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Finance

13- FINANCE

  • THE Ministry of Finance is responsible for the administration of the finances of the government.
  • It is concerned with all economic and financial matters affecting the country as a whole including mobilization of resources for development and other purposes.
  • It regulates expenditure of the government including the transfer of resources to the states.
  • In particular, it concerns itself with taxation, financial legislation, financial institutions, capital markets, center and state finances, and the Union Budget.
  • The Ministry is also the cadre controlling authority of the Indian Revenue Service, Indian Economic Service, Indian Cost Accounts Service, and Indian Civil Accounts Service.
  • This Ministry consists of five departments:
    • Economic Affairs
    • Expenditure
    • Revenue
    • Investment and Public Asset Management
    • Financial Services

Department of Economic Affairs:

  • The Department of Economic Affairs is the nodal agency of the government to formulate and monitor the country’s economic policies and programs having a bearing on domestic and international aspects of economic management.
  • A principal responsibility of this Department is the preparation and presentation of the Union Budget (including Railway Budget) to the Parliament and budget for the state governments under President’s Rule and union territory administrations.
  • Other functions:
    • Formulation and monitoring of macroeconomic policies, including issues relating to fiscal policy and public finance
    • Production of bank inflation, public debt management and the functioning of the capital market including stock exchanges notes and coins of various denominations, postal stationery, postal stamps
    • Cadre management, career planning and training of the Indian Economic Service
  • The Department, inter alia, monitors current economic trends and advises the Government on all matters having bearing on internal and external aspects of economic management including, prices, credit, fiscal and monetary policy, and investment regulations.
  • All the external, financial, and technical assistance received by India, except through specialized International Organizations like FAO, ILO, UNIDO, and except under International bilateral specific agreement in the field of science and technology, culture, and education are also monitored by this Department.
  • The Directorate of Currency has the administrative control of the Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly-owned Government of India Corporation that manages Government of India mints, currency presses, security presses, and security paper mill.

Annual Financial Statement:

  • Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year.
  • This statement titled ‘Annual Financial Statement’ is the main Budget document.
  • The Annual Financial Statement shows the receipts and payments of the government under the three parts in which government accounts are kept:
    • Consolidated Fund
    • Contingency Fund
    • Public Account

Consolidated Fund

  • All revenues received by the government, loans raised by it, and also its receipts from recoveries of loans granted by it, form the Consolidated Fund.
  • All expenditure of the government is incurred from the Consolidated Fund and no amount can be withdrawn from the Fund without authorization from Parliament.

Contingency Fund

  • Occasions may arise when the government may have to meet urgent unforeseen expenditures pending authorization from Parliament.
  • The Contingency Fund is an imprest placed at the disposal of the President to incur such expenditure.
  • Parliamentary approval for such expenditure and for withdrawal of an equivalent amount from the Consolidated Fund is subsequently obtained and the amount spent from Contingency Fund is subsequently recouped to the Fund.
  • The corpus of the Fund authorized by the Parliament, at present, is ? 500 crore.

Public Account

  • Besides the normal receipts and expenditure of Government which relate to the Consolidated Fund, certain other transactions enter Government accounts, in respect of which, Government acts more like a banker, for example, transactions relating to provident funds, small savings collections, and other deposits, etc.
  • The money thus received are kept in the Public Account and the connected disbursements are also made therefrom.
  • Parliamentary authorization for such payments from the Public Account is, therefore, not required.
  • In a few cases, a part of the revenue of Government is set apart in separate funds for expenditure on specific objects like road development, primary education including mid-day meal schemes, etc.
  • These amounts are withdrawn from the Consolidated Fund with the approval of Parliament and kept in the Public Account for expenditure on the specific objects.
  • The actual expenditure proposed on the specific objects is, also submitted for the vote of Parliament.
  • Under the Constitution, Budget has to distinguish expenditure on revenue account from other expenditure.
  • Government Budget, therefore, comprises (i) Revenue Budget; and (ii) Capital Budget.

Annual Financial Statement

Demands for Grants

  • The estimates of expenditure from the Consolidated Fund included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants in pursuance of Article 113 of the Constitution.
  • Generally, one Demand for Grant is presented in respect of each ministry or department.
  • However, in respect of large ministries or departments more than one demand is presented.
  • Each demand normally includes the total provisions required for a service, that is, provisions on account of revenue expenditure, capital expenditure, grants to state and union territory governments, and also loans and advances relating to the service.
  • In regard to union territories without a legislature, a separate Demand is presented for each of the union territories.
  • Where the provision for service is entirely for expenditure charged on the Consolidated Fund, for example, interest payments, a separate Appropriation, as distinct from a Demand, is presented for that expenditure and it is not required to be voted by Parliament.
  • Where, however, expenditure on service includes both ‘voted’ and ‘charged’ items of expenditure, the latter are also included in the Demand presented for that service but the ‘voted’ and ‘charged’ provisions are shown separately in that Demand.
  • The Demands for Grants are presented to the Lok Sabha along with the Annual Financial Statement.

Finance Bill

  • At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also presented in fulfillment of the requirement of Article 110(1)(a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget.
  • A Finance Bill is a Money Bill as defined in Article 110 of the Constitution.
  • It is accompanied by a Memorandum explaining the provisions included in it.

Appropriation Bills

  • After the Demands for Grants are voted by the Lok Sabha, Parliament’s approval to the withdrawal from the Consolidated Fund of the amounts so voted and of the amount required to meet the expenditure charged on the Consolidated Fund is sought through the Appropriation Bill.
  • Under Article 114(3) of the Constitution, no amount can be withdrawn from the Consolidated Fund without the enactment of such a law by Parliament.

Balance of Payments

  • India’s balance of payments (BoP) situation which has been benign and comfortable since 2013-14, to 2016-17, registered an increase in Current Account Deficit (CAD) during 2018-19 (April-March) and stood at US$ 57.3 billion (2.1 percent of GDP) as compared to US$ 48.7 billion in (1.8 percent of GDP) in 2017-18 (April-March).
  • During, 2018-19 (April-March), merchandise exports (on a BoP basis) increased by 9.1 percent to US$ 337.2 billion from a level of US$ 309.0 billion in 2017-18 (April-March).
  • While imports increased by 10.3 percent to US$ 517.8 billion in 2018-19 (April-March) as compared to US$ 469.0 billion in the corresponding period of the previous year.
  • This led to a higher trade deficit of US$ 180.3 billion in 2018-19 (April-March), as compared to US$ 160.0 billion in the corresponding period of the previous year.
  • Net Invisibles receipts were higher at US$ 123.0 billion in 2018-19 (April-March) as compared to US$ 111.3 billion in 2017-18 (April-March) mainly due to an increase in both net services and net private transfers.
  • Net services receipts increased by 5.6 percent on a year-on-year basis during 2018-19 (April-March).

Sources of Revenue:

  • In accordance with the Constitution (Eightieth Amendment) Act, 2000, which has been given retrospective effect from April 1, 1996, all taxes to in the Union List, except the duties and taxes referred to in Articles 268 and 269, respective surcharge on taxes and duties referred to in Article 271 and any cess levied for specific purpose under any law made by Parliament, shall be levied and collected by the Government of India and shall be distributed between the Union and the states in such manner as may be prescribed by the President on the recommendations of the Finance Commission.
  • For the period 2015-2020, the manner of distribution between the Centre and the states has been prescribed in Presidential Orders issued after considering the recommendations of the Fourteenth Finance Commission.
  • The main sources of Union Tax revenue are customs duties, union excise duties, service tax, corporate and income taxes, non —tax revenues largely comprise interest receipts, dividends/profits, fines and miscellaneous receipts collected in the exercise of sovereign functions, regulatory charges and license fees and user charges for publicly provided goods and services.

Sources of Revenue

Public Debt and Other Liabilities

  • The Public Debt of India is classified into three categories of Union Government liabilities into internal debt, external debt and other liabilities.
  • Internal debt for the Government of India largely consists of fixed tenure and fixed rate government papers (dated securities and treasury bills) which are issued through auctions.
  • These include market loans (dated securities), treasury bills (91, 182 and 364 days) and 14 day treasury bills (issued to state governments only), cash management bills, special securities issued to the Reserve Bank of India (RBI), compensation and other bonds, non-negotiable and non-interest bearing rupee securities issued to international financial institutions.
  • External debt represents loans received from foreign governments and multilateral institutions.
  • The Union Government does not borrow directly from international capital markets.
  • Its foreign currency borrowing takes place from multilateral agencies and bilateral sources, and is a part of official development assistance (ODA).
  • At present, the Government of India does not borrow in the international capital markets.
  • “Other” liabilities, not a part of public debt, includes other interest-bearing obligations of the government, such as post office saving deposits, deposits under small savings schemes, loans raised through post office cash certificates, provident funds and certain other deposits.
  • The Reserve Bank manages the public debt of the Central and the state governments and also acts as a banker to them under the provisions of the Reserve Bank of India Act, 1934 (Section 20 and 21).
  • It also undertakes similar functions for the state governments by agreement with the Government of the respective state (under Section 21 A).

Direct Benefit Transfer

  • DBT is a major reform initiative launched by Government of India in 2013 to enable direct cash transfer of benefits under various government schemes and programmes to individuals.
  • The mandate of DBT was universalized and extended to cover all central sector schemes and centrally sponsored schemes that have any component of cash benefit transfer to individual beneficiaries.
  • Further, the scope of DBT has been further expanded to include in kind transfers to beneficiaries as well as transfers/ honorariums given to various enablers of Government schemes like ASHA, Aanganwadi workers, etc., and not limited to cash transfers to beneficiaries only.

Schemes for the Development of Scheduled Castes and Scheduled Tribes

  • From 2005-06, a separate Statement on the schemes for the welfare of Scheduled Castes (SCs) and Scheduled Tribes (STs) was introduced in the Budget document.
  • From the financial year 2011-12 this statement is focused only on Plan schemes under ‘Scheduled Castes Sub Plan’ and ‘Tribal Sub Plan’ exclusively for scheduled castes and scheduled tribes welfare schemes respectively.
  • It shows year-wise budget Estimates and Revised Estimates of current year and Budget Estimates of next financial year.

Green Climate Fund

  • GCF is a multilateral fund created to support the efforts of developing countries to respond to the challenge of climate change.
  • So far, 43 projects have been approved by the Board of the GCF.
  • India also has one project approved by the Board with NABARD on “Ground water recharge and Solar Micro Irrigation to ensure food security and enhance resilience in vulnerable tribal areas of Odisha” from 16 GCF Board meeting.
  • The project is approved with an outlay of USD 166.29 million including GCF grant support of USD 34.357 million whereas other financial resources would be provided by Government of Odisha and World Bank.

Prices

  • Consumer Price Index (Combined) (CPI-C) inflation (Base 2012=100) for 2017-18 declined to 3.6 percent from 4.5 percent in 2016-17, 4.9 per cent in 2015-16 and 5.9 per cent in 2014-15.
  • It averaged 3.4 per cent in 2018-19 and stood at 2.9 per cent in March 2019.
  • Food inflation based on Consumer Food Price Index (CFPI) declined to 1.8 per cent in 2017-18 from 4.2 percent in 2016-17, 4.9 per cent in 2015-16 and 6.4 per cent in 2014-15.
  • It averaged 0.1 per cent in 2018-19 and stood at 0.3 per cent in March 2019.
  • Inflation measured in terms of Wholesale Price Index (WPI) stood at 3.0 per cent in 2017-18 as compared to 1.7 per cent in 2016-17, (-)3.7 per cent in 2015-16 and 1.2 per cent in 2014-15.
  • It averaged 4.3 per cent in 2018-19 and stood at 3.1 per cent in March 2019.

Foreign Exchange Reserves

  • It is largely the outcome of Reserve Bank of India’s intervention in the foreign exchange market to stabilize the rupee value.
  • India’s foreign exchange reserves stood at US$ 427.8 billion as on 28th June, 2019, showing an increase of US$ 14.9 billion over the level of US$ 412.9 billion end-March 2019.

Exchange Rate of Rupee

  • In 2018-19 (April-March, the average monthly exchange rate of rupee (RBI’s reference rate) was ? 65.64 per US dollar in April 2018 and ? 69.48 per US dollar in March 2019.
  • On year-on-year basis, the rupee depreciated by 7.8 per cent from ? 64.46 per US dollar in 2017-18 to ? 69.93 per US dollar in 2018-19.
  • In the month of March 2019, rupee appreciated against US dollar.

External Debt

  • India’s external debt stock stood at US$ 543.02 billion at end-March 2019 recording an increase of US$ 13.7 billion over the level at end-March 2018.
  • At end-March 2019, long-term external debt was US$ 434.6 billion, witnessing an increase of 1.7 per cent over the end-March 2018 level of US$ 427.1 billion.
  • Long-term external debt accounted for 80.0 per cent of total external debt at end March 2019 vis-a-vis 80.7 per cent at end-March 2018.

Climate Change

  • The 24th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 24) was held in Katowice, Poland.
  • The most important outcome of the Conference was finalization of Paris Agreement Work Programme - guidelines/modalities/ rules for implementation of Paris Agreement.
  • Under it, the developed countries have obligations to provide financial support to developing countries.
  • The developed countries had made a commitment to a goal of mobilizing US$ 100 billion annually by 2020 for supporting climate action in developing countries.

Banking Sector

  • The performance of the banking sector (domestic operations), Public Sector Banks (PSBs) in particular, improved in 2018-19.
  • Performance of Scheduled Commercial Banks (SCBs)- March 2018 and December 2018:
    • Gross Non-Performing Advances (GNPA) ratio decreased from 11.5 per cent to 10.1 per cent.
    • Restructured Standard Advances (RSA) ratio declined from 0.7 to 0.4 per cent.
    • The Stressed Advances (SA) ratio decreased from 12.1 to 10.5 per cent.
  • GNPA ratio of PSBs decreased from 15.5 to 13.9 per cent.

Credit Growth

  • Non-Food Credit (NFC) grew by 13.2 per cent (y-o-y) in February 2019 as compared with 9.8 per cent in February 2018.
  • Bank credit to large industry and services segments were the main drivers of overall NFC growth in 2018-19.

Changes in Banking Regulations

  • In order to enhance the credit discipline among larger borrowers, the guidelines on loan system for delivery of bank credit were issued on December 5, 2018.
  • Accordingly, in respect of borrowers having aggregate fund based working capital limit of 1,500 million and above from the banking system, a minimum level of ‘loan component’ of 40 per cent of sanctioned limit was effective from April 1, 2019.
  • The 40 per cent loan component was revised to 60 per cent, from July 1, 2019.

One-time Restructuring of Loans to MSMEs

  • The scheme was made available to MSMEs qualifying certain objective criteria including inter alia a cap of Rs 250 million on the aggregate exposure of banks and NBFCs to an MSME as on January 1, 2019.
  • The restructuring is to be implemented by March 31, 2020 and an additional provision of 5 per cent to be maintained in respect of accounts restructured under this scheme.

Monetary Developments

  • Under the revised statutory framework of 2016, the Monetary Policy Committee (MPC) of the Reserve Bank met six times in 2018-19.
  • In its sixth Bi-monthly Statement, the MPC decided to change the stance of monetary policy from calibrated tightening to neutral and reduced the policy repo rate by 25 basis points to 6.25 per cent in February 2019.

Insolvency And Bankruptcy Code

  • A Bankruptcy Law Reforms Committee was set up in 2014 for providing an entrepreneur friendly legal bankruptcy framework for meeting global standards for improving the ease of doing business with necessary judicial capacity.
  • Accordingly, the Insolvency and Bankruptcy Code, 2016 (IBC) became operational in 2016.
  • It proposes a framework to ensure:
    • Early detection of stress in a business;
    • Initiation of the insolvency resolution process by debtor, financial creditor or operational creditor;
    • Liquidation of unviable businesses; and avoiding destruction of value of failed business.

Financial Stability and Development Council

  • FSDC was set up as the apex level forum in 2010.

Aim:

  • To strengthening and institutionalizing the mechanism for maintaining financial stability.
  • Enhancing inter-regulatory coordination and promoting financial sector development.

Financial Stability Board

  • FSB was established in 2009 under the aegis of G20 by bringing together the national authorities, standard setting bodies and international financial institutions for addressing vulnerabilities and developing and implementing strong regulatory, supervisory and other policies in the interest of financial stability.
  • India is an active member of the FSB having three seats in its Plenary.

Infrastructure Financing

 

Bank Financing:

  • Banks continue to be major source of financing infrastructure.
  • RBI has been modifying guidelines for advances to infrastructure including 5/25 scheme, take out financing.

Institutional Finance:

  • The Government has also set up India Infrastructure Finance Company Limited (IIFCL) with the specific mandate to play a catalytic role in the Infrastructure sector by providing long-term debt for financing infrastructure projects.
  • IIFCL funds viable infrastructure projects through long term debt, refinance to banks and financial institutions for loans granted by them, with tenure exceeding 10 years or any other mode approved by the government.

Infrastructure Debt Funds (IDFs):

  • Government of India has conceptualized Infrastructure Debt Funds (IDFs) to accelerate and enhance the flow of long term debt into infrastructure projects to help in the migration of project loans for operating assets from banks to the fixed income markets.

Real Estate Investment Trusts (REITs)/Infrastructure Investment Trust (InvITs):

  • These are trust-based structures that maximize returns through efficient tax pass-through and improved governance structures.
  • Guidelines/Regulations for InvIT and REIT were notified by SEBI in 2014.

Public Private Partnerships

  • PPPs bridge the deficit in financing of infrastructure projects, and also bring in cost effective new technology for operation and maintenance of created asset, thus, extracting long term value for proposition.
  • India systematically rolled out a PPP programme for the delivery of high-priority public utilities and infrastructure and, over the last decade or so, developed what is perhaps one of the largest Programme in the world.

Information Dissemination

  • DEA maintains a website dedicated to PPPs, www.pppinindia.gov.in, to provide information related to PPP initiatives in the country.
  • The website serves as a hub of information on PPP initiatives and contains related policy documents, government guidelines issued for mainstreaming PPPs.
  • www.infrastructureindia.gov.in is a database of infrastructure projects including PPPs being implemented across the sectors in India.
  • It provides key information on the status of infrastructure projects being executed by the government as well as the private sector.

G-20:

  • The G20 was formed in 1999, as a forum of Finance Ministers and Central Bank Governors, in recognition of the fact that there was a major shift in the global economic weight from the advanced economies to emerging market economies.
  • The gradually declining role of G8 as world’s economic coordinator and the increasing clout of EMEs in global deliberations on economic governance resulted in G20 replacing G8 in 1999.
  • However, G20 rose into true prominence in 2008 when it was elevated from a forum of Finance Ministers and Central Bank Governors to that of the G20 Heads of Nations in order to effectively respond to the global financial crisis of 2007-2010.

BRICS:

  • The BRICS nations or Brazil, Russia, India, China and South Africa form the five key pillars of south-south cooperation and are the representative voice of Emerging Markets and Developing Countries in the global forums such as the G20.
  • The New Development Bank, established by these nations in 2015, marked its first imprints in India by signing a loan agreement for financing of the major district road project in Madhya Pradesh in March 2017.
  • India is working closely with the Bank’s management team to develop a robust pipeline of projects cutting across areas such as Smart Cities, renewable energy, urban transport, clean coal technology, solid waste management and urban water supply.
  • The framework of swap lines, conceived as a BRICS Contingent Reserve Arrangement (CRA) with a corpus of US$ 100 billion, stands operationalized in case any member nation requires short-term liquidity support.

United Nations Development Programme:

  • The overall mission of the UNDP is to assist the programme countries through capacity development in Sustainable Human Development (SHD) with priority on poverty alleviation, gender equity, women empowerment and environmental protection.
  • All assistance provided by the UNDP is grant assistance.
  • The UNDP derives its funds from voluntary contributions from various donor countries.
  • India’s annual contribution to the UNDP has been to the extent of US$ 4.5 million, which is one of the largest from developing countries.
  • The country-specific allocation of UNDP resources is made every five years under the Country Cooperation Framework (CCF) which usually synchronizes with India’s fiveyear plans.

South Asian Association for Regional Cooperation:

  • SAARC, in existence since 1985 (founded in Dhaka), is a regional organisation that aims to promote economic, social, cultural, technical and scientific cooperation in South Asia.
  • Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka.
  • Its secretariat is based in Kathmandu, Nepal.
  • It is a consensus-based forum for the exchange of ideas, development of regional programmes and projects.
  • The Framework for Currency Swap Arrangement for the SAARC countries was formulated with the intention to provide a line of funding for short term foreign exchange requirements or to meet balance of payments crises till longer term arrangements are made or the issue is resolved in the short-term itself.
  • Under the facility, RBI offers swaps of varying sizes to each SAARC member country (Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka) depending on their two months import requirement and not exceeding US$ 2 billion in total, in USD, Euro or INR.
  • So far, the facility has been availed by Bhutan, Sri Lanka and Maldives.
  • SAARC Development Fund (SDF):
    • SDF was established in 2008 by the SAARC countries to improve the livelihood of the people and to accelerate economic growth, social progress and poverty alleviation in the region.
    • Project funding in SDF is to be taken up under three windows (Social, Economic and Infrastructure).
    • Of the three windows of SDF, economic and infrastructure windows are being operationalized.

Bilateral Cooperation:

  • Department of Economic Affairs also deals with Bilateral Development Assistance from G-8 countries, namely the USA, UK, Japan, Germany, Italy, Canada and Russian Federation as well as the European Union.
  • The Division also deals with the work relating to extension of Lines of Credit to developing countries.
  • It is also the focal point for administering short term foreign training courses of the duration upto four weeks offered by various international agencies/countries.
  • Bilateral Official Development Assistance:
    • India has been accepting external assistance from bilateral partners in the form of loans, grants and technical assistance for development of infrastructure, social sector and for enhancement of knowledge/ skills of Indian nationals at both Centre and state level.
    • In terms of the guidelines issued in 2005, bilateral development assistance can be accepted from all G-8 countries, namely USA, UK, Japan, Germany, France, Italy, Canada and the Russian Federation as well as from European Commission.
    • European Union Countries outside the G-8 can also provide bilateral development assistance to India provided they commit a minimum annual development assistance of US$ 25 million.

International Monetary Fund:

  • India is a founder member of the International Monetary Fund (IMF) which was established to promote a cooperative and stable global monetary framework.
  • At present, 188 nations are members of the IMF.
  • The Board of Governors of the IMF consists of one Governor and one Alternate Governor from each member country.
  • For India, the Finance Minister is the exofficio Governor on the Board of Governors of the IMF.
  • There are three other countries in India’s constituency at the IMF, viz. Bangladesh, Bhutan and Sri Lanka.
  • Governor, Reserve Bank of India (RBI) is India’s Alternate Governor.

World Bank:

  • India has been borrowing from the World Bank through International Bank for Reconstruction and Development (IBRD) and International Development Association (lDA) for various development projects in the areas of poverty reduction, infrastructure, rural development, etc.
  • IDA funds were one of the most concessional external loans for Government of India and were used largely in social sector projects that contribute to the achievement of millennium development goals.

International Finance Corporation:

  • lFC, a member of the World Bank Group, focuses exclusively on investing in the private sector in developing countries.
  • Established in 1956, IFC has 184 members. India is founding member of IFC.
  • It is an important development partner for India with its operations of financing and advising the private sector in the country.
  • India represents IFC’s largest portfolio exposure globally.
  • The IFC’s investments in India are spread across important sectors like infrastructure, manufacturing, financial markets, agribusiness, SMEs and renewable energy.
  • Keeping in alignment with the Country Partnership Strategy (CPS) of the World Bank Group in India, IFC focuses on low-income states in India.

New Development Bank:

  • The NDB has been instituted with a vision to support and foster infrastructure and sustainable development initiatives in emerging economies.
  • The founding members of the NDB - Brazil, Russia, India, China and South Africa (BRICS) - brought in capital of USD 1 billion as initial contribution.

Asian Infrastructure Investment Bank:

  • AIIB is a Multilateral Development Bank (MDB) set up in 2016 to foster sustainable economic development, create productive assets and improve infrastructure in Asia through financing of infrastructure projects.
  • India is one of the founding Members and the second largest shareholder.
  • India along with 20 other countries signed the InterGovernmental Memorandum of Understanding (MoU) for establishing the AIIB in Beijing.

International Fund for Agricultural Development:

  • IFAD was set up in 1977 as the 13th specialized agency of the UN.
  • It is dedicated to eradicating poverty and hunger in rural areas of developing countries.

Global Environment Facility:

  • GEF provides grants to eligible countries in its focal areas: biodiversity, climate change, land degradation, international waters, chemicals and waste.
  • It also serves as financial mechanism for the Convention on Biological Diversity (CBD), United Nations Framework Convention on Climate Change (UNFCCC), Stockholm Convention on Persistent Organic Pollutants (POPs), UN Convention to Combat Desertification (UNCCD), Minamata Convention on Mercury and supports the implementation of the Protocol in countries with economies in transition for the Montreal Protocol on Substances that Deplete the Ozone Layer (MP).

Asian Development Bank:

  • India is a founding member of the Asian Development Bank (ADB) which was established in 1966.
  • ADB has 67 members (including 48 regional and 19 non-regional members), with its headquarters at Manila, Philippines.
  • India is holding 6.331 per cent of shares, totaling 6,72,030 shares in ADB as on 31st December, 2016, with 5.363 per cent voting rights.
  • The Bank is engaged in promoting economic and social progress of its developing member countries (DMCs) in the Asia Pacific Region.
  • India borrows from ADB within overall external debt management policy pursued by the Government which focuses on raising funds on concessional terms from less expensive sources with longer maturities.
  • India started borrowing from ADB in 1986.

Currency and Coinage: - Security Printing and Minting Corporation of India Limited:

  • Security Printing and Minting Corporation of India Ltd. (SPMCIL) is the only PSU under the Department of Economic Affairs.
  • It was formed after corporatisation of nine units, i.e. four mints, four presses (two currency note presses and two security presses) and one paper mill which were earlier functioning under the Ministry.
  • The Company was incorporated in 2006 under the Companies Act, 1956.
  • It is engaged in the manufacturing of security paper, minting of coins, printing of currency and bank notes, non-judicial stamp papers, postage stamps, travel documents, etc.
  • The Company supplies currency/bank notes and coins to RBI, non-judicial stamp papers to various state governments; postal stationery and stamps to postal department; passports, visa stickers and other travel documents to the Ministry of External Affairs.

National Investment and Infrastructure Fund:

  • India’s average investment in infrastructure was 4.7 percent of GDP during 1992-2010.
  • Moreover, there has been a slowdown in equity inflows into the infrastructure sectors over the past few years, constraining further investment.
  • NIIF was created with the aim to attract equity investments from both domestic and international sources for infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects.

International Investment Treaties and Framework:

  • India initiated the exercise to negotiate and enter into Bilateral Investment Treaties (BITs)/ Bilateral Investment Promotion and Protection Agreements (BIPAs) with other countries as a part of the comprehensive economic reforms programme which was initiated in 1991.
  • A BIT is essentially an international treaty which increases the comfort level and boosts the confidence of the investors by assuring a minimum standard of treatment and non-discrimination in all matters while providing for an independent forum for dispute settlement through arbitration.
  • In turn, BITs are expected to project India as an attractive foreign direct investment (FDI) destination as well as protect outbound Indian FDI abroad.
  • The new Indian Model BIT of 2015 aims to provide appropriate protection to foreign investors in India and Indian investors in the foreign country, in the light of relevant international precedents and practices.

Department of Expenditure:

  • The Department of Expenditure is the nodal Department for overseeing the public financial management system in the central government and matters connected with state finances.
  • It is responsible for the implementation of the recommendations of the Finance Commission and Central Pay Commission, monitoring of audit comments/ observations, preparation of central government accounts.
  • It further assists central ministries/ departments in controlling the costs and prices of public services, reviewing system and procedure to optimize outputs and outcomes of public expenditure.

Department of Expenditure

Controller General of Accounts

  • CGA, in the Department of Expenditure, is the Principal Accounting Adviser to Government of India and is responsible for establishing and maintaining a technically sound Management Accounting System.
  • The Office of CGA prepares monthly and annual analysis of expenditure, revenues, borrowings and various fiscal indicators for the Union Government.
  • Under Article 150 of the Constitution, the Annual Appropriation Accounts (Civil) and Union Finance Accounts are submitted to Parliament on the advice of Comptroller and Auditor General of India.
  • It further formulates policies relating to general principles, form and procedure of accounting for the central and state governments.
  • Along with these documents, an M.I.S Report titled ‘Accounts at a Glance’ is prepared and circulated in Parliament.

Public Financial Management System

  • PFMS is a web-based online software application designed, developed, owned and implemented by the CGA.
  • Aim: To provice a sound public financial management system by establishing a comprehensive payment, receipt and accounting network.
  • Integration with financial IT systems of various state governments is one key objective of PFMS which will facilitate complete tracking of funds transferred for scheme implementation and provide more holistic view of finances available for welfare programmes.
  • All the Schemes of Gol and their implementing agencies have been registered on PFMS.

Non-Tax Receipt Portal

  • The objective of the Non Tax Receipts Portal (NTRP), is to provide a one stop window to citizens/corporates/institutions/other users for making online deposits of Non-Tax receipts (NTR) which are payable to the Government of India.
  • This was inaugurated in 2016.
  • NTRP uses the modality of Payment Gateway Aggregator (PGA).

Institute of Government Accounts & Finance

  • INGA is the training arm of the Controller General of Accounts.
  • It was set up in February 1992 to train personnel in specific areas of accounting, administrative matters, and financial management.
  • The Institute has evolved to become an elite training centre in government accounting and public financial management.

Central Pension Accounting Office

  • CPAO was established in 1990 for Payment and Accounting of Central (Civil) Pensioners and pension to freedom fighters etc.
  • CPAO is a subordinate office under the Office of the Controller General of Accounts, Ministry of Finance.
  • It has been entrusted with the responsibility of administering the scheme of payment of pension to central government (Civil) pensioners through authorized banks.

National Institute of Financial Management

  • NIFM was set up in 1993 as an autonomous body under the Societies Registration Act, to impart training to officers recruited by the Union Public Service Commission through the annual Civil Service Examinations and allocated to the various services responsible for managing senior and top management posts dealing with accounts and finance in the Government of India and to develop as a Centre of Excellence in the areas of financial management and related disciplines, not only in India but also in Asia.

Revision of General Financial Rules

  • The General Financial Rules (GFRs) are rules and orders dealing with matters involving public finances.
  • General Financial Rules were issued for the first time in 1947 bringing together in one place all existing orders and instructions pertaining to financial matters.
  • The Revised General Financial Rules 2017 was released in 2017 to enable an improved, efficient, and effective framework of fiscal management while providing the necessary flexibility to facilitate timely delivery of services.

Department of Revenue:

  • The Department of Revenue exercises control in respect of revenue matters relating to Direct and Indirect Union taxes through two statutory boards namely, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC).
  • The Department is also entrusted with the administration and enforcement of regulatory measures provided in the enactments concerning Central Sales tax, Stamp duties and other relevant fiscal statutes.
  • Control over production and disposal of opium and its products is vested in this Department.

Goods and Services Tax:

Legislative Development:

  • The proposal to introduce a national level Goods and Services Tax (GST) was first mooted in 2006-07. The Goods and services Tax Council was constituted in 2016.
  • GST was implemented in the country in July, 2017.
  • Subsuming of various central indirect taxes and levies such as central excise duty, additional excise
  • duties, excise duty levied under the medicinal and toilet preparations (excise duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as countervailing duty, special additional duty of customs, and central surcharges and cesses so far as they relate to the supply of goods and services.
  • Coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax.
  • In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy till a date notified on the recommendation of the GST Council.
  • Compensation to the states for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years.

Indian Stamp Act:

  • The Indian Stamp Act, 1899 is a fiscal statute laying down the law relating to tax levied in the form of stamps on instruments recording transactions.
  • Briefly, the scheme relating to stamp duties, provided for in the Constitution is as follows:
    • Under Article 246, stamp duties on documents specified in Entry 91 of the Union List in Schedule VIl of the Constitution (viz.,bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts) are levied by the Union but under Article 268, each State, in which they are levied, collects and retains the proceeds (except in the case of Union Territories in which case the proceeds form part of the Consolidated Fund of India).  At present duty is levied on all these documents except cheques.
    • Stamp duties on documents other than those mentioned above are levied and collected by the states by virtue of the Entry 63 in the State List in the 7th Schedule of the Constitution.
    • Provisions other than those relating to rates of duty fall within the legislative power of both the Union and the states under Entry 44 of the Concurrent List in the ScheduleVll.
    • The rates of the stamp duty in respect of Debenture and Promissory Notes have been rationalized by the central government in September 2008.

Central Board of Direct Taxes

Direct Taxes

  • The Central Board of Direct Taxes (CBDT), created by the Central Boards of Revenue Act 1963, is the apex body entrusted with the responsibility of administering direct tax laws in India.
  • It is the cadre controlling authority for the Income Tax Department (ITD).
  • With modern information technology as a key driver, the CBDT has implemented a comprehensive computerization programme in the Income Tax Department.
  • The programme is aimed to establish a taxpayer friendly regime, increase the tax-base, improve supervision and generate more revenue for the Government.

Revenue Collection

  • Revenue collection from direct taxes has been growing consistently.
  • As a result of improved tax administration and better tax compliance, direct tax collection has been showing a positive trend over a period of time.

Central Board of Excise and Customs:

  • CBEC deals with formulation of policy concerning levy and collection of Customs, Central Excise duties and Service Tax, prevention of smuggling and evasion of duties.
  • The main objectives of CBEC are to collect indirect tax revenues, improve tax payer services, to improve compliance for fair trade and enforcement of border controls and promote efficiency and transparency and develop human resources for such purposes.
  • The CBEC consists of a Chairman and 6 members.

Dispute Settlement and Appeal:

  • The Officers of Customs, Excise and Service Tax have powers to adjudicate cases under the Customs Act, 1962, the Central Excise Act, 1944 and Service Tax laws (Finance Act, 1994).
  • The appellate machinery comprising the Commissioners (Appeals) deals with appeals against the orders passed by the officers lower in rank than Commissioner of Customs and Central Excise.
  • The Customs, Excise and Service Tax Appellate Tribunal, CESTAT (earlier Customs Excise and Gold (Control) Appellate Tribunal) is an independent forum to hear the appeals against orders and decisions passed by the Commissioners of Customs and Excise under the Customs Act, 1962, Central Excise Act, 1944 and a Second appellate forum against orders passed by Commissioner (Appeals).

Customs:

  • The Indian Customs Electronic Data Interchange (EDI) System (ICES) is an EDI based work flow application which enables:
    • Electronic filing and processing of import and export declarations/manifests
    • System appraisal of select goods
    • Messaging with custodians and other agencies concerned with cargo clearance
  • Implemented at 214 locations, ICES cover more than 98 per cent of the country’s international trade consignment wise and 90 percent value wise.
  • In 2016, Central Board of Excise and Customs (CBEC) launched single window interface for facilitating trade (SWIFT) at all customs EDI locations with six major participating government agencies(PGAs), as a single point interface for clearance of imported goods.

Enterprise Data Warehouse:

  • CBEC is one of the first government departments to have implemented an Enterprise Date Warehouse, a central repository of clean and consistent, near real time data pertaining to Customs, Central Excise and Service Tax.
  • It employs best-in-class business Intelligence tools for online analytical processing and data mining, and is today the primary source of data and reports required by C.B.E.C. other ministries and external agencies.

Directorate of Enforcement:

  • Directorate of Enforcement was set up at New Delhi in 1956 for enforcement of the provisions of the Foreign Exchange Regulation Act (FERA), 1947.
  • FERA, 1947 was later replaced by Foreign Exchange Regulation Act, 1973.
  • FERA was a Criminal Act, which provided for filing of prosecutions in a court of law, besides adjudication of violations by the Adjudicating Authorities.
  • FERA was repealed in 2000 and replaced with Foreign Exchange Management Act, 1999 (FEMA).
  • Subsequently, the Directorate was also entrusted with the responsibility of implementing the Prevention of Money Laundering Act, 2002 (PMLA), which came into force in 2005.
  • At present, the Directorate of Enforcement enforces two laws viz., the Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA) apart from looking after the residual work initiated under FERA.
  • The Directorate initiates investigations under FEMA for contraventions relating to foreign exchange transactions on the basis of specific intelligence/information and takes appropriate action under FEMA.
  • The offence of money laundering under PMLA is punishable with imprisonment of not less than three years which may extend to seven years and also with fine.
  • Upon conviction under PMLA, the attached property is liable to be confiscated.

Financial Intelligence Unit-India:

  • Financial Intelligence Unit-India (FIU-IND) is the central national agency for receiving, processing, analyzing and disseminating information relating to suspect financial transactions.
  • FIU-IND was established by the Government of India in 2004 for coordinating and strengthening collection and sharing of financial intelligence through an effective national, regional and global network to combat money laundering, related crimes and terrorist financing.
  • It is an independent body reporting to the Economic Intelligence Council (EIC) headed by the Finance Minister.
  • For administrative purposes, FIU-IND is under the Department of Revenue, Ministry of Finance.
  • FIU-IND does not investigate cases.

Narcotics

Narcotics Control

  • The Narcotics Control Division administers the Narcotic Drugs and Psychotropic Substances Act,1985 (61 of 1985), which prohibits ,except for medical and scientific purposes, the manufacture, production, possession, sale, purchase, transport, warehouse, use, consumption, import inter-State, export inter-State, import into India, export from India or transhipment of narcotic drugs and psychotropic substances.

Central Bureau of Narcotics

  • The Central Bureau of Narcotics (CBN) headed by the Narcotics Commissioner is headquartered at Gwalior.
  • The administrative control of the department lies with CBEC(Central Board of Excise
  • and Customs) while its operational functions are monitored by the Department of Revenue, the nodal Department entrusted with the task of policy decisions over control over narcotic drugs, psychotropic substances and precursor and essential chemicals used in the manufacture of the NDPS.
  • It performs the function of National Opium Agency for India under the Single Convention on Narcotics Drugs 1961 to exercise control and supervision over opium poppy cultivation, which is presently undertaken in selected notified areas of Madhya Pradesh, Uttar Pradesh and Rajasthan.
  • In addition to the work relating to control over opium poppy cultivation, the CBN takes preventive action against drug trafficking and enforces the provisions of the Narcotic Drugs and Psychotropic Substances Act, 1985 and Rules made there under.

Government Opium and Alkaloid Factories

  • GOAF, under the administrative control of the Department of Revenue, are engaged in the processing of raw opium for export purposes and manufacture of opiate alkaloids.
  • The organization is headed by the Chief Controller of Factories.
  • The Narcotics Control Division administers the Narcotic Drugs and Psychotropic Substances Act,1985 (61 of 1985), which prohibits ,except for medical and scientific purposes, the manufacture, production, possession, sale, purchase, transport, warehouse, use, consumption, import inter-State, export inter-State, import into India, export from India or transhipment of narcotic drugs and psychotropic substances.

Customs, Excise and Service Tax Appellate Tribunal

  • Earlier known as Customs Excise and Gold (Control) Appellate Tribunal.
  • It was formed as a quasi-judicial body to hear appeals from the orders and decisions passed by the Commissioner/ Commissioner (Appeals) of Customs, Central Excise and Service Tax under the Customs Act, 1962, Central Excise Act, 1944 and Finance Act, 1994 respectively.
  • The Tribunal is also having appellate jurisdiction on Anti-dumping matters and such matters are heard by special bench headed by the President, CESTAT.

Department of Financial Services:

  • The DFS is mainly responsible for policy issues relating to Public Sector Banks (PSBs) and Financial Institutions including their functioning, appointment of Chairman, Managing Director and Chief Executive Officers (MD & CEOs), Executive Directors (EDs), Chairman cum Managing Directors (CMDs), legislative matters, international banking relations.
  • Appointment of Governor/Deputy Governor of Reserve Bank of India, matters relating to National Bank for Agriculture and Rural Development (NABARD), Agriculture Finance Corporation, Co-operative Banks, Regional Rural Banks (RRBs) and rural/agriculture Credit.
  • The Department also administers the financial inclusion programme of the government, social security schemes and other targeted schemes aimed at facilitating flow of credit, matters relating to insurance sector and performance of public sector insurance companies, administration of various Insurance Acts.
  • Matters relating to Insurance Regulatory and Development Authority of India (IRDAI) and matters relating to pension reforms including the New Pension System (NPS), etc.
  • It also covers pension reforms and industrial finance and micro, small and medium enterprise.
  •  It started the Pradhan Mantri Jan Dhan Yojana.
  • Pension Fund Regulatory and Development Authority (PFRDA) is a statutory body which also works under this Department.

Banking:

  • In India, banks have played a vital role in financial inclusion of the general population by providing access to basic financial services to unbanked households and formal credit to the agriculture sector and micro-enterprises.
  • Public Sector Banks (PSBs) are the mainstay of the Indian banking industry.
  • PSBs and PSB sponsored Regional Rural Banks (RRBs) have dominant market presence and constitute 78 percent of the bank network of Scheduled Commercial Banks (SCBs).
  • In rural locations, this share is even higher at 87 per cent.
  • PSBs play an important role in fuelling investment needed for the country’s economic development, with a share of over 70 per cent of SCBs’ deposits and 66 per cent of outstanding credit.
  • In rural and semi-urban (RUSU) locations, their share is even higher at 88 per cent of saving account deposits and 81 per cent of outstanding credit.
  • PSBs and RRBs play a critical role in priority sector lending and account for 74 per cent of outstanding credit to small and marginal farmers, 65 per cent of outstanding credit to Micro and Small Enterprises and 95 per cent of education loans.

Reserve Bank of India:

  • RBI is India’s central banking institution, which controls the monetary policy of the Indian rupee.
  • It commenced its operations on April 1, 1935 in accordance with the Reserve Bank of India Act, 1934.
  • Following India’s independence on 15 August 1947, the RBI was nationalised on 1 January 1949.
  • The RBI has four zonal offices at Chennai, Delhi, Kolkata and Mumbai.
  • It is a member bank of the Asian Clearing Union.
  • The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors which has : (The governor + 4 deputy governors + 2 finance ministry representatives + 10 government-nominated directors to represent important elements of India’s economy + 4 directors) to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi.
  • The central bank executes many functions such as overseeing monetary policy, issuing currency, managing foreign exchange, working as a bank for government and as a banker of scheduled commercial banks.
  • The primary objective of RBI is to undertake consolidated supervision of the financial sector comprising
  • commercial banks, financial institutions and non-banking finance companies.
  • The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank oversight authority, including regulation and supervision, for the payment and settlement systems in the country.
  • Two payment systems National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) allow individuals, companies and firms to transfer funds from one bank to another.
  • These facilities can only be used for transferring money within the country.
  • It manages forex and gold reserves of the nation.
  • RBI is the sole body that is authorized to issue currency in India.
  • The bank also destroys the same when they are not fit for circulation.
  • All the money issued by the central bank is its monetary liability, i.e., the central bank is obliged to back the currency with assets of equal value, to enhance public confidence in paper currency.
  • In order to curb the fake currency, RBI has launched a website to raise awareness among masses about fake notes in the market www.paisaboltahai.rbi.org.in provides information about identifying fake currency.

Regional Rural Banks

  • RRBs were established under Regional Rural Banks Act, 1976 to create an alternative channel to the cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector.
  • RRBs are jointly owned by Government of India, concerned state government and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively.

Agriculture Credit

  • In order to boost the agriculture sector with the help of effective and hasslefree  agriculture credit, the government has been fixing annual targets for ground level agriculture credit by Scheduled Commercial Banks, Regional Rural Banks (RRBs) and Cooperative Banks.
  • Year wise position of target and achievement under agricultural credit flow for the last five years indicates the sustained trend of actual disbursement, surpassing the incremental annual targets year after year.

Kisan Credit Card

  • KCC scheme was introduced in 1998-99, as an innovative credit delivery system aiming at adequate and timely credit support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible, convenient and cost effective manner.
  • The scheme is being implemented by all cooperative banks, RRBs and public sector commercial banks throughout the country.
  • NABARD monitors the scheme in respect of cooperative banks and RRBs and RBI in respect of commercial banks.
  • A new scheme for KCC has been circulated by RBI and NABARD which provides for KCC as an ATM card which can be used at ATM/Point of Sale (POS) terminal.

Rural Infrastructure Development Fund

  • RIDF, which was set-up within NABARD during 1995-96 by way of deposits from Scheduled Commercial Banks operating within the country from the shortfall in their agricultural/priority sector/weaker sections lending.
  • The fund has since been continued, with its allocation being announced every year in the Union Budget.

Insurance

Life Insurance Corporation of India

  • LIC was established by an Act of Parliament called the Life Insurance Corporation of India Act, 1956.
  • It is governed by the Insurance Act, 1938, LIC Act, 1956, LIC Regulations, 1959 and Insurance Regulatory and Development Authority Act, 1999.
  • LIC is present in 14 countries abroad through branch offices/joint ventures companies and wholly owned subsidiary.

Reforms in the Insurance Sector

 

  • The insurance sector was opened for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999.
  • Core functions:
    • Licencing of insurers and insurance intermediaries
    • Financial and regulatory supervision
    • Regulation of premium rates
    • Protection of the interests of the policyholders
  • Since the opening up this sector for private and foreign investment, the number of participants in the insurance industry has gone up from seven insurers to sixty eight insurers as on 31st March 2018 operating in the life, general, and reinsurance segments (including specialized insurers, namely Export Credit Guarantee Corporation and Agricultural Insurance Company (AIC).
  • One of the key reforms undertaken in this sector is the passing of Insurance Laws (Amendment) Act, 2015 which paved the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development
  • Authority (IRDA) Act, 1999.
  • It also provided for enhancement of the foreign investment cap in an Indian insurance company from 26 per cent to an explicitly composite limit of 49 per cent with the safeguard of Indian ownership and control.
  • The Insurance Laws (Amendment) Act, 2015 also enabled foreign reinsurers to set up branches in India.

Pradhan Mantri Vyay Vandana Yojana

  • PMVVY  to protect elderly persons aged 60 years and above against a future fall in their interest income due to the uncertain market condition, as also to provide social security in old age.
  • The Scheme is being implemented through LIC of India.
  • It provides an assured return of 8 per cent per annum payable monthly for 10 years.
  • The differential return i.e., the difference between return generated by LIC and the assured return of 8 per cent would be borne by Government of India as subsidy on annual basis.
  • In pursuance of Budget 2018-19, Government approved the extension of Pradhan Mantri Vyay Vandana Yojana upto 31st March, 2020 and enhanced the limit of maximum purchase price of ? 7.5 lakh per family to ? 15 lakh per senior citizen.

Aam Aadmi Bima Yojana

  • AABY  is administered through Life Insurance Corporation of India.
  • Under this social security scheme below poverty line (BPL) and marginally above poverty line citizens are covered under 48 identified occupations.
  • The scheme provides death cover of ? 30,000/- in case of natural death.
  • In case of death or total disability (including loss of two eyes/two limbs) due to accident, a sum of ? 75,000/- and in case of partial permanent disability (loss of one eye/ limb) due to accident, a sum of ? 37,500/- is payable to the nominee/ beneficiary.
  • All these benefits are paid for a nominal premium of ? 200/- per member per annum, out of which ? 100/- is borne by the central government through Social Security Fund maintained through LIC of India, and the balance premium of ? 100/- is borne by the member and/or nodal agency and/or central/state government department which acts as the nodal agency.

Pension Reforms

National Pension System

  • It has been made mandatory for all new recruits to the Government (except armed forces) with effect from January 1, 2004 and has also been rolled out for all citizens with effect from May 1, 2009 on a voluntary basis.
  • As a pure ‘defined contribution’ product, returns would be totally market driven.
  • The NPS provides various investment options and choices to individuals to switch over from one option to another or from one fund manager to another, subject to certain regulatory restrictions.
  • The NPS architecture is transparent and web enabled.
  • It allows a subscriber to monitor his/ her investments and returns.
  • The facility for seamless portability is designed to enable subscribers to maintain a single pension account (Permanent Retirement Account Number-PRAN) throughout the saving period.
  • Pension Fund Regulatory and Development Authority (PFRDA), set-up as a regulatory body for the pension sector, is engaged in consolidating the initiatives taken so far regarding the full NPS architecture and expanding the reach of NPS distribution network.

Swavalamban Scheme

  • To encourage the workers in the unorganized sector to save voluntarily for their old age, an initiative called Swavalamban Scheme was launched in 2010.
  • It is a co-contributory pension scheme whereby the central government contributes a sum of ? 1,000 per annum in each NPS account opened having a saving of ? 1,000 to ? 12,000 per annum.

Rural Housing Fund

  • The Rural Housing Fund was set up in 2008-09 to enable primary lending institutions to access funds for extending housing finance to targeted groups in rural areas at competitive rates.

 

Pradhan Mantri Mudra Yojana

  • There are a large number of small business units, estimated at around 5.77 crore in the informal sector, running small manufacturing, trading or service businesses, who find it difficult to access formal systems of credit.
  • The loan requirement of these units is generally below ? 10 lakh.
  • Pradhan Mantri Mudra Yojana (PMMY) was launched in 2015, to enable income generating small business enterprises to have access to loans.
  •  Accordingly, lending institutions would finance micro entrepeneurs up to ? 10 lakh.
  • Under the guidelines of PMMY, MUDRA has launched three innovative products namely Shishu, Kishor, and Tarun, which signifies the stage of growth and funding needs of the micro units or entrepreneur.
  • MUDRA shall refinance through state level institutions, NBFCs, MFIs, regional rural banks, nationalized banks, private banks and other intermediaries.
  • Any Indian citizen who is involved in income generating activity such as manufacturing, processing, trading and service sector and whose credit need is less than ? 10 lakh can approach either banks, MFIs, financial institutions or NBFC for availing of MUDRA loans under PMMY.
  • It has been decided to extend funding support under PMMY for activities allied to agriculture also.

Credit Guarantee Fund for Skill Development

  • To guarantee the loans and advances upto ? 1.5 lakh (term loan) or any other limit as may be decided by the settler, sanctioned and disbursed by the lending institutions without any collateral security and/or third party guarantees to the eligible borrowers pursuing skill development courses as per the Skill Loan Scheme.
  • Any person (Indian national) can avail of skill loan having minimum qualification as per National Skill Qualification Framework (NSQF).

Social Security Schemes

Atal Pension Yojana

  • APY was launched in May, 2015, to address the longevity risks among the workers in unorganised sector who are not covered under any statutory social security scheme.
  • The APY is focussed on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA).
  • Any Indian citizen between 18-40 years of age can join through their savings bank account/post office savings account.
  • Minimum pension of ? 1,000 or ? 2,000 or ? 3,000 or ? 4,000 or ? 5,000 is guaranteed by the Government of India to the subscriber at the age of 60 years, with a minimum monthly contribution (for those joining at age at 18) of 42 or 84 or 126 or 168 or 210, respectively.

Revisions in APY:

  • In the event of pre-mature death of the subscriber, the government has decided to give an option to the spouse of the subscriber to continue contributing to APY account of the subscriber, for the remaining vesting period i.e., till the original subscriber would have attained the age of 60 years.
  • The earlier provision was to hand over lump sum amount to spouse on the premature death (death before 60 years of age) of the subscriber.
  • The spouse of the subscriber shall be entitled to receive the same pension amount as that of the subscriber until the death of the spouse.
  • After the death of both the subscriber and the spouse, the nominee of the subscriber shall be entitled to receive the pension wealth, as accumulated till 60 years of the subscriber.
  • In order to facilitate subscribers with the convenience and accessibility of his/her APY account, Mobile Application for APY has been launched by PFRDA(Pension Fund Regulatory and Development Authority).

Pradhan Mantri Jeevan Jyoti BimaYojana

  • PMJJBY is a one year life insurance scheme, renewable from year to year, offering coverage of two lakhs rupees for death due to any reason and is available to people in the age group of 18 to 50 years (life cover up to 55 years of age) having a bank account who give their consent to join and enable auto debit.
  • It involves convenient bank account linked enrolment with implementation in IT mode, and premium payment through auto-debit from the bank account of the subscriber.

Pradhan Mantri Suraksha Bima Yojana

  • The PMSBY is a one year personal accident insurance scheme, renewable from year to year, offering coverage for death/disability due to an accident and is available to people in the age group of 18 to 70 years having a bank account who give their consent to join and enable auto-debit.
  • Under the said scheme, risk coverage available will be ? 2 lakh for accidental death and permanent total disability and ? 1 lakh for permanent partial disability.
  • It involves convenient bank account linked enrolment with implementation in IT mode, and premium payment through auto-debit from the bank account of the subscriber.

Pradhan Mantri Jan Dhan Yojana

  • PMJD was announced in 2014.

Objectives:

  • Universal access to banking facilities for all households across the country through a bank branch or a fixed point business correspondent (BC) within a reasonable distance.
  • To cover all households with atleast one basic bank account with RuPay Debit card having inbuilt accident insurance cover of ? 1 lakh.

Department of Investment and Public Asset Management

  • The Department of Disinvestment was set up as a separate Department in 1999 and was later renamed as Ministry of Disinvestment in 2001.
  • From 2004, the Department of Disinvestment is one of the departments under the Ministry of Finance.
  • The Department of Disinvestment has been renamed as Department of investment and Public Asset Management (DIPAM) from 2016.
  • The mandate of the Department includes all matters related to management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings.
  • Financial policy in regard to the utilization of the proceeds of disinvestment channelized into the National Investment Fund.

Disinvestment Policy

The salient features of the Policy include:

  • Public sector undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSEs
  • While pursuing disinvestment through minority stake sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings
  • Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs upto 50 per cent or more, along with transfer of management control.

National Investment Fund

  • Government constituted the National Investment Fund (NIF) in 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized.
  • The corpus of NIF was to be of a permanent nature and NIF was to be professionally managed to provide sustainable returns to the Government, without depleting the corpus.
  • Selected Public Sector Mutual Funds, namely UTI Asset Management Company Ltd., SBI Funds Management Private Ltd. and LIC Mutual Fund Asset Management Company Ltd. were entrusted with the management of the NIF corpus.
  • As per this Scheme, 75 per cent of the annual income of the NIF was to be used for financing selected social sector schemes which promote education, health and employment.
  • The residual 25 percent of the annual income of NIF was to be used to meet the capital investment requirements of profitable and revivable PSUs.
  • In view of the difficult economic situation caused by the global slowdown of 2008-09 and a severe drought in 2009-10, Government approved a change in the policy for utilization of Disinvestment proceeds by granting a one-time exemption to utilize the disinvestment proceeds directly for selected social sector schemes allocated by Department of Expenditure/Planning Commission.
  • In order to align the NIF with the Disinvestment Policy, Government decided that the disinvestment proceeds, with effect from the fiscal year 2013-14, will be credited to the existing NIF which is a public account under the Government Accounts and the funds would remain there until withdrawn/invested for the approved purposes.

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