RBI cancels Paytm Payments Bank licence: Reasons, Legal Basis, and Impact for UPSC

Context: RBI cancels Paytm Payments Bank licence

RBI cancelled the licence of Paytm Payments Bank Ltd effective April 24, 2026 after sustained regulatory non-compliance; winding-up proceedings will follow.

Payments Banks

• Origin: Nachiket Mor Committee, 2013
• Purpose: Financial inclusion and low-cost digital payments

Model

Niche banks for deposits and payments, not full-service banking

Key Points

• Deposits up to ₹2 lakh per customer
• Savings/current accounts, UPI, remittances
• Debit/ATM cards allowed
• No lending or credit cards
• Funds largely invested in government securities

RBI Action Reasons + Legal Basis

RBI used Section 22(4), Banking Regulation Act, 1949.

Grounds

• Breach of licence conditions under Section 22
• Persistent non-compliance despite repeated directions
• KYC/AML lapses and weak due diligence
• Deficiencies in governance and internal controls
• Improper conduct of permissible banking activities under Sections 5(b) and 6
• Threat to depositors’ interest and public interest

Regulatory Trajectory

• 2022: Bar on new customers
• 2024: Operational restrictions
• 2026: Licence cancellation

Anti-Defection Law: Will AAP MPs Shift to BJP Lead to Disqualification? UPSC Analysis

Context: Anti-Defection Law

Seven AAP MPs in the Rajya Sabha joined the BJP. The key issue is whether this attracts disqualification under the anti-defection law.

Anti-Defection Law (Tenth Schedule)

Origin and Evolution

• Added by the 52nd Constitutional Amendment Act, 1985
• Strengthened by the 91st Constitutional Amendment Act, 2003

Purpose

• Prevent defections and maintain party discipline

Core Rule

• A member is disqualified if he/she:
  • Voluntarily gives up party membership
  • Votes or abstains against the party whip

Exception – Merger (Central to this case)

• Paragraph 4: No disqualification if at least two-thirds of a party’s members in a House agree to merge with another party

91st Amendment (Key Impact)

• Abolished protection for split (one-third)
• Only two-thirds merger is a valid safeguard now

Decision Authority

• Chairman (Rajya Sabha) or Speaker (Lok Sabha)

Why disqualification may not apply

• AAP had 10 MPs in Rajya Sabha; 7 have switched
• This crosses the two-thirds threshold
• Therefore, it can be treated as a “merger” under Paragraph 4, not defection
• If the Chairman accepts this as a merger, no disqualification applies

Foreign Direct Investment: Net FDI Hits 45-Month High in Feb 2026 – Key Facts for UPSC

Context: Foreign Direct Investment

Net FDI turned positive in February 2026, reaching a 45-month high after six months of decline.

Foreign Direct Investment

• Definition: Foreign Direct Investment is an investment made by a foreign entity in a domestic enterprise with the objective of establishing lasting interest and significant control (generally 10% or more ownership)
• Types: Greenfield, Brownfield
• Components: Equity, reinvested earnings, other capital
• Significance: Growth, jobs, technology

Key Points

• Net FDI: $4.6 billion
• Gross FDI: +61.6% (~$9 billion)
• Rise mainly due to sharp fall in outflows (lower repatriation + outward FDI)
• Key sectors: Manufacturing, services
• Top sources (Economic Survey): Singapore, Mauritius, USA
• Greenfield attractiveness remains, but announcements declined

Extreme climate events impact habitats: 36% Land Species at Risk by 2085 – UPSC Study

Context: Extreme climate events impact habitats

A study in Nature Ecology & Evolution finds extreme climate events could affect over one-third of land animal habitats by 2085.

Key Points

• Magnitude of risk
  
  • 36% habitats exposed to multiple extreme events by 2085
  • Based on ~34,000 vertebrate species across 794 ecoregions
• Nature of threat
  
  • Shift from gradual warming to frequent, intense extreme events
  • Heatwaves most widespread driver of impact
• Projected exposure
  
  • By 2050: ~74% habitats exposed to heatwaves
  • Other risks:
    • Wildfires: ~16%
    • Droughts: ~8%
    • Floods: ~3%
• Geographical concentration
  
  • High-risk zones: Amazon, Tropical Africa, Southeast Asia
  • Asia to witness a sharp increase in extreme events
• Compounding effect
  
  • Sequential or simultaneous events amplify ecosystem damage
  • Greater risk than isolated events
• Empirical evidence
  
  • Australia heatwave (2019–20): >72,000 flying foxes died
  • Pantanal wildfires: ~17 million vertebrates lost
• Key concern
  
  • Species cannot adapt at the pace of climate change
  • Conservation planning underestimates extreme-event risks
• Way forward
  
  • Rapid emission cuts and net-zero transition can significantly limit exposure
  • Need for climate-resilient conservation strategies

SC quota sub-classification: Karnataka Approves Internal Reservation – Supreme Court View Explained

Context: SC quota sub-classification

Karnataka government approved internal sub-classification within the 15% SC quota to ensure equitable distribution among SC groups, based on commission recommendations.

What Karnataka has done

• 15% SC quota split as:
  • Category 1 (Madiga & allied): 5.25%
  • Category 2 (Holeya & allied): 5.25%
  • Category 3 (Others incl. Bhovi, Lambani etc.): 4.5%
• Based on Justice H.N. Nagamohan Das Commission
• Objective: Address intra-SC inequalities

Supreme Court Position on Sub-classification

• E.V. Chinnaiah v. State of Andhra Pradesh (2004)
  → SCs treated as a homogeneous class; sub-classification not allowed
  
• State of Punjab v. Davinder Singh & Others (2020)
  → Questioned Chinnaiah; held sub-classification may be permissible
  → Referred to a larger Bench
  
• State of Punjab v. Davinder Singh (Constitution Bench, 2024)
  → Upheld that States can sub-classify SCs
  → Valid to achieve substantive equality