five years, and the five-year period as a whole, will be the warmest on record,” the WMO said.

• The 2015 Paris Agreement saw countries agree to cap global warming at “well below” two degrees Celsius above average levels measured between 1850 and 1900 — and 1.5 degrees Celsius if possible.

• The global mean temperature in 2022 was 1.15 degrees Celsius above the 1850-1900 average.

• The WMO said there was a 66% chance that annual global surface temperatures will exceed 1.5 degrees Celsius above pre-industrial levels for at least one of the years 2023-2027, with a range of 1.1 degrees Celsius to 1.8 degrees Celsius forecasted for each of those five years.

• “WMO is sounding the alarm that we will breach the 1.5C level on a temporary basis with increasing frequency,” said the agency’s chief Petteri Taalas.

• “A warming El Nino is expected to develop in the coming months and this will combine with human-induced climate change to push global temperatures into uncharted territory.

• “This will have far-reaching repercussions for health, food security, water management and the environment. We need to be prepared.”

• El Nino is the large-scale warming of surface temperatures in the central and eastern equatorial Pacific Ocean. The weather phenomenon normally occurs every two to seven years.

• Typically, El Nino increases global temperatures in the year after it develops — which in this cycle would be 2024. Heat gets trapped in the atmosphere by so-called greenhouse gases, which are at a record high.

• The major greenhouse gases are carbon dioxide, plus methane and nitrous oxide. “The return to normal level might take even thousands of years because we already have such a high concentration of carbon dioxide, and we have lost the melting of glaciers and sea level game,” said Mr. Taalas.

• “There’s no return to the climate which persisted during the last century.”

Q5. Consider the following statements about the Lingaraj temple

1. Lingaraj temple is the largest temple in Bhubaneswar.

2. The temple is built in the Deula style.

Which of the above statements is/are incorrect?

A. 1 only

B. 2 only

C. Both 1 and 2

D. Neither 1 nor 2

Answer (d)

Explanation:

• The Central government had told the Odisha government that its ordinance to bring the 11th century Lingaraj temple in Bhubaneswar and its associated temples under a special law is outside the legislative competence of the state legislature.

• Lingaraj temple is the largest temple in Bhubaneswar.

• Constructed by King Jajati Keshari in the 10th Century and completed by King Lalatendu Keshari in the 11th century.

• The temple is built in the Deula style.

• The temple, dedicated to Lord Shiva, marks the culmination of the temple architecture in Bhubaneswar which was the cradle of the Kalinga School of Temple Architecture.