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<div>An interest rate corridor or a policy corridor refers to the range within which the operating target of the monetary policy - a short term interest rate, say the weighted average call money market rate - moves around the [http://arthapedia.in/index.php?title=Policy_Rate policy rate] announced by the central bank.<br />
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Generally a corridor should have a discount rate or standing lending facility at the upper bound and an uncollateralised<sup class="reference">[[#ref1|[1]]]</sup> deposit facility at the lower bound. The word standing facility means a facility to access funds at a specified rate from the Central Bank (or deposit funds with Central Bank) on a standing basis (i.e. non ad-hoc, operational throughout the year on a permanent basis). The idea of a standing lending facility is to enable banks to obtain funding from the central bank when all other options have been exhausted. Uncollateralised deposit facility (this is also a standing facility though in many economies generally the word “standing facility” is used only for indicating the permanent window for borrowing funds) provides an option for banks to park their excess funds, for which there are no takers in the market. Since the funds are parked with the central bank, there is generally no need to take securities as collateral.<br />
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The policy rate is the key lending rate of the central bank. It is generally the [http://arthapedia.in/index.php?title=Repo_Rate_and_Reverse_Repo_Rate repo rate] though the nomenclature varies from country to country. If a bank has faced shortage of liquidity, then it can approach the Central bank with acceptable collaterals to pledge and borrow funds at the repo rate. The spreads around the policy rate for determination of the corridor is generally fixed such that any change in the policy rate automatically gets translated into corresponding changes in the standing facility rates. Notwithstanding the width of the formal corridor charted by the two standing facilities, the overnight interest rate, in practice, varies around the policy rate in a narrow corridor.<br />
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Monetary policy is generally conducted with a single policy rate in many countries. The policy rate is set within a corridor charted by<br />
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*A standing collateralised marginal lending facility available throughout the day at a rate higher than the Policy rate that provides the upper bound; and<br />
*A standing uncollateralised deposit facility at a rate lower than the Policy rate that provides the lower bound to the corridor. <br />
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The two standing facilities provided by the European Central Bank may be seen [https://www.ecb.europa.eu/mopo/implement/sf/html/index.en.html here]. Although in the US there is no standing deposit facility, the interest rate paid on excess reserves provides a floor and the discount rate provides the ceiling.<br />
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The market logically has to operate within the interest rate corridor as a trader having excess cash would demand the minimum rate from a borrower of funds, which it can get from the Central Bank by depositing its excess cash. The maximum rate he can charge would be below the standing facility rate at which central bank gives liquidity to the participants at a penal rate.<br />
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The width of the corridor is generally based on the following two considerations. <br />
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*First, it should not be so wide as to induce volatility in short-term money market rates. <br />
*Second, it should not be so narrow that it retards the development of the short-term money market by taking away the incentive from market participants to deal amongst themselves before approaching the central bank.<br />
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The width of the corridor fixed by countries generally varies from 50 basis points to 200 basis points.In India, the width of the corridor has been substantially brought down from 200 bps to 50 bps over the last few years.<br />
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Just as the spread between commercial banks deposit and lending rates is a measure of the cost of bank intermediation, the spread between the parameters of the corridor is measure of the cost of central bank intermediation.<br />
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For most countries, the policy rate is placed symmetrically at the centre of the corridor. Countries like New Zealand, have asymmetric spread around the policy rate.<br />
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The money market rates should ideally be in the middle of the corridor, hovering around the policy rate.<br />
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The overnight operations are generally conducted at a fixed rate tender at the Policy Rate to clearly signal the stance of monetary policy. The longer-term repo operations and fine-tuning operations are conducted at a variable rate tender essentially as liquidity management operations. The longer-term operations and fine tuning operations are viewed essentially as liquidity management operations.<br />
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By changing the repo rate, the central banks indicate the interest rate direction. A shift in monetary policy can be signaled by adjusting the interest rate corridor. <br />
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For instance, widening of the corridor may imply tighter monetary policy stance as borrowing from central bank is relatively costlier than placing money with the central bank. <br />
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Frequent changing of the width of the corridor may create uncertainty and may also make it difficult to keep the target rate aligned to the policy rate. However, in extraordinary situations, when there is a need to incentivise or disincentivise market participants from accessing the standing lending facility or parking funds with the central banks, the width of the corridor could be changed.<br />
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A too-narrow corridor could increase the reliance of banks on the central bank and thus hamper the growth of the money market. On the other hand, too wide a corridor could give scope for volatility in the overnight interest rate which could impair the transmission of monetary policy. The guiding principle in the determination of the width of the corridor is that it should stabilise the overnight money market interest rate while facilitating the development of the money market so that the reliance of banks on central bank facilities comes down over time.<br />
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International experience suggested that the width of the corridor generally remains fixed but the recent global financial crisis saw countries changing the width of the corridor<sup class="reference">[[#ref2|[2]]]</sup>. <br />
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There are a number of ways to operate an interest rate corridor, depending on the specific country circumstances, liquidity forecasting abilities, state of development of the financial markets etc. Some of the main alternative interest rate corridor and policy rate configurations include:<br />
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*'''A corridor with no official central bank policy rate:''' The central bank may, or may not, have an internal target for the interbank rate.<br />
*'''A floor system''' where the rate on the central bank deposit facility that constitutes the floor of the corridor both serves as the target for the interbank rate and as the official central bank policy rate.<br />
*'''A mid-rate corridor system''' where the policy rate either is an announced target for the interbank rate-and a central bank commitment to use open market operations (OMOs) to steer interbank rates to the target-or the rate the central bank uses to transact with its counterparts (the “OMO rate”). Typically, the policy rate is positioned in the middle of the corridor with the standing facility rates that constitutes the floor and ceiling of the corridor set at a fixed margin above and below the policy rate so that they move in tandem with changes in the policy rate.<br />
*'''A ceiling system''' where the rate on the central bank lending facility that constitutes the ceiling of the corridor both serve as the target for the interbank rate and as the official central bank policy rate, somewhat similar to the "classical system" where the central bank discount rate, or Bank Rate, combined with OMOs were used to steer short-term market rates somewhat below the Bank Rate. Ceiling systems are not common anymore.<br />
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For a more detailed discussion on alternate regimes see [https://www.imf.org/external/np/seminars/eng/2014/oapbali/pdf/M3.pdf IMF Working paper]. <br />
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'''Interest Rate Corridor in India'''<br />
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In India, policy rate is the fixed repo rate announced by the central bank - Reserve Bank of India (RBI) - for its overnight borrowing/lending operations through its mechanism for managing short term liquidity - the [http://www.arthapedia.in/index.php?title=Liquidity_Adjustment_Facility_(LAF) Liquidity Adjustment Facility]. The Repo Rate is an instrument for borrowing funds by selling securities of the ''Central Government or a State Government or of such securities of a local authority'' as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed.<br />
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<div style="flot:right; width:593px; margin:10px 0px 25px 0px;">[[File:interest-rc-pic1.jpg]]</div><br />
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The upper bound of the interest rate corridor in India is served by the [http://www.arthapedia.in/index.php?title=Marginal_Standing_Facility Marginal Standing Facility] (MSF) rate, which is the penal rate at which banks borrow money from the central bank and lower bound is served by the reverse repo rate, the rate at which banks park their surplus with RBI by purchasing the securities from central bank<sup class="reference">[[#ref3|[3]]]</sup>. (For more details on marginal standing facility rate, repo and reverse repo rates and policy rate please see the respective concepts in Arthapedia)<br />
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Other interest rates in the system like, inter-bank overnight call money rate, 7 and 14 day market repo and Collateralized Borrowing and Lending Obligations (CBLO) rates, form the short term money market rates in India. These rates typically hover around the policy rates - at the time of excess liquidity in the system, the rates are around the reverse repo rate while at the time of shortage, the same hovers around repo rate. At extremely tight liquidity conditions, these rates hug near to the MSF rate. The actual movement of rates during the period May 2015 to April 2016 is shown in the graph below. <br />
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<div style="flot:right; width:593px; margin:10px 0px 25px 0px;">[[File:interest-rc-pic2.jpg]]</div><br />
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Source: [http://dbie.rbi.org.in/DBIE/dbie.rbi?site=home RBI database]<br />
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The typical corridor used by RBI had been 200 basis points (100 basis point (bps) = 1%) or +/- 100 bps around the policy rate. In April 2016, RBI narrowed the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps. Thus, MSF will be fixed 50 basis points above repo rate and Reverse repo would be fixed 50 basis points below Repo rate. This was done with a view to ensure finer alignment of the weighted average call rate or the overnight money market rates with the repo rate (which essentially means more effective transmission of monetary policy).<br />
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At present, the objective of meeting short term liquidity needs is being accomplished through the provision of liquidity by the Reserve Bank under its regular facilities - variable rate 14-day/7-day repo auctions equivalent to 0.75 per cent of banking system Net demand and Time Liabilities (NDTL), supplemented by daily overnight fixed rate repos (at the repo rate) equivalent to 0.25 per cent of bank-wise NDTL. Frictional and seasonal mismatches that move the system away from normal liquidity provision are addressed through fine-tuning operations, including variable rate repo/reverse repo auctions of varying tenors. Under the Marginal Standing Facility, the eligible entities may borrow up to 2% of their respective NDTL.<br />
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'''History of Interest rate corridor in India'''<br />
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The operating procedure of monetary policy in India has evolved over the years from regulation and direction of credit to liquidity management in a market environment. The focus on liquidity management arose particularly after the liberalisation of the economy and inflow of capital. Setting of an interest rate corridor in a formal manner thus started in India with the introduction of Liquidity Adjustment Facility in 1999. <br />
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In 1998, the Committee on Banking Sector Reforms (Narasimham Committee II) recommended the introduction of a Liquidity Adjustment Facility (LAF) under which the RBI should conduct auctions periodically. Accordingly, the RBI introduced an Interim Liquidity Adjustment Facility (ILAF) in April 1999 to minimize volatility in the money market by ensuring the movement of short-term interest rates within a reasonable range. Under the ILAF, the [http://arthapedia.in/index.php?title=Bank_Rate Bank Rate] acted as the refinance rate (i.e., the rate at which the liquidity was to be injected) and liquidity absorption was done through the fixed reverse repo rate announced on a day-to-day basis (At that point of time they were called as repo rate). An informal corridor of the call rate thus emerged with the Bank Rate as the ceiling and the reverse repo rate as the floor rate, thereby minimising the volatility in the money market. ILAF was expected to promote stability in money market activities and ensure that interest rates moved within a reasonable range.<br />
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With the introduction of revised LAF in 2004 (whereby the meaning of the hitherto used Repo and Reverse Repo rates were inter-changed), in effect from November 2004, all liquidity injections are made at the fixed repo rate and liquidity absorption at the fixed reverse repo rate, with the two rates intended to act as the upper and lower bound of the corridor, respectively. <br />
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The 2011 [https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=631 Report of the Working Group on Operating Procedure of Monetary Policy] (RBI, March 15, 2011; Chairman: Shri Deepak Mohanty)) paved the way for the installation of the current framework of interest rate corridor. Both the corridors designed earlier worked without a single policy rate. Depending on the liquidity situation either bank rate or repo rate or reverse repo rate assumed the role of policy rate. The operation of the LAF during April 2001 to February 2011 indicated that the repo and reverse repo rates were changed either separately or together 39 times, leading to changes in the corridor width 26 times. Hence, the committee recommended the following with respect to interest rate corridor. <br />
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*''Idea of operating the monetary system in a deficit mode''<br />
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The Working Group report stated that monetary transmission is substantially more effective in a deficit liquidity situation than in a surplus liquidity situation. If the banks have surplus funds, the commercial bank will have discretion as to whether they lend their surplus to the central bank at the policy rate or create more credit by lowering credit standard if the policy rate is not attractive and the banks have the risk appetite. In case of surplus, the central bank's ability to transmit its preferred interest rate structure (yield curve direction) into the market gets weakened. If the shortage is a continuing feature of the market, the central bank becomes a net creditor of the banking system and the effectiveness of the monetary policy is likely to be stronger. However, the level of acceptable shortage for effectiveness of the monetary policy is a debate in itself.<br />
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An empirical exercise carried out by the Group suggested that under deficit liquidity conditions, money market rates responded immediately to a policy rate shock. For example, a 100 basis points (bps) change in the repo rate caused around 80 bps change in the weighted average call rate over a month. However, the strength of the response is relatively small in a surplus liquidity situation: a 100 bps change in the reverse repo rate, which is the operational rate in a surplus liquidity situation, caused around 25 bps change in the weighted average call rate over a month. Given the substantially superior strength of monetary transmission in a deficit liquidity condition, the Group recommended that the RBI should operate the modified LAF in a deficit liquidity mode to the extent feasible.<br />
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A simulation exercise carried out by the Group showed that at a liquidity deficit of one per cent of NDTL, the weighted average of money market rates exceeded the repo rate, on average, by around 15 bps. Similarly, with a liquidity surplus of one per cent of NDTL, the weighted average of money market rates was lower by about 20 bps. But when the liquidity deficit increased beyond one per cent of NDTL, the impact on the weighted average of money market rates was non-linear. For example, for a deficit at 1.25 per cent of NDTL, the deviation in weighted average of money market rates was 40 bps which rose to 75 bps for deficits at 1.5 per cent of NDTL and became unbounded at higher deficit levels. The Group was of the view that the objective of the LAF should be to stabilize short-term interest rates around the chosen policy rate for the smooth transmission of monetary policy. The Group, therefore, recommended that the liquidity level in the LAF should be contained around (+)/ (-) one per cent of NDTL. If the liquidity surplus/deficit persists beyond (+)/ (-) one per cent of NDTL, the RBI should use alternative instruments to supplement the LAF operations for effective monetary transmission.<br />
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*''Setting a single policy rate'' <br />
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However, it poses a major communication challenge to clearly articulate the stance of monetary policy, particularly in a situation when liquidity alternates between the surplus mode and the deficit mode in quick succession. World over central banks generally follow a corridor approach and they have a single policy rate as the system mostly operates in a deficit mode. As the Working Group suggested that the RBI operate the LAF in a deficit mode, it also recommended that the repo rate be the single policy rate. <br />
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*''Bank Rate and Reverse Repo rates acting as the ceiling of the Corridor''<br />
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Further, the Group recommended that the repo rate should operate within a corridor so that the overnight interest rate moves around the repo rate in a narrow informal bound by redesigning the corridor. The Group recommended that the Bank Rate be re-activated as a discount rate with a spread over the repo rate. Once the policy rate changes, the Bank Rate should change automatically with a fixed spread over the repo rate.<br />
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The Group recommended that the reverse repo facility at which the RBI absorbs liquidity from the system should constitute the lower bound of the corridor. However, the reverse repo rate should not act as a policy rate as at present and should be determined as a negative spread over the repo rate. Moreover, as the Group envisaged the reverse repo facility more in the nature of a standing deposit facility, it suggested that the reverse repo rate should be such that it does not incentivise market participants to place their funds with the RBI and this needs to be kept in view while designing width of the corridor.<br />
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*''Creation of an Exceptional standing facility at the Bank Rate''<br />
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The Group recommended the institution of a collateralised Exceptional Standing Facility (ESF) at the Bank Rate up to one per cent of the NDTL of banks carved out of their required SLR portfolio. Under sub-section (8) of Section 24 of the Banking Regulation Act, 1949, the RBI is allowed to waive payment of the penal interest on account of default in the maintenance of the SLR by a bank. The idea of liquidity facility up to one per cent of NDTL by waiving the penalty for the SLR default is to ensure that interest rates in the overnight inter-bank market do not spike for want of eligible collateral with some banks. The Group, therefore, recommended that the RBI should grant general exemption from payment of penal interest rate for the proposed ESF.<br />
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*''Suitable corridor width'' <br />
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An empirical exercise carried out by the Working Group showed a positive significant correlation of corridor width with weighted average overnight call rate. Controlling for liquidity, a wider corridor was associated with greater volatility in the overnight interest rate. In India, the corridor width has varied between 100 and 300 bps. An international survey suggests a corridor width of 50 to 200 bps. The Group also examined the effect of corridor width on weighted average call money rate volatility which indicated that a corridor width in the range of 150–175 bps could be optimal. Considering these estimates and keeping in view the optimality at containing liquidity within (+)/(-) one per cent of NDTL, the Group recommended 150 bps for the corridor width.<br />
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*''Spread of the corridor around the policy rate''<br />
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Assuming a liquidity surplus scenario (due to capital flows and growth prospects) Group recommended an asymmetric corridor with the spread between the policy repo rate and reverse repo rate twice as much as the spread between the policy repo rate and the Bank Rate. That is, with a corridor width of 150 bps, the Bank Rate should be at ‘repo rate plus 50 bps’ and the reverse repo rate should be at ‘repo rate minus 100 bps’. This will ensure that market participants have an incentive to deal among themselves before approaching the RBI.<br />
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Accordingly, an operating framework of monetary policy was implemented on [https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6376&Mode=0 3 May 2011] on the basis of recommendations of the Working Group on Operating Procedure of Monetary Policy (RBI, 2011). The framework had the following distinguishing features<sup class="reference">[[#ref4|[4]]]</sup>:<br />
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*The weighted average overnight call money rate will be the operating target of monetary policy.<br />
*There will henceforth be only one independently varying policy rate and that will be the repo rate.<br />
*The reverse repo rate will continue to be operative but it will be pegged at a fixed 100 basis points below the repo rate. Hence, it will no longer be an independent rate.<br />
*A new Marginal Standing Facility (MSF) will be instituted from which Scheduled Commercial Banks (SCBs) can borrow overnight up to one per cent of their respective NDTL. The rate of interest on amount accessed from this facility will be 100 basis points above the repo rate. This facility is expected to contain volatility in the overnight inter-bank market.<br />
*As per the above scheme, the revised corridor will have a fixed width of 200 basis points. The repo rate will be in the middle. The reverse repo rate will be 100 basis points below it and the MSF rate 100 basis points above it.<br />
*While the width of the corridor is fixed at 200 basis points, the Reserve Bank will have the flexibility to change the corridor, should monetary conditions so warrant.<br />
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Thus, till the monetary policy statement of [https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6376&Mode=0 3.5.2011], LAF Repo and reverse repo rates were being fixed separately. In this 2011 monetary policy statement, based on the working group report, it was decided that the reverse repo rate would not be announced separately but will be linked to repo rate. The reverse repo rate was proposed to be kept at 100 basis points below repo rate (100 basis points = 1%). Thus, reverse repo ceased to exist as an independent rate.<br />
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The +/- 100 basis points system with MSF and Reverse Repo as the upper and lower bounds continued till April 2016, with the width of the corridor remaining at 200 basis points, except for some brief periods in between.<br />
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The Reserve Bank’s liquidity framework was changed significantly in September 2014 in order to implement key recommendations of the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=743 Expert Committee to Revise and Strengthen the Monetary Policy Framework] (Chairman: Dr. Urjit R Patel), RBI, January 2014). Based on the committee report, it was decided that RBI would adopt inflation targeting using repo rate as the policy rate and by maintaining a tight grip on the other interest rates. <br />
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Urjit Patel Committee, while recommending [http://www.arthapedia.in/index.php?title=Inflation_Targeting_In_India inflation targeting] regime for the central bank advised continuing with the above operating framework in a broad manner. In the first or transitional phase, the weighted average call rate will remain the operating target, and the overnight LAF repo rate will continue as the single policy rate. The reverse repo rate and the MSF rate will be calibrated off the repo rate with a spread of (+/-) 100 basis points, setting the corridor around the repo rate. The repo rate will be decided by the [http://www.arthapedia.in/index.php?title=Monetary_Policy_Committee_(MPC) Monetary Policy Committee] (MPC) through voting. The MPC may change the spread, which however should be as infrequent as possible to avoid policy induced uncertainty for markets. Provision of liquidity by the RBI at the overnight repo rate will, however, be restricted to a specified ratio of bank-wise net demand and time liabilities (NDTL), that is consistent with the objective of price stability. As the 14-day term repo rate stabilizes, Committee suggested that, central bank liquidity should be increasingly provided at the 14-day term repo rate and through the introduction of 28-day, 56-day and 84-day variable rate auctioned term repos by further calibrating the availability of liquidity at the overnight repo rate as necessary. The objective should be to develop a spectrum of term repos of varying maturities with the 14-day term repo as the anchor.<br />
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Accordingly, in the [https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=36654 April 2016 monetary policy] RBI reviewed its monetary policy stance. It was stated by RBI that, it is possible for the Reserve Bank to keep the system closer to balance on average without the operational rate falling significantly, given that new instruments such as variable rate reverse repo auctions allow the Reserve Bank to suck out excess short term liquidity from the system without the excess liquidity being deposited with the Reserve Bank through overnight fixed rate reverse repo. Thus, RBI found that the past rationale for keeping the system in significant average liquidity deficit is no longer as compelling, especially when the policy stance is intended to be accommodative. Moreover, given that the Reserve Bank’s market operations rather than depositing or borrowing at standing facilities determine the operational interest rate, the policy rate corridor could be narrowed, as suggested by the Expert Committee.<br />
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Thus, in the [https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=36654 April 2016 monetary policy statement], RBI narrowed the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps. Thus, MSF will be fixed 50 basis points above repo rate and Reverse repo would be fixed 50 basis points below Repo rate; i.e., the width of the corridor came down from 200 bps to 100 bps. This was done with a view to ensure finer alignment of the weighted average call rate or the overnight money market rates with the repo rate (which essentially means more effective transmission of monetary policy). Also, RBI decided that it would continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality. Further, it has been decided to:<br />
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*Smooth the supply of durable liquidity over the year using asset purchases and sales as needed;<br />
*Ease liquidity management for banks without abandoning liquidity discipline by reducing the minimum daily maintenance of CRR from 95 per cent of the requirement to 90 per cent with effect from the fortnight beginning April 16, 2016;<br />
*Allow substitution of securities in market repo transactions in order to facilitate development of the term money market; and<br />
*Consult with the Government on how to moderate the build-up of cash balances with the Reserve Bank.<br />
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[https://m.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=944#CP36 Report of the Internal Working Group to Review the Liquidity Management Framework of September 2019] recommended that the existing difference of 25 basis points between the repo rate and the reverse-repo rate, as well as between the repo rate and the MSF rate, be retained. In India, the fixed rate reverse repo has acted as floor to the corridor; there is no bank-wise or overall limit on the reverse repo amount and the same is limited by the collateral available with the Reserve Bank. To overcome collateral constraints, the Reserve Bank has been resorting to issuances of Cash Management Bills (CMBs) under MSS to impound the surplus liquidity. The Working group felt that for effective liquidity management operations, institutionalising an uncollateralised standing deposit facility is essential. In order to strengthen the operating framework further, the Government has since amended the RBI Act, 1934 for introduction of a SDF. The Group recommended that the SDF be operationalised early.<br />
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<span class="small_footernote" id="ref1">1. Refers to depositing funds with the central bank without receiving any collateral as security in return</span><br />
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<span class="small_footernote" id="ref2">2. It has also been argued recently that the constant width of the corridor is a waste of a good instrument. Goodhart, Charles (2009), "Liquidity Management". Paper prepared for the Federal Reserve Bank of Kansas City Symposium at Jackson Hole, August, 2009 as quoted in the Working Group Report. </span><br />
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<span class="small_footernote" id="ref3">3. "reverse repo" means an instrument for lending funds by purchasing securities of the ''Central Government or a State Government or of such securities of a local authority'' as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent.</span><br />
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<span class="small_footernote" id="ref4">4. The transition to the current framework in which the interest rate is the operating target, from the earlier regime based on reserve targeting – i.e., base money, borrowed reserves, non-borrowed reserves – was generally driven by two guiding considerations. First, financial sector reforms largely freed the interest rate from administrative prescriptions and setting, thereby enhancing its effectiveness as a transmission channel of monetary policy. Second, the erosion in stability and predictability in the relationship between money aggregates, output and prices with the proliferation of financial innovations, advances in technology and progressive global integration.</span><br />
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==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Marginal_Standing_Facility Marginal Standing Facility (MSF)]<br />
*[http://www.arthapedia.in/index.php?title=Statutory_Liquidity_Ratio Statutory liquidity ratio (SLR)]<br />
*[http://www.arthapedia.in/index.php?title=Cash_Reserve_Ratio_(CRR) Cash reserve ratio (CRR)]<br />
*[http://www.arthapedia.in/index.php?title=Liquidity_Adjustment_Facility_(LAF) Liquidity Adjustment Facility (LAF)]<br />
*[http://arthapedia.in/index.php?title=Base_Rate Base Rate]<br />
*[http://arthapedia.in/index.php?title=Market_Stabilization_Scheme_(MSS) Market Stabilization Scheme (MSS)]<br />
*[http://arthapedia.in/index.php?title=Bank_Rate Bank Rate]<br />
*[http://arthapedia.in/index.php?title=Policy_Rate Policy Rate ]<br />
*[http://arthapedia.in/index.php?title=Repo_Rate_and_Reverse_Repo_RateRepo and Reverse Repo Rate]<br />
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==References==<br />
*[https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=631 Report of the Working Group on Operating Procedure of Monetary Policy] (RBI, March 15, 2011; Chairman: Shri Deepak Mohanty))<br />
*Report of the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=743 Expert Committee to Revise and Strengthen the Monetary Policy Framework] (Chairman: Dr. Urjit R Patel), RBI, 21 January 2014<br />
*Dr. Golaka C Nath (2013): [https://www.ccilindia.com/Research/CCILPublications/Lists/CCILPubRakshitra/Attachments/214/Rakshitra December.pdf Repo Market - A Tool to Manage Liquidity in Financial Institutions], CCIL Monthly Newsletter, Clearing Corporation of India Ltd (CCIL), December 2013<br />
*Nils Maehle (2014): Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Regimes, [https://www.imf.org/external/np/seminars/eng/2014/oapbali/pdf/M3.pdf IMF Working Paper September 2014]<br />
*[https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=36654 April 2016 monetary policy statement] of RBI<br />
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==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
[[Category:concepts|Interestratecorridor]]</div>Rosemary.ahttp://arthapedia.in/index.php/Electoral_BondElectoral Bond2019-04-10T04:35:14Z<p>Rosemary.a: </p>
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<div>Electoral Bond is a financial instrument (similar to a promissory note) for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.<br />
<br />
Electoral bond was announced in the [http://indiabudget.gov.in/ub2017-18/bs/bs.pdf Union Budget 2017-18]. Required amendments to the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf Reserve Bank of India Act, 1934] (Section 31(3)) and the [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf Representation of People Act, 1951] were made through Section 133 to 136 of [http://indiabudget.gov.in/ub2017-18/fb/bill.pdf Finance Bill, 2017].<br />
<br />
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. From the bonds, no details of the donor nor of the intended political beneficiary can be made out. So electoral bond cannot be identified or associated with any particular buyer or political party. However, some security features are encoded into the bonds to avoid issuance of fake /forged bonds. These include a random serial number invisible to the naked eye. However, the number is not noted by the SBI in any record associated with buyer or political party depositing a particular electoral bond. The number is not being used or can be used to track the donation or the buyer. The issuing bank is not sharing the serial number with anybody including the Government and users as per the [https://dea.gov.in/sites/default/files/Press%20Release%20on%20EBB.pdf press release] issued by Ministry of Finance on 17 April 2018. <br />
<br />
Government [http://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf notified] the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;The text of the Article written by the Union Finance Minister, Shri Arun Jaitley on Necessity of Electoral Bonds may be seen [http://pib.nic.in/newsite/PrintRelease.aspx?relid=175452 here].<br />
<br />
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day. <br />
<br />
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.<br />
<br />
State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds initially at its [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176734 4 Authorised Branches]. The first issue of the Scheme was opened in March 2018. Accordingly, the first sale of Electoral Bonds commenced from 1 March 2018 for a period of 10 days i.e. up to 10 March 2018. <br />
<br />
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. <br />
<br />
As per Section 29C(1) of [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf The Representation of People Act, 1951], the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond. <br />
<br />
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.<br />
<br />
<br />
'''Also See''' <br />
<br />
[http://www.arthapedia.in/index.php?title=Electoral_Trust Electoral Trust] <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Electoral Bond]]</div>Rosemary.ahttp://arthapedia.in/index.php/Public_Debt_Management_of_the_Union_Government_in_IndiaPublic Debt Management of the Union Government in India2019-04-03T07:26:18Z<p>Rosemary.a: </p>
<hr />
<div>'''Objectives of Public Debt Management in India'''<br />
<br />
See the definition of public debt in India [http://arthapedia.in/index.php?title=Public_Debt here].<br />
<br />
The overall objective of the Central Government’s debt management policy, as laid out by the [http://finmin.nic.in/reports/govt_debt_2010.pdf Central Government's status paper in November 2010] is to “meet Central Government’s financing needs at the lowest possible long term borrowing costs and also to keep the total debt within sustainable levels. Additionally, it aims at supporting development of a well-functioning and vibrant domestic bond market”. <br />
<br />
Apart from this declared objectives, timely availability of resources for Government is ensured in a non-disruptive manner for the market. Various institutional arrangements are also put in place accordingly.<br />
<br />
Government published its first Debt Management Strategy (DMS) document (earlier published across various documents of the Government and RBI) on December 31, 2015.The scope of DMS is restricted to active elements of domestic debt management, i.e., marketable debt of the Central Government. Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities including external debt as well as General Government Debt including state development loans (SDL). The objective of the debt management strategy (DMS) is to secure the government's funding at all times at low cost over the medium/long-term while avoiding any excessive risk. The DMS has been articulated for the medium-term for a period of three years and would be<br />
reviewed annually and rolled over for the next three years. <br />
<br />
India is not formally using the [http://treasury.worldbank.org/bdm/htm/guidelines_publicdebt.html IMF / World Bank Medium Term Debt Strategy] and Debt Sustainability Analysis. (See the IMF Guidelines [http://www.imf.org/external/np/mae/pdebt/2000/eng/index.htm here]). Many countries across the globe follow / target Medium Term Public Debt Strategy specifying the debt targets to be met and the strategies for achieving the same. In India, such a framework / document is not in existence. However, in the [http://indiabudget.nic.in/ub2012-13/frbm/frbm2.pdf Medium Term Fiscal Policy Statement] laid before the Parliament, a two year target for outstanding liabilities is incorporated. In the [http://indiabudget.nic.in/ub2012-13/frbm/frbm3.pdf Fiscal Policy Strategy Statement] laid before the Parliament, Government outlines the prudent debt management strategies so as to ensure that the public debt remains within sustainable limits and does not crowd out private borrowing for investment. <br />
<br />
As per the [http://indiabudget.nic.in/ub2012-13/frbm/frbm3.pdf Fiscal Policy Strategy Statement of 2012-13] the public debt management policy of the Government is driven by the principle of gradual reduction of [http://www.investopedia.com/terms/d/debtgdpratio.asp#axzz2AHaQZiPA public debt to GDP ratio]. This is with the objective of further reducing the [http://www.investopedia.com/terms/d/debtservice.asp#axzz2AHaQZiPA debt servicing] risk and to create [http://en.wikipedia.org/wiki/Fiscal_space fiscal space] for developmental expenditure. On the financing side, the Government policy focuses on the following principles<br />
<br />
<ol style="list-style-type:lower-roman"><br />
<li>greater reliance on domestic borrowings over external debt, </li><br />
<li>preference for market borrowings over instruments carrying administered interest rates,</li><br />
<li>consolidation of the debt portfolio and </li><br />
<li>development of a deep and wide market for Government securities to improve liquidity in secondary market.</li><br />
</ol><br />
<br />
Finance Minister in his Budget Speech for 2010-11 had indicated his intention to bring out a status paper giving detailed analysis of the government’s debt situation and a road map for curtailing the overall public debt. Accordingly, a paper was brought out in November 2010, titled ''[http://finmin.nic.in/reports/govt_debt_2010.pdf Government Debt: Status and Road Ahead]'' with detailed analysis on status of Central Government debt. At the same time, it also charts out a well calibrated roadmap for reduction in the overall debt as percentage of GDP for the general government during the period 2010-11 to 2014-15.<br />
<br />
Subsequent to the issue of DMS in 2015, the Government's borrowing programme is being planned and executed in terms of DMS. The present debt profile of the Central Government is analysed with regard to cost, maturity and potential risk factors. The risk analysis contains metrics such as average time to maturity, analysis of the redemption profile, average time to re-fixing, percentage of outstanding debt maturing in next 12 months, etc. The DMS revolves around three broad pillars, viz., low cost, risk mitigation and market development. Low cost objective is attained by planned issuances and offer of appropriate instruments to lower cost in medium to long-run, taking into account market conditions and preferences of various investor segments. Low cost also attained by improved transparency by way of a detailed issuance calendar. Scenario analysis, which contains expected cost of debt based on the assumptions of future interest and exchange rates and future borrowing needs, is included in MTDS. Debt sustainability indicators, such as debt to GDP, average time to maturity and interest expense to GDP, are projected. Stress tests of the debt structure on the basis of the economic and financial shocks, to which the government is exposed, are conducted. <br />
<br />
The latest version of the status paper for the year 2017-18 is available [https://dea.gov.in/public-debt-management here]. <br />
<br />
<br />
'''Accounting of Debt and risk measurements'''<br />
<br />
For all practical purposes India runs a [http://www.imf.org/external/pubs/ft/tnm/2011/tnm1104.pdf Single Treasury Account]. Both [http://accounting4management.com/preparation_of_statement_of_cash_flows.htm cash flow method] and [http://www.investopedia.com/terms/a/accrualaccounting.asp#axzz2AHaQZiPA accrual accounting] methods (see comparison between the two methods [http://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accounting here]) are used for measuring the cost of public debt. Risk of the debt portfolio is measured in terms of different parameters which include future cash flows and level of projected deficit and borrowings. Based on the different scenarios, internal limits are defined. <br />
<br />
Meetings with Primary Dealers (investors who take government securities in bulk and then redistribute to their clients) are generally held twice a year, or more depending on the market conditions. Issuance plans and debt strategy are discussed in general terms with the investors.<br />
<br />
<br />
'''Institutions responsible for management of public debt'''<br />
<br />
The Constitution of India gives the executive branch of Government the powers to borrow upon the security of the Consolidated Fund of India. Reserve Bank as an agent of the Government (both Union and the States) used to implement the borrowing program. The Reserve Bank draws the necessary statutory powers for debt management from Section 21 of the Reserve Bank of India Act, 1934. While the management of Union Government's public debt is an obligation for the Reserve Bank, the Reserve Bank undertakes the management of the public debts of the various State Governments by agreement. <br />
<br />
The jurisdiction of various institutions responsible for public debt management is given below:<br />
:#Reserve Bank of India – Domestic Marketable Debt i.e., dated securities, treasury bills and cash management bills.<br />
:#Ministry of Finance (MOF); Office of Aid and accounts Division – external debt <br />
:#Ministry of Finance; Budget Division and Reserve Bank of India – Other liabilities such as small savings, deposits, reserve funds etc. <br />
<br />
For monetary and fiscal coordination, there is a cash and debt management committee which meets regularly. The members comprise of officials from RBI and MOF.<br />
<br />
The Central Government’s Budget for 2007-08 announced setting up an autonomous debt Management Office (DMO) and, in the first phase, a Middle Office was set up in September 2008 in the Ministry of Finance to facilitate the transition to a full-fledged DMO. The Middle Office would be merged into the Debt Management Office (DMO), when it is established. The functionalities presently carried out by RBI and Ministry of Finance will be undertaken by the Middle Office in a phased manner to ensure a smooth transition from the existing arrangements. The responsibilities of the Middle Office can be seen [http://finmin.nic.in/the_ministry/dept_eco_affairs/middle_office/midoffice_index.asp here].<br />
<br />
To take forward the process of financial sector legislative reforms, the Government had proposed to move the Public Debt Management Agency of India Bill, 2012 in the Parliament. However, instead of moving a separate bill, Government introduced the creation of Public Dent Management Agency (PDMA) through the [http://indiabudget.nic.in/bill.asp Finance Bill of 2015], presented along with the [http://indiabudget.nic.in/bill.asp Union Budget of 2015-16]. Consequent amendments to RBI Act and Government Securities Act was also proposed and the latter was proposed to be repealed. The agency was to set up with the objective of minimizing the cost of raising and servicing public debt over the long term within an acceptable level of risk at all times, under the superintendence of the central government. Alternatively one could say, this is now the legal objective of public debt management policy in India. <br />
<br />
However, the proposals mentioned above in the Finance Bill 2015 could not be agreed upon in the Parliament. Accordingly, Clauses relating to the creation of PDMA, amendments to the RBI Act 1934 and the Government Securities Act 2006 were withdrawn from the Finance Bill, 2015.<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|PublicDebtManagementoftheUnionGovernmentinIndia]]</div>Rosemary.ahttp://arthapedia.in/index.php/Kisan_Credit_CardKisan Credit Card2019-02-05T08:15:57Z<p>Rosemary.a: </p>
<hr />
<div>Kisan Credit Card is a pioneering credit delivery innovation for providing adequate and timely credit to farmers under single window. It is a flexible and simplified procedure, adopting whole farm approach, including short-term, medium-term and long-term credit needs of borrowers for agriculture and allied activities and a reasonable component for consumption needs.<br />
<br />
Credit card and pass book or credit card cum pass book provided to eligible farmers facilitate revolving cash credit facility. Any number of drawals and repayments within a limit, which is fixed on the basis of operational land holding, cropping pattern and scale of finance can be made. Each drawal has to be repaid within a maximum period of 12 months and the Card is valid for 3 to 5 years subject to annual review. Conversion/reschedulement of loans is permissible in case of damage to crops due to natural calamities. Crop loans disbursed under KCC Scheme for notified crops are covered under Rashtriya Krishi Bima Yojana (National Crop Insurance Scheme), to protect farmers against loss of crop yield caused by natural calamities, pest attacks etc.<br />
<br />
Kisan Credit Card (KCC) Scheme, which enables the farmers to purchase agricultural inputs such as seeds, fertilizers, pesticides, etc. and to draw cash to satisfy their consumption needs has since been simplified and converted into an ATM enabled debit card [http://www.arthapedia.in/index.php?title=Rupay_Debit_Card (Rupay KCC- RKCC)]. <br />
<br />
In order to extend the operational flexibility to farmers engaged in [https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11462&Mode=0 Animal Husbandry and Fisheries] the Government of India decided to extend the facilities of KCC to these farmers in the Budget 2018-19. <br />
<br />
==References==<br />
#http://www.nabard.org/development&promotional/kisancreditcardmore.asp<br />
#http://www.statebankofindia.com/user.htm<br />
#http://www.bankofindia.com/kisan.aspx<br />
<br />
<br />
==Contributed by==<br />
*[http://www.ies.gov.in/myaccount-profile-view.php?memid=106 Sudhir Tewari, IES (1985)]<br />
*Email- [mailto:sudhirtewari@hotmail.com sudhirtewari@hotmail.com]<br />
<br />
[[Category:concepts|KisanCreditCard]]</div>Rosemary.ahttp://arthapedia.in/index.php/Government_CompanyGovernment Company2018-12-12T10:36:03Z<p>Rosemary.a: </p>
<hr />
<div><p>A &ldquo;Government company&rdquo; is defined under Section 2(45) of the [http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf Companies Act, 2013] as &ldquo;any company in which not less than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company&rdquo;.</p><br />
<p>Thus, the cardinal feature of a government company is not less than 51% ownership by Central/state government, either individually or jointly.</p><br />
<p>This definition includes what is generally known as [http://arthapedia.in/index.php?title=Public_Sector_Undertakings/Enterprises public sector undertakings]/ enterprises in India. </p><br />
<p>A &ldquo;subsidiary company&rdquo; or &ldquo;subsidiary&rdquo; of a Government Company would also be categorized as a Government Company provided the Government Company<br><br />
(<em>i</em>) controls the composition of the Board of Directors; or<br><br />
(<em>ii</em>) exercises or controls more than one-half of the total voting rights [till January 2018 the word share capital was used instead of voting rights] either at its own or together with one or more of its other subsidiary companies. </p><br />
<p>Even if the control referred above is of another subsidiary company of the Government company, the company would still be categorized as a &ldquo;subsidiary&rdquo; and hence a government company. Thus, joint-venture companies formed by various Government companies or public sector undertakings are also considered as government companies. </p><br />
<p>The composition of a company&rsquo;s Board of Directors shall be deemed to be controlled by another company if that other company, by exercise of some power exercisable by it at its discretion, can appoint or remove all or a majority of the directors;</p><br />
<p>There are some restrictions on the number of layers of subsidiaries beyond a certain number.</p><br />
<p>In respect of Government Companies, the [http://www.saiindia.gov.in/english/index.html Comptroller and Auditor-General of India] appoints the auditor and does the supplementary audit through its authorized persons, based on the first audit report. Further, a Government Company&rsquo;s annual reports have to be tabled in both houses of Parliament / state legislature, depending on the nature of ownership. </p><br />
<p>A Government company cannot contribute any amount directly or indirectly to any political party, unlike other companies.</p><br />
<br />
<br />
<br />
==Also See==<br />
*[http://arthapedia.in/index.php?title=Public_Sector_Undertakings/Enterprises Public sector undertakings]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|GovernmentCompany]]</div>Rosemary.ahttp://arthapedia.in/index.php/Public_Sector_Undertakings/EnterprisesPublic Sector Undertakings/Enterprises2018-12-12T10:32:08Z<p>Rosemary.a: </p>
<hr />
<div>The term public sector undertaking or Enterprise refers to a Government Company. “Government Company” is defined under Section 2 (45) of the Companies Act, 2013 as Any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company. The term is not intended to mean a public company (where shares are freely transferable and has a shareholder base of more than 200 people) though public sector enterprises are mostly public companies. <br />
<br />
<p>Public Sector undertakings refer to commercial ventures of the Government <br />
where user fees are charged for services rendered. The tariff/fees may be market <br />
based or subsidised. They are usually fully owned and managed by the Government <br />
such as Railways, Posts, Defence Undertakings, Banks etc. Public sector <br />
enterprises on the other hand refer to those companies registered under the <br />
Companies Act, 1956,which are predominantly owned by Government and which are <br />
managed by a Government appointed Chairman and Managing Director. Government <br />
nominees represent the interests of the Government on the board of Public sector <br />
enterprises. Public sector companies usually compete with private sector <br />
enterprises in the domestic as well as international market.</p><br />
<br />
<p>Investment decisions of PSUs are passed by the respective boards and then <br />
appraised and approved by the adminsitrative ministry to which they are <br />
accountable (e.g. Shipping Corporation of India is under the Department of <br />
Shipping in the Union Ministry of Surface Transport) or the Public Investment <br />
Board under the Department of Expenditure, Union Ministry of Finance and if the <br />
investment is beyond a certain threshold level or if a new public sector company <br />
is being created, then the proposal has to be approved by Cabinet. Central <br />
public sector enterprises are classified as “mahratnas” “mini-ratnas” and other <br />
enterprises depending on their track record based on guidelines approved by the <br />
Government from time to time.</p><br />
<br />
<p>Sub national governments also own and manage public sector undertakings and <br />
in most cases they are loss making and require considerable budgetary support.</p><br />
<p>The audit of public sector undertakings is done by the Comptroller and <br />
Auditor General of India while that of public sector enterprises is done first <br />
by Chartered Accountants and the supplementary audit is done by the Comptroller <br />
and Auditor General of India.</p><br />
<br />
<br />
'''Evolution of Public Sector enterprises''' <br />
<p>At the time of independence in 1947, Indian industry was ill-developed and <br />
required considerable policy thrust. The Second Five year Plan (1956-61) and the <br />
Industrial Policy Resolution of 1956 provided the framework for public sector <br />
undertakings/enterprises in India, which were expected to play a substantial <br />
role in preventing the concentration of economic power, reducing regional <br />
disparities and ensuring that planned development serves the common good. A list <br />
of 17 industrial sectors was reserved for the public sector in Schedule A of the <br />
1956 Resolution and no new units in the private sector in these categories would <br />
be permitted. Another list of industries was included in Schedule B where the <br />
Government actively encouraged public ownership. The Union Government and <br />
various sub-national governments made considerable investment on setting up and <br />
running public sector undertakings/enterprises.</p><br />
<br />
<p>Initially, the public sector was confined to core and strategic industries <br />
such as irrigation projects (e.g. the Damodar Valley Corporation), Fertilizers <br />
and Chemicals (e.g. Fertilizers and Chemicals, Travancore Limited) Communication <br />
Infrastructure (e.g. Indian Telephone Industries), Heavy Industries (e.g. Bhilai <br />
Steel Plant, Hindustan Machine Tools, Bharat Heavy Electricals, Oil and Natural <br />
Gas Commission etc.). Subsequently, however, the Government nationalized several <br />
banks (starting with nationalization of the Imperial Bank of India which was <br />
renamed State Bank of India in 1955) and foreign companies (Jessop &amp; Co, <br />
Braithwaite &amp; Co, Burn &amp; Co.).Later Public Sector companies started <br />
manufacturing consumer goods (e.g. Modern Foods, National Textile Corporation <br />
etc) and providing consultancy, contracting, and transportation services.</p><br />
<br />
<p>The internal (profits) and extra-budgetary resources (borrowed funds) of <br />
public sector undertakings are factored into the preparation of the Annual <br />
Financial Statement (Budget) of the Government. However, poor productivity, poor <br />
project management, over-manning, lack of continuous technological upgradation, <br />
and inadequate attention to R&amp;D and human resource development resulted in a <br />
large number of public enterprises showing a very low rate of return on the <br />
capital invested and the need for budgetary support for day to day running. <br />
Several of them accumulated huge losses and ran up huge debts which had to be <br />
written off /settled from time to time by the Government.</p><br />
<p>Reviewing the role of the public sector, the Industrial Policy Resolution <br />
1991 reduced the number of industrial undertakings exclusively reduced to the <br />
public sector to just six areas which included strategic industries like atomic <br />
energy, defence, coal, mineral oils etc. as well as railway transport. Efforts <br />
were made to divest non strategic public sector industries and to increase <br />
private participation in the equity of profitable public sector industries. At <br />
the same time a Board for Reconstruction of Public Sector Enterprises has been <br />
set up to suggest ways to turn around sick and loss making public sector <br />
enterprises.</p><br />
<br />
<br />
<br />
==References==<br />
#http://dpe.nic.in<br />
#http://dipp.nic.in<br />
<br />
<br />
==Contributed by==<br />
*[http://www.ies.gov.in/myaccount-profile-view.php?memid=128 Dr. Anuradha Balaram, IES (1986)]<br />
*Email- [mailto:pabalaram@hotmail.com pabalaram@hotmail.com]<br />
<br />
[[Category:concepts|PublicSectorUndertakings/Enterprises]]</div>Rosemary.ahttp://arthapedia.in/index.php/RBI_Reference_Exchange_RateRBI Reference Exchange Rate2018-09-26T05:15:05Z<p>Rosemary.a: </p>
<hr />
<div>RBI reference exchange rate refers to the benchmark foreign exchange rates for Indian Rupee against major four foreign currencies, published by Reserve Bank of India on a daily basis. However, the practice of publishing this rate has been discontinued by RBI. <br />
<br />
The Reserve Bank of India compiles and publishes on a daily basis, reference rates for four major currencies i.e. US dollar (USD), British Pound (GBP), Japanese Yen (YEN) and Euro (EUR). <br />
<br />
Uptill September 2014, the rates were arrived at by averaging the mean of the bid/ offer rates polled from a few select banks at a randomly chosen five minute window between 11.45 a.m. and 12.15 p.m. every week-day (excluding Saturdays, Sundays and Bank Holidays in Mumbai). The contributing banks were randomly selected from a large panel of banks, identified on the basis of their standing, market-share in the domestic foreign exchange market and representative character<sup class="reference">[[#ref1|[1]]]</sup>.<br />
<br />
Based on the recommendations of the [https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=761 Committee on Financial Benchmarks] (constituted on June 28, 2013; Chairman: Shri P. Vijaya Bhaskar; report submitted in February 2014) the following changes were made to the existing methodology for calculation of exchange rates.<br />
<br />
<br />
*The rate for spot US Dollar against Indian Rupee will be polled from the select list of contributing banks at a '''randomly chosen five minute window between 11.30 a.m. and 12.30 p.m. every week-day''' (excluding Saturdays, Sundays and Bank Holidays in Mumbai).<br />
*The other three rates, viz. EUR/INR, GBP/INR and JPY/INR would be computed by crossing the USD/INR Reference Rate with the ruling EUR/USD, GBP/USD and USD/JPY rates.<br />
*The daily press release on RBI Reference Rate for US Dollar will be issued every week-day (excluding Saturdays, Sundays and Bank Holidays in Mumbai) at around '''1.30 p.m'''.<br />
<br />
<br />
These changes have come into effective from September 1, 2014.<br />
<br />
The RBI reference exchange rate may be different from the rates established through the currency trading venues of stock exchanges or over the counter segments. However, the direction of movement would be the same.<br />
<br />
For instance, [http://www.fedai.org.in/ Foreign Exchange Dealers Association of India] (FEDAI)<sup class="reference">[[#ref1|[2]]]</sup> used to publish spot fixing rates for USD, GBP, EUR and JPY against INR at 11:40 AM - 12 noon on every working day based on quotes collected through polling. The FEDAI spot fixings were used for cash settlement of exercise of over the counter foreign currency- Indian rupee options primarily by some corporates. FEDAI also publishes [http://www.fedai.org.in/RevaluationRates.aspx revaluation rates] for spot contracts (against INR) in 25 currencies and for forward contracts (against INR) upto 6 months in nine currencies and upto 12 months in four currencies. The banks use the FEDAI revaluation rates for marking to market<sup class="reference">[[#ref1|[3]]]</sup> the outstanding spot and forward contracts in their books.<br />
<br />
The RBI Reference Rates are used for settlement of exchange traded currency futures and options. The Reference Rate is reportedly used by many corporates for determining [http://www.incometaxindia.gov.in/Pages/international-taxation/transfer-pricing.aspx transfer pricing]. The foreign exchange transactions of Government of India undertaken through RBI take place at the Reference Rate. The RBI’s foreign currency assets and liabilities are revalued at weekly and monthly intervals using the Reference Rate. The International Monetary Fund (IMF) also uses the rate for revaluation of Special Drawing Rights (SDRs).<br />
<br />
The RBI reference rates fixed for the day may be seen[https://rbi.org.in/ here]. Historical data may be seen from [http://dbie.rbi.org.in/DBIE/dbie.rbi?site=home RBI database]. <br />
<br />
Concerns are often raised as to whether RBI being the regulator of the Indian foreign exchange market should be involved in fixation of Reference Rates. However, across the globe, many central banks like European Central Bank, Bank of Canada, Central banks of countries like Brazil, South Africa, Thailand, Indonesia etc. publish such reference rates. Further in view of the scandals relating to manipulation of major global foreign exchange benchmarks administered by private sector entities, as also the fact that the Reference Rate setting process has remained quite robust, the Committee on Financial Benchmarks recommended that it may not be appropriate for RBI to discontinue fixing the Reference Rates.<br />
<br />
The Committee also felt that the USD/INR Reference Rate of RBI should be derived based on the actual market transactions obtained from defined source/s covering a sufficiently longer time window so as to ensure that the Reference Rate appropriately represents the prevailing spot rate. The Reference Rate was also recommended to be volume weighted to smoothen the impact of small value off-market transactions in determination of the benchmark. The sources of the EUR/USD, GBP/USD and JPY/USD rates used for crossing the USD/INR Reference Rate was also recommended to be publicly disclosed.<br />
<br />
The Reserve Bank periodically reviews the procedure for selecting the banks and the methodology of polling so as to ensure that the reference rate is a true reflection of the market activity.<br />
<br />
<br />
Since the timing of publication of the FEDAI spot rates and RBI reference rates were almost the same, Committee on Financial Benchmarks (Page No.71), had advised FEDAI to decide on phasing out the benchmark of Spot Fixing Rate at 11.30 a.m. after conducting a survey among banks. Accordingly, vide its circular dated [http://www.fedai.org.in/pdf/SPL_6_2014_16_June_2014.pdf16 June 2014], FEDAI decided to discontinue publishing daily FEDAI Spot Fixing Rates at 11.30 a.m. with effect from 1 October 2014. It does not mean that RBI reference rate would be mandated as an alternate reference rate. The settlement may be done at the ruling market rate.<br />
<br />
<p>Reserve Bank of India (RBI) announced in the Sixth Bi-monthly Monetary Policy Statement for the year 2017-18 in February, 2018 that Financial Benchmarks India Private Limited (FBIL) will assume, i.e. take over from RBI, the responsibility of computation and dissemination of reference rate for USD/INR and exchange rate of other major currencies at some appointed date. FIBIL has commenced the process of computing and disseminating reference rate for USD/INR and exchange rate of other major currencies with effect from July 10, 2018. Accordingly, the dissemination of Exchange Rate on RBI’s website has been discontinued now. </p><br />
<br />
<br />
==References==<br />
*RBI Press release dated [https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=31801 7 August 2014]<br />
*RBI press release dated [https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927 6 August 2008]<br />
*Report of the [https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=761Committee on Financial Benchmarks] (constituted on June 28, 2013; Chairman: Shri P. Vijaya Bhaskar; report submitted in February 2014)<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. The reference rate computation process was reviewed and changed with effect from April 15, 2010. In the changed procedure, the number of banks in the polling panel was significantly expanded, of which a set of banks are selected randomly every day for calling for quotes. Further, the reference time window was expanded to 30 minutes, i.e. 11:45 AM to 12:15 PM from the earlier system of 15 minutes, of which a five minute window is selected randomly for conducting poll. The means of the polled bids and offers are calculated for each contributing bank and the outlier mean rates are removed. The Reference Rates are arrived at by averaging the remaining mean rates. </span><br />
<br />
<span class="small_footernote" id="ref2">2.'''Foreign Exchange Dealer's Association of India''' (FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchange in India (typically called Authorised Dealers - ADs) as a self regulatory body and is incorporated under Section 25 of The Companies Act, 1956. It's major activities include framing of rules governing the conduct of inter-bank foreign exchange business among banks vis-à-vis public and liaison with RBI for reforms and development of forex market. </span><br />
<br />
<span class="small_footernote" id="ref3">3. '''Valuing the security in terms of its market value rather than the book value''' </span><br />
<br />
<br />
==Contributed by== <br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
<br />
[[Category:concepts|RBIReferenceExchangeRate]]</div>Rosemary.ahttp://arthapedia.in/index.php/RBI_Reference_Exchange_RateRBI Reference Exchange Rate2018-09-26T05:13:56Z<p>Rosemary.a: </p>
<hr />
<div>RBI reference exchange rate refers to the benchmark foreign exchange rates for Indian Rupee against major four foreign currencies, published by Reserve Bank of India on a daily basis. However, publishing this rate is discontinued by RBI. <br />
<br />
The Reserve Bank of India compiles and publishes on a daily basis, reference rates for four major currencies i.e. US dollar (USD), British Pound (GBP), Japanese Yen (YEN) and Euro (EUR). <br />
<br />
Uptill September 2014, the rates were arrived at by averaging the mean of the bid/ offer rates polled from a few select banks at a randomly chosen five minute window between 11.45 a.m. and 12.15 p.m. every week-day (excluding Saturdays, Sundays and Bank Holidays in Mumbai). The contributing banks were randomly selected from a large panel of banks, identified on the basis of their standing, market-share in the domestic foreign exchange market and representative character<sup class="reference">[[#ref1|[1]]]</sup>.<br />
<br />
Based on the recommendations of the [https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=761 Committee on Financial Benchmarks] (constituted on June 28, 2013; Chairman: Shri P. Vijaya Bhaskar; report submitted in February 2014) the following changes were made to the existing methodology for calculation of exchange rates.<br />
<br />
<br />
*The rate for spot US Dollar against Indian Rupee will be polled from the select list of contributing banks at a '''randomly chosen five minute window between 11.30 a.m. and 12.30 p.m. every week-day''' (excluding Saturdays, Sundays and Bank Holidays in Mumbai).<br />
*The other three rates, viz. EUR/INR, GBP/INR and JPY/INR would be computed by crossing the USD/INR Reference Rate with the ruling EUR/USD, GBP/USD and USD/JPY rates.<br />
*The daily press release on RBI Reference Rate for US Dollar will be issued every week-day (excluding Saturdays, Sundays and Bank Holidays in Mumbai) at around '''1.30 p.m'''.<br />
<br />
<br />
These changes have come into effective from September 1, 2014.<br />
<br />
The RBI reference exchange rate may be different from the rates established through the currency trading venues of stock exchanges or over the counter segments. However, the direction of movement would be the same.<br />
<br />
For instance, [http://www.fedai.org.in/ Foreign Exchange Dealers Association of India] (FEDAI)<sup class="reference">[[#ref1|[2]]]</sup> used to publish spot fixing rates for USD, GBP, EUR and JPY against INR at 11:40 AM - 12 noon on every working day based on quotes collected through polling. The FEDAI spot fixings were used for cash settlement of exercise of over the counter foreign currency- Indian rupee options primarily by some corporates. FEDAI also publishes [http://www.fedai.org.in/RevaluationRates.aspx revaluation rates] for spot contracts (against INR) in 25 currencies and for forward contracts (against INR) upto 6 months in nine currencies and upto 12 months in four currencies. The banks use the FEDAI revaluation rates for marking to market<sup class="reference">[[#ref1|[3]]]</sup> the outstanding spot and forward contracts in their books.<br />
<br />
The RBI Reference Rates are used for settlement of exchange traded currency futures and options. The Reference Rate is reportedly used by many corporates for determining [http://www.incometaxindia.gov.in/Pages/international-taxation/transfer-pricing.aspx transfer pricing]. The foreign exchange transactions of Government of India undertaken through RBI take place at the Reference Rate. The RBI’s foreign currency assets and liabilities are revalued at weekly and monthly intervals using the Reference Rate. The International Monetary Fund (IMF) also uses the rate for revaluation of Special Drawing Rights (SDRs).<br />
<br />
The RBI reference rates fixed for the day may be seen[https://rbi.org.in/ here]. Historical data may be seen from [http://dbie.rbi.org.in/DBIE/dbie.rbi?site=home RBI database]. <br />
<br />
Concerns are often raised as to whether RBI being the regulator of the Indian foreign exchange market should be involved in fixation of Reference Rates. However, across the globe, many central banks like European Central Bank, Bank of Canada, Central banks of countries like Brazil, South Africa, Thailand, Indonesia etc. publish such reference rates. Further in view of the scandals relating to manipulation of major global foreign exchange benchmarks administered by private sector entities, as also the fact that the Reference Rate setting process has remained quite robust, the Committee on Financial Benchmarks recommended that it may not be appropriate for RBI to discontinue fixing the Reference Rates.<br />
<br />
The Committee also felt that the USD/INR Reference Rate of RBI should be derived based on the actual market transactions obtained from defined source/s covering a sufficiently longer time window so as to ensure that the Reference Rate appropriately represents the prevailing spot rate. The Reference Rate was also recommended to be volume weighted to smoothen the impact of small value off-market transactions in determination of the benchmark. The sources of the EUR/USD, GBP/USD and JPY/USD rates used for crossing the USD/INR Reference Rate was also recommended to be publicly disclosed.<br />
<br />
The Reserve Bank periodically reviews the procedure for selecting the banks and the methodology of polling so as to ensure that the reference rate is a true reflection of the market activity.<br />
<br />
<br />
Since the timing of publication of the FEDAI spot rates and RBI reference rates were almost the same, Committee on Financial Benchmarks (Page No.71), had advised FEDAI to decide on phasing out the benchmark of Spot Fixing Rate at 11.30 a.m. after conducting a survey among banks. Accordingly, vide its circular dated [http://www.fedai.org.in/pdf/SPL_6_2014_16_June_2014.pdf16 June 2014], FEDAI decided to discontinue publishing daily FEDAI Spot Fixing Rates at 11.30 a.m. with effect from 1 October 2014. It does not mean that RBI reference rate would be mandated as an alternate reference rate. The settlement may be done at the ruling market rate.<br />
<br />
<p>Reserve Bank of India (RBI) announced in the Sixth Bi-monthly Monetary Policy Statement for the year 2017-18 in February, 2018 that Financial Benchmarks India Private Limited (FBIL) will assume, i.e. take over from RBI, the responsibility of computation and dissemination of reference rate for USD/INR and exchange rate of other major currencies at some appointed date. FIBIL has commenced the process of computing and disseminating reference rate for USD/INR and exchange rate of other major currencies with effect from July 10, 2018. Accordingly, the dissemination of Exchange Rate on RBI’s website has been discontinued now. </p><br />
<br />
<br />
==References==<br />
*RBI Press release dated [https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=31801 7 August 2014]<br />
*RBI press release dated [https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927 6 August 2008]<br />
*Report of the [https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=761Committee on Financial Benchmarks] (constituted on June 28, 2013; Chairman: Shri P. Vijaya Bhaskar; report submitted in February 2014)<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. The reference rate computation process was reviewed and changed with effect from April 15, 2010. In the changed procedure, the number of banks in the polling panel was significantly expanded, of which a set of banks are selected randomly every day for calling for quotes. Further, the reference time window was expanded to 30 minutes, i.e. 11:45 AM to 12:15 PM from the earlier system of 15 minutes, of which a five minute window is selected randomly for conducting poll. The means of the polled bids and offers are calculated for each contributing bank and the outlier mean rates are removed. The Reference Rates are arrived at by averaging the remaining mean rates. </span><br />
<br />
<span class="small_footernote" id="ref2">2.'''Foreign Exchange Dealer's Association of India''' (FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchange in India (typically called Authorised Dealers - ADs) as a self regulatory body and is incorporated under Section 25 of The Companies Act, 1956. It's major activities include framing of rules governing the conduct of inter-bank foreign exchange business among banks vis-à-vis public and liaison with RBI for reforms and development of forex market. </span><br />
<br />
<span class="small_footernote" id="ref3">3. '''Valuing the security in terms of its market value rather than the book value''' </span><br />
<br />
<br />
==Contributed by== <br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
<br />
[[Category:concepts|RBIReferenceExchangeRate]]</div>Rosemary.ahttp://arthapedia.in/index.php/MIBOR_and_MIBIDMIBOR and MIBID2018-09-26T05:00:40Z<p>Rosemary.a: </p>
<hr />
<div><p>Mumbai Inter-Bank Offer Rate (MIBOR) and Mumbai Inter-Bank Bid Rate (MIBID) are the benchmark rates at which Indian banks lend and borrow money to each other. The&nbsp;<strong>bid</strong>&nbsp;is the price at which the market would&nbsp;<em>buy</em>&nbsp;and the <strong>offer</strong>&nbsp;(or&nbsp;<strong>ask</strong>) is the price at which the market would&nbsp;<em>sell</em>. These rates reflect the short term funding costs of major banks. In other words, MIBOR reflects the price at which short term funds are made available to participating banks. </p><br />
<p> MIBID is&nbsp;the rate at which banks would like to borrow from other banks and MIBOR is the rate at which banks are willing to lend to other banks. Contrary to general perception, MIBID is <em><u>not</u></em> the rate at which banks attract deposits from other banks. </p><br />
<p> MIBOR is the Indian version of [https://www.theice.com/publicdocs/IBA_LIBOR_FAQ.pdf London Interbank Offer Rate] (LIBOR). MIBOR is fixed for overnight to 3 month long funds and these rates are published every day at a designated time. Of the above tenors, the overnight MIBOR is the most widely used one which is used for pricing and settlement of [http://www.investopedia.com/terms/o/overnightindexswap.asp Overnight Index Swaps] (OIS). Corporates use the OIS for hedging their interest rate risks<sup class="reference">[[#ref1|[1]]]</sup>. The MIBID/MIBOR rate is also used as a bench mark rate for majority of deals struck for [https://en.wikipedia.org/wiki/Interest_rate_swap Interest Rate Swaps] (IRS), [http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/characteristics-fras-forward-rate-agreements.asp Forward Rate Agreements] (FRA), [http://www.investopedia.com/terms/f/frn.asp Floating Rate Debentures] and [http://www.investopedia.com/terms/t/termdeposit.asp Term Deposits]. The aggregate amount of outstanding interbank/[https://en.wikipedia.org/wiki/Primary_dealer Primary Dealers] (PD) notional principal referenced to MIBOR remained at INR 16,847.6 billion as on October 31, 2013<sup class="reference">[[#ref2|[2]]]</sup>.</p><br />
<p>&nbsp;</p><br />
<p><strong>Financial Benchmarks</strong><br><br />
MIBOR, MIBID etc. are all financial benchmarks. Financial benchmarks are mainly used for pricing, settlement, and valuation of financial contracts. The IOSCO&rsquo;s [https://www.iosco.org/library/pubdocs/pdf/IOSCOPD415.pdf Report on Principles for Financial Benchmarks] describes financial benchmarks as:</p><br />
<p><em>&ldquo;Prices, estimates, rates, indices or values that are:</em></p><br />
<ul><br />
<li><em>Made available to users, whether free of charge or for payment;</em></li><br />
<li><em>Calculated periodically, entirely or partially by the application of a formula or another method of calculation to, or an assessment of the value of one or more underlying Interests;</em></li><br />
<li><em>Used for reference for purposes that includes one or more of the following:</em></li><br />
<li style="margin-left:20px;"><em>determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments;</em>&nbsp;</li><br />
<li style="margin-left:20px;"><em>determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument; and/or</em>&nbsp;</li><br />
<li style="margin-left:20px;"><em> measuring the performance of a financial instrument.&rdquo;</em></li><br />
</ul><br />
<p>The London Inter-bank Offer Rate (LIBOR) is the primary global benchmark for short term interest rates and has been used for pricing and settlement of large varieties of interest rate and derivative contracts. Hundreds of trillions of dollars worth of outstanding loans and financial contracts world-wide are estimated to be linked to LIBOR. Before the rate fixation scandal, [http://www.bbatrent.com/disclaimer British Bankers' Association&nbsp;](BBA) used to calculate LIBOR. Now the responsibility for its administration has been transferred to&nbsp;[https://www.theice.com/publicdocs/IBA_LIBOR_FAQ.pdf Intercontinental Exchange] (ICE). Thus,&nbsp;<strong>BBA Libor</strong>&nbsp;is now known as <strong>ICE Libor</strong>. </p><br />
<p> ICE LIBOR is produced for the following five currencies with seven maturities quoted for each - ranging from overnight to 12 months, producing 35 rates each business day. </p><br />
<ul><br />
<li>CHF (Swiss Franc)</li><br />
<li>EUR (Euro)</li><br />
<li>GBP (Pound Sterling)</li><br />
<li>JPY (Japanese Yen)</li><br />
<li>USD (US Dollar)</li><br />
</ul><br />
<p>ICE LIBOR provides an indication of the average rate at which a LIBOR contributor bank can obtain unsecured funding in the London interbank market for a given period, in a given currency. Individual ICE LIBOR rates are the end-product of a calculation based upon submissions from LIBOR contributor banks.ICE Benchmark Administration maintains a reference panel of between 11 and 18 contributor banks for each currency calculated<sup class="reference">[[#ref3|[3]]]</sup>.</p><br />
<p> The Indian foreign exchange and Rupee interest rate benchmarks are used by the banking sector mainly for two purposes, i.e. </p><br />
<ul><br />
<li>pricing and settlement of foreign exchange and Rupee interest rate contracts, </li><br />
<li>periodic valuation of various foreign exchange and Rupee interest rate related assets and liabilities. </li><br />
</ul><br />
<p>The major foreign exchange and interest rate benchmarks currently in use by the banking sector are listed below.</p><br />
<p><em><u>A. Rupee Interest Rate Benchmarks</u></em></p><br />
<ol><br />
<li>[http://www.fimmda.org/ Fixed Income Money Market and Derivative Association of India] (FIMMDA)- National Stock Exchange (NSE) Mumbai Interbank Bid Rate (MIBID) and Offer Rate (MIBOR)</li><br />
<li>FIMMDA-Thomson Reuters Mumbai Interbank Forward Offered Rate (MIFOR)</li><br />
<li>Thomson Reuters Indian Benchmark Yield Curve (INBMK)</li><br />
<li>FIMMDA-Thomson Reuters Mumbai Interbank Overnight Indexed Swaps (MIOIS)</li><br />
<li>FIMMDA-Thomson Reuters Mumbai Interbank Offered Currency Swaps (MIOCS)</li><br />
<li>FIMMDA-[http://pdai.org.in/about-us/index.html Primary Dealers Association of India] (PDAI) G-Sec Yield Curve</li><br />
<li>FIMMDA- PDAI Spread for Government of India (GoI) Floating Rate Bonds</li><br />
<li>FIMMDA- PDAI Prices for State Development Loans</li><br />
<li>FIIMDA- PDAI &nbsp;Prices for Corporate Bonds</li><br />
<li>FIMMDA-Thomson Reuters T-Bill Curve</li><br />
<li>FIMMDA-Thomson Reuters [https://en.wikipedia.org/wiki/Commercial_paper Commercial Paper] (CP) Curve</li><br />
<li>Thomson Reuters [https://en.wikipedia.org/wiki/Certificate_of_deposit Certificate of Deposits] (CD) Curve</li><br />
</ol><br />
<p>Of the various benchmarks currently used in the market, MIBOR is the most liquid benchmark in rupee interest rate contracts, accounting for 92 percent share of the total trades. </p><br />
<p><em><u>B. Foreign Exchange Benchmarks</u></em></p><br />
<ol><br />
<li>RBI Reference rates</li><br />
<li>[http://www.fedai.org.in/ Foreign Exchange Dealers&rsquo; Association of India] (FEDAI) Spot Fixing Rates</li><br />
<li>FEDAI Foreign Currency Non-Resident (FCNR(B)) Benchmark Rates</li><br />
<li>FEDAI Month end Revaluation Rate – Foreign Exchange Contracts</li><br />
<li>FEDAI USD-INR Option Volatility</li><br />
</ol><br />
<p>&nbsp;</p><br />
<p><strong>Evolution of MIBOR- How MIBOR is fixed?</strong><br><br />
An Internal Committee at NSE for the Development of the Debt Market had studied and recommended the modalities for the development for a benchmark rate for the [http://www.investopedia.com/terms/i/interbank_call_money_market.asp call money market]. Accordingly, [http://www.nseindia.com/ National Stock Exchange] (NSE) developed and launched the NSE Mumbai Inter-bank Bid Rate (MIBID) and NSE Mumbai Inter-bank Offer Rate (MIBOR) for the overnight [http://www.investopedia.com/terms/i/interbank_call_money_market.asp call money market] on June 15, 1998. The success of the Overnight NSE MIBID-MIBOR encouraged the Exchange to develop a benchmark rate for the term money market. Thus, NSE launched the 14-day NSE MIBID- MIBOR on November 10, 1998 and the longer term money market benchmark rates for 1 month and 3 months on December 1, 1998.&nbsp;[http://www.fimmda.org/ Fixed Income Money Market and Derivative Association of India] (FIMMDA) became a partner to NSE in co-branding the dissemination of MIBID-MIBOR rates for the overnight and term segments on March 4, 2002 and the product thereafter was rechristened as FIMMDA-NSE MIBID/MIBOR. Later, NSE introduced a 3 Day FIMMDA-NSE MIBID-MIBOR on all Fridays with effect from June 6, 2008 in addition to existing overnight rate. </p><br />
<p>FIMMDA-NSE MIBID MIBOR was based on rates polled by NSE from a representative panel of 30 banks/ primary dealers. That is, participating banks are asked at what rate they would be borrowing/lending funds of a reasonable market size at the scheduled time of reference. Extreme values are avoided while calculating the reference rates and the mean or average benchmark rate is calculated with &quot;[https://en.wikipedia.org/wiki/Bootstrapping_(statistics) Bootstrapping]&quot; scores (i.e., computing the reference rate from a sample with replacement, as an average of the polled rates after an appropriate amount of trimming to minimize noise (outliers) and then computing a measure of dispersion i.e. the confidence intervals for the trimmed means/average). </p><br />
<p>Every day the FIMMDA-NSE MIBID MIBOR along with their respective standard deviations (probability that the estimated trimmed mean obtained after avoiding extreme values, lies in a given range) were disseminated to the market at 9.40 (IST) for overnight rates (3 day on all Fridays) and at 11.30 PM for the three term rates, viz. 14-day, 1-month and 3-month. The structure of the reporting is given below. </p><br />
<br />
<table border="0" cellspacing="0" cellpadding="0" width="100%" class="table_formatting"><br />
<tr><br />
<td colspan="6" align="center">FIMMDA-NSE MIBID MIBOR for the Day</td><br />
</tr><br />
<tr bgcolor="#FADECB"><br />
<td><strong>Category</strong></td><br />
<td><strong>Time</strong></td><br />
<td><strong>MIBOR</strong></td><br />
<td><strong>Standard Deviation of MIBOR</strong></td><br />
<td><strong>MIBID</strong></td><br />
<td><strong>Standard Deviation of MIBID</strong></td><br />
</tr><br />
<tr><br />
<td><strong>OVERNIGHT</strong></td><br />
<td>9:40 a.m.</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
</tr><br />
<tr bgcolor="#FADECB"><br />
<td><strong>3 DAY</strong></td><br />
<td>9:40 a.m.</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
</tr><br />
<tr><br />
<td><strong>14 DAY</strong></td><br />
<td>11:30 a.m.</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
</tr><br />
<tr bgcolor="#FADECB"><br />
<td><strong>1 MONTH</strong></td><br />
<td>11:30 a.m.</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
</tr><br />
<tr><br />
<td><strong>3 MONTH</strong></td><br />
<td>11:30 a.m.</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
<td>&nbsp;</td><br />
</tr><br />
</table><br />
<br />
<br />
<br />
<p>As is the practice internationally, a polled rate, instead of actual transaction data was used, so as to ensure continuous publication of this systemic benchmark rate, even in times when liquidity is low and there are few transactions on which to base the rate. Further, the method of polling was adopted because market participants generally do not like to reveal the identity of those whom they have lent and at what rate they have lent. However, obtaining benchmark reference rates by polling a few market participants and summarizing the prices they report suffer from lack of transparency, accuracy and truthfulness in reporting and is liable to corruption and fixing since the number of participants is limited. </p><br />
<p> In the wake of misconduct of financial benchmark setters in international financial markets (A few big banks were found to have fixed the polled benchmark rates in order to benefit from derivative trades which are settled on these benchmark rates), the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18 RBI committee on &lsquo;Financial Benchmarking&rsquo;] (Chairperson: Shri P.Vijaya Bhaskar) recommended measures to improve the system of bench marking in India. </p><br />
<p> Acting on these recommendations, <strong>Board</strong> <strong>of Financial Benchmarks India Pvt. Ltd</strong> (FBIL) was jointly formed by FIMMDA, [http://www.fedai.org.in/ Foreign Exchange Dealers&rsquo; Association of India] (FEDAI) and [http://www.iba.org.in/ Indian Banks&rsquo; Association] (IBA). FBIL was incorporated in December 2014 and commenced operations in February 2015. </p><br />
<p> As part of the measures to initiate reforms in the area of benchmark setting, the existing benchmark ie. MIBOR based on &lsquo;polled rates&rsquo; administered by FIMMDA and NSE has been replaced by a new Benchmark known as &lsquo;FBIL Overnight Mumbai Interbank Outright Rate&rsquo; (<strong>FBIL-Overnight MIBOR</strong>) and the new benchmark has been in operation from July 22,2015. The new benchmark setting is based on &ldquo;transaction rates&rsquo; rather than &lsquo;polled rates&rsquo; by banks. That is, it is based on trade weighted inter-bank call money transactions on the [https://www.ccilindia.com/Pages/default.aspx Clearing Corporation of India Ltd] (CCIL)&rsquo;s platform for call money transactions - Negotiated Dealing System [https://www.ccilindia.com/FAQ/Pages/SecuritySettlement.aspx (NDS)-Call platform] - between 9 A.M. and 10 A.M. The trades will be pulled out from the NDS-CALL system immediately after the cut-off time. CCIL will be the calculating agent. The approved methodology for the benchmark is also being placed on the websites of FIMMDA and Clearing Corporation of India Ltd(CCIL). </p><br />
<p> A minimum of 10 trades with a total traded value of Rs.500 crore in the NDS-Call segment will be considered as the minimum threshold limit (both) for estimation of the volume weighted average rate. A rate Range will be computed – Max will be Weighted Average Rate + 3* Standard Deviation and Min will be Weighted Average Rate - 3* Standard Deviation. Any trades executed at rates outside the said Max and Min range will be considered as outlier and will be excluded from the computation process (i.e. higher than Max and lower than Min). In case either of the criteria mentioned above (a minimum of 10 trades with a total traded value of Rs.500 crore) is not met, the timeframe for computation of rates will be extended by 30 minutes. If the threshold criteria are still not met, then time frame is extended by another 30 minutes. If the threshold criteria are not met even after the two extensions, no rate computation will be initiated. The previous day&rsquo;s values will be used for dissemination. This may continue for a maximum of two consecutive working days after which if the threshold criteria are still not met, CCIL will not disseminate any rate on such days and Banks will use their own fallback mechanism. Thus, Volume weighted average (VWA)&nbsp;is calculated by averaging the reported trades after weighting them with their respective volume. The VWA needs price volume data of all executed deals and is a reliable measure of the market sentiment, however, suffers from discontinuity if the market is not liquid.</p><br />
<p> Accordingly, computation &amp; dissemination of FIMMDA-NSE MIBID - MIBOR for overnight and three days were discontinued w.e.f July 22, 2015. The other rates (14 Day, 1 month and 3 month rates) are still being published, for which NSE is awaiting further directions as on date. The FBIL proposes to take over administration of forex benchmarks and other Indian Rupee interest rate benchmarks over a period of time after careful examination of the methodology and utility to the financial markets in consultation with the stakeholders. There will be periodic review of the benchmark methods to ensure that they are robust and conform to the best governance standards.</p><br />
<br />
<p>Reserve Bank of India (RBI) announced in the Sixth Bi-monthly Monetary Policy Statement for the year 2017-18 in February, 2018 that Financial Benchmarks India Private Limited (FBIL) will assume, i.e. take over from RBI, the responsibility of computation and dissemination of reference rate for USD/INR and exchange rate of other major currencies at some appointed date. FIBIL has commenced the process of computing and disseminating reference rate for USD/INR and exchange rate of other major currencies with effect from July 10, 2018. Accordingly, the dissemination of Exchange Rate on RBI’s website has been discontinued now. </p><br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. The OIS is actively traded by the banks and primary dealers (wholesale traders in securities) with average daily trading volume (notional principal) of INR 105.7 billion during the period from May to October 2013. Source: Report of the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18 RBI committee on &lsquo;Financial Benchmarking&rsquo;] </span><br />
<br />
<span class="small_footernote" id="ref2">2. Source: Report of the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18 RBI committee on &lsquo;Financial Benchmarking&rsquo;] </span><br />
<br />
<span class="small_footernote" id="ref3">3. Source: [https://www.theice.com/iba/libor https://www.theice.com/iba/libor] </span><br />
<br />
<br />
<br />
==Data==<br />
*The FBIL overnight MIBOR can be seen [http://www.fimmda.org/modules/securitiesApproval/securitiesApproval.aspx?op=mibor here].<br />
*<strong>The FBIL Term MIBOR can be seen </strong>[http://www.fimmda.org/modules/securitiesApproval/securitiesApproval.aspx?op=fbiltermmibor here]<strong>. </strong><br />
*<strong>FIMMDA-NSE MIBID MIBOR can be seen </strong>[http://www.nseindia.com/products/content/debt/wdm/fimmda_mibid_mibor.htm here]<strong>. </strong><br />
<br />
<br />
==References==<br />
*[https://www.theice.com/publicdocs/IBA_LIBOR_FAQ.pdf The FAQ on LIBOR] <br />
*Report of the [https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=761#f18 RBI committee on &lsquo;Financial Benchmarking&rsquo;]<br />
*FIMMDA [http://www.fimmda.org/Uploads/general/FBIL-Overnight-Mibor-Press-Release-22-june-2015.pdf Press Release dated 22 July 2015]<br />
*[http://www.nseindia.com/products/content/debt/wdm/fimmda_mibid_mibor.htm NSE&rsquo;s brief on MIBOR]<br />
<br />
<br />
==Contributed by==<br />
*[http://www.ies.gov.in/myaccount-profile-view.php?memid=234 P.K Abdul Kareem (IES 1996)] with inputs from officials at National Stock Exchange of India Ltd. (NSE)<br />
*Email-[mailto:pkakareem@yahoo.com pkakareem@yahoo.com]<br />
<br />
[[Category:concepts|MIBORandMIBID]]</div>Rosemary.ahttp://arthapedia.in/index.php/Disaster_funding_arrangements_in_IndiaDisaster funding arrangements in India2018-09-12T01:38:54Z<p>Rosemary.a: </p>
<hr />
<div>Financial assistance to meet the rescue and relief expenditure during any notified disaster event is governed by notified guidelines on [http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Fund (SDRF)] and [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]. These funds have been created under the legal frame work of 48(1) (a) and section 46 of [https://ndma.gov.in/en/disaster.html Disaster Management Act, 2005] respectively.<br />
<br />
'''Calamities covered under SDRF/NDRF''' <br />
<br />
Natural calamities of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave & frost considered to be of severe nature by Government of India and requiring expenditure by a State Government in excess of the balances available in its own State Disaster Response Fund (SDRF), will qualify for immediate relief assistance from NDRF. Ministry of Agriculture is responsible for handling natural calamities of Drought, hailstorm, pest Attack, Cold Wave & Frost. All other notified natural calamities are managed by Ministry of Home Affairs. Ministry of Home Affairs is nodal ministry for disaster management in the country.<br />
<br />
There is no categorisation of calamities mentioned as [http://arthapedia.in/index.php?title=National_Calamity National Calamity] in Disaster Management Act, 2005. As per the DM Act 2005 and 14th Finance Commission (FC) recommendations, any notified [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature calamity of a severe nature] will qualify for assistance from NDRF.<br />
<br />
The State Governments are primarily responsible for execution of relief operations in the wake of natural calamities. The Government of India supplements the efforts of the State Governments by extending additional financial assistance from NDRF. Funds from SDRF and NDRF are released to assist States to provide immediate relief. Assistance for long term reconstruction of assets is provided through overall development plans of the Centre and the States, and is not covered under the norms and guidelines of SDRF & NDRF.<br />
<br />
Assistance provided from NDRF is on 100% central grant basis whereas in case of SDRF, states also need to contribute their share as per successive Finance Commission’s recommendations.<br />
<br />
NDRF is maintained by Government of India in the Public Account. A limited size cess (NCCD-National Calamity Contingency Duty) backed the fund earlier. After implementation of GST, most of the cesses are subsumed in GST, hence the size of cess is narrowed down and not sufficient to fulfil the growing needs of disaster funding under NDRF. Therefore, now as per requirement, necessary budgetary support is being provided for NDRF.<br />
<br />
Thirteenth Finance Commission (FC-XIII) had recommended differential State shares, with general category States contributing 25 per cent and [http://www.arthapedia.in/index.php?title=Special_Category_States special category States] contributing 10 per cent, and the balance being contributed by the Union Government as grants-in-aid. Fourteenth Finance Commission (FFC) has recommended an amount of Rs. 61,219 crore as aggregated corpus of State Disaster Response Fund(SDRF) for all States for award period 2015-20 with state contribution of 10% (6122 crore ) to SDRF, the remaining 90% (Rs. 55097 crore ) coming from Central Government. The Government has accepted the above recommendations of FFC with modification that the percentage share of the States will continue to be as before (i.e. during FC-XIII award period) and once GST is in place, the recommendation of FFC on disaster relief would be fully implemented. Thereafter, from the year 2018-19, the share of states in SDRF has been decided at 10% and rest 90% is being contributed by the centre. <br />
<br />
The grant under SDRF is to be released by Ministry of Finance in two instalments in June and December in each financial year on the recommendations of Home Ministry. In case of severe calamity, there is a provision of advance release of these instalments. State-wise and Year-wise allocation of SDRF has been decided by the 14th FC for its award period 2015-16 to 2019-20. Further, in the event of a [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature calamity of a severe nature] when the SDRF is insufficient to meet the relief requirements, additional central assistance is provided from NDRF. The quantum of assistance from NDRF is subjected to an adjustment of 50% of the balance in SDRF as on 1st April the financial year.<br />
<br />
<br />
'''Assessment of Relief Assistance from the NDRF''' <br />
<br />
In the case of notified natural calamities, as per the established procedure, the State Government is required to submit a detailed memorandum indicating the sector-wise details of damage and requirement of funds for relief operations of immediate nature.<br />
<br />
Upon a request made by a State not having adequate balance in its State Disaster Response Fund (SDRF), Ministry of Home Affairs or the Ministry of Agriculture, as the case may be, assess need for additional assistance from NDRF under the existing guidelines and the approved items of expenditure.<br />
<br />
<br />
'''The following procedure will be adopted for making such assessment:''' <br />
<br />
* The memorandum of the State Government is examined to assess the likely requirement of funds as per items and norms of expenditure under SDRF/NDRF. If the preliminary examination reveals that there are adequate funds in SDRF with the State for providing relief as per norms, the State would be advised accordingly.<br />
<br />
* If the preliminary examination reveals that the State is in need of assistance, a Central Team will be deputed for making an on the spot assessment.<br />
<br />
* The report of the Central Team shall be examined by the Sub-Committee of National Executive Committee (SC-NEC) constituted under section 8 of the DM Act, 2005. The SC-NEC will assess the extent of assistance and expenditure which can be funded from the NDRF, as per the norms of NDRF/SDRF, and make recommendations.<br />
<br />
* Based on the recommendations of SC-NEC, a High Level Committee (HLC) will approve the quantum of immediate relief to be released from NDRF.<br />
<br />
<br />
High Level Committee consists of Finance Minister, Agriculture Minister, Home Minister, and Planning Minister/Vice Chairman-NITI AAYOG as members. HLC is serviced by the Disaster Management Division of Ministry of Home Affairs.<br />
<br />
Ministry of Home Affairs to supervise:- The Ministry of Home Affairs (MHA) oversee the utilisation of releases from NDRF for the purposes for which funds have been released and monitor compliance with the guidelines of NDRF. States will need to provide the required information to MHA.<br />
<br />
Releases to States:- Upon the approval of HLC, Ministry of Finance releases assistance from NDRF to States.<br />
<br />
'''Norms of assistance under NDRF'''<br />
<br />
The norms of assistance to be provided under NDRF, including items and amount of assistance for each item, are decided by Expert Committee constituted by Ministry of Home Affairs and these norms are revised from time to time. Last such revision was done vide MHA’s letter dated 08.04.2015.<br />
<br />
<br />
==Also See==<br />
* [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]<br />
* [http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Fund (SDRF)]<br />
* [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature Calamity of a severe nature]<br />
<br />
<br />
==References==<br />
* [http://www.ndmindia.nic.in/guidelines NDMA Guidelines]<br />
<br />
<br />
==Contributed by==<br />
* [http://ies.gov.in/myaccount-profile-view.php?memid=342 Shri. Subash Chandra Meena (IES 2006)]<br />
<br />
<br />
<br />
[[Category:concepts|DisasterfundingarrangementsinIndia]]</div>Rosemary.ahttp://arthapedia.in/index.php/Disaster_funding_arrangements_in_IndiaDisaster funding arrangements in India2018-09-12T01:37:53Z<p>Rosemary.a: </p>
<hr />
<div>Financial assistance to meet the rescue and relief expenditure during any notified disaster event is governed by notified guidelines on [http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Fund (SDRF)] and [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]. These funds have been created under the legal frame work of 48(1) (a) and section 46 of [https://ndma.gov.in/en/disaster.html Disaster Management Act, 2005] respectively.<br />
<br />
'''Calamities covered under SDRF/NDRF''' :-<br />
<br />
Natural calamities of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave & frost considered to be of severe nature by Government of India and requiring expenditure by a State Government in excess of the balances available in its own State Disaster Response Fund (SDRF), will qualify for immediate relief assistance from NDRF. Ministry of Agriculture is responsible for handling natural calamities of Drought, hailstorm, pest Attack, Cold Wave & Frost. All other notified natural calamities are managed by Ministry of Home Affairs. Ministry of Home Affairs is nodal ministry for disaster management in the country.<br />
<br />
There is no categorisation of calamities mentioned as [http://arthapedia.in/index.php?title=National_Calamity National Calamity] in Disaster Management Act, 2005. As per the DM Act 2005 and 14th Finance Commission (FC) recommendations, any notified [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature calamity of a severe nature] will qualify for assistance from NDRF.<br />
<br />
The State Governments are primarily responsible for execution of relief operations in the wake of natural calamities. The Government of India supplements the efforts of the State Governments by extending additional financial assistance from NDRF. Funds from SDRF and NDRF are released to assist States to provide immediate relief. Assistance for long term reconstruction of assets is provided through overall development plans of the Centre and the States, and is not covered under the norms and guidelines of SDRF & NDRF.<br />
<br />
Assistance provided from NDRF is on 100% central grant basis whereas in case of SDRF, states also need to contribute their share as per successive Finance Commission’s recommendations.<br />
<br />
NDRF is maintained by Government of India in the Public Account. A limited size cess (NCCD-National Calamity Contingency Duty) backed the fund earlier. After implementation of GST, most of the cesses are subsumed in GST, hence the size of cess is narrowed down and not sufficient to fulfil the growing needs of disaster funding under NDRF. Therefore, now as per requirement, necessary budgetary support is being provided for NDRF.<br />
<br />
Thirteenth Finance Commission (FC-XIII) had recommended differential State shares, with general category States contributing 25 per cent and [http://www.arthapedia.in/index.php?title=Special_Category_States special category States] contributing 10 per cent, and the balance being contributed by the Union Government as grants-in-aid. Fourteenth Finance Commission (FFC) has recommended an amount of Rs. 61,219 crore as aggregated corpus of State Disaster Response Fund(SDRF) for all States for award period 2015-20 with state contribution of 10% (6122 crore ) to SDRF, the remaining 90% (Rs. 55097 crore ) coming from Central Government. The Government has accepted the above recommendations of FFC with modification that the percentage share of the States will continue to be as before (i.e. during FC-XIII award period) and once GST is in place, the recommendation of FFC on disaster relief would be fully implemented. Thereafter, from the year 2018-19, the share of states in SDRF has been decided at 10% and rest 90% is being contributed by the centre. <br />
<br />
The grant under SDRF is to be released by Ministry of Finance in two instalments in June and December in each financial year on the recommendations of Home Ministry. In case of severe calamity, there is a provision of advance release of these instalments. State-wise and Year-wise allocation of SDRF has been decided by the 14th FC for its award period 2015-16 to 2019-20. Further, in the event of a [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature calamity of a severe nature] when the SDRF is insufficient to meet the relief requirements, additional central assistance is provided from NDRF. The quantum of assistance from NDRF is subjected to an adjustment of 50% of the balance in SDRF as on 1st April the financial year.<br />
<br />
<br />
'''Assessment of Relief Assistance from the NDRF:''' <br />
<br />
In the case of notified natural calamities, as per the established procedure, the State Government is required to submit a detailed memorandum indicating the sector-wise details of damage and requirement of funds for relief operations of immediate nature.<br />
<br />
Upon a request made by a State not having adequate balance in its State Disaster Response Fund (SDRF), Ministry of Home Affairs or the Ministry of Agriculture, as the case may be, assess need for additional assistance from NDRF under the existing guidelines and the approved items of expenditure.<br />
<br />
<br />
'''The following procedure will be adopted for making such assessment:''' <br />
<br />
* The memorandum of the State Government is examined to assess the likely requirement of funds as per items and norms of expenditure under SDRF/NDRF. If the preliminary examination reveals that there are adequate funds in SDRF with the State for providing relief as per norms, the State would be advised accordingly.<br />
<br />
* If the preliminary examination reveals that the State is in need of assistance, a Central Team will be deputed for making an on the spot assessment.<br />
<br />
* The report of the Central Team shall be examined by the Sub-Committee of National Executive Committee (SC-NEC) constituted under section 8 of the DM Act, 2005. The SC-NEC will assess the extent of assistance and expenditure which can be funded from the NDRF, as per the norms of NDRF/SDRF, and make recommendations.<br />
<br />
* Based on the recommendations of SC-NEC, a High Level Committee (HLC) will approve the quantum of immediate relief to be released from NDRF.<br />
<br />
<br />
High Level Committee consists of Finance Minister, Agriculture Minister, Home Minister, and Planning Minister/Vice Chairman-NITI AAYOG as members. HLC is serviced by the Disaster Management Division of Ministry of Home Affairs.<br />
<br />
Ministry of Home Affairs to supervise:- The Ministry of Home Affairs (MHA) oversee the utilisation of releases from NDRF for the purposes for which funds have been released and monitor compliance with the guidelines of NDRF. States will need to provide the required information to MHA.<br />
<br />
Releases to States:- Upon the approval of HLC, Ministry of Finance releases assistance from NDRF to States.<br />
<br />
'''Norms of assistance under NDRF''':-The norms of assistance to be provided under NDRF, including items and amount of assistance for each item, are decided by Expert Committee constituted by Ministry of Home Affairs and these norms are revised from time to time. Last such revision was done vide MHA’s letter dated 08.04.2015.<br />
<br />
<br />
==Also See==<br />
* [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]<br />
* [http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Fund (SDRF)]<br />
* [http://arthapedia.in/index.php?title=Calamity_of_Severe_Nature Calamity of a severe nature]<br />
<br />
<br />
==References==<br />
* [http://www.ndmindia.nic.in/guidelines NDMA Guidelines]<br />
<br />
<br />
==Contributed by==<br />
* [http://ies.gov.in/myaccount-profile-view.php?memid=342 Shri. Subash Chandra Meena (IES 2006)]<br />
<br />
<br />
<br />
[[Category:concepts|DisasterfundingarrangementsinIndia]]</div>Rosemary.ahttp://arthapedia.in/index.php/National_Disaster_Response_Fund_(NDRF)National Disaster Response Fund (NDRF)2018-09-05T12:30:02Z<p>Rosemary.a: </p>
<hr />
<div>National Disaster Response Fund is defined in Section 46 of the [http://www.ndma.gov.in/images/ndma-pdf/DM_act2005.pdf Disaster Management Act, 2005] (DM Act) as a fund managed by the Central Government for meeting the expenses for emergency response, relief and rehabilitation due to any threatening disaster situation or disaster. NDRF is constituted to supplement the funds of the [http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Funds] (SDRF) of the states to facilitate immediate relief in case of calamities of a severe nature.<br />
<br />
The DM Act defines "disaster" to mean ‘a catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or by accident or negligence which results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area.'<br />
<br />
The [http://ndmindia.nic.in/NDRFSDRF_300715.pdf July 2015 guidelines] states that natural calamities of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave and frost considered to be of severe nature by Government of India (GoI) and requiring expenditures by a state government in excess of the balances available in its own SDRF will qualify for immediate relief assistance from NDRF.<br />
<br />
In the event of a disaster of 'a severe nature', in which the funds needed for relief operations exceeded the balances in the SDRF account, additional assistance would be provided from the NDRF after following prescribed procedures.<br />
<br />
The financial assistance from SDRF/NDRF is for providing immediate relief and is not compensation for loss/damage to properties /crops<sup class="reference">[[#ref4|[4]]]</sup>. In other words, NDRF amount can be spent only towards meeting the expenses for emergency response, relief and rehabilitation. For projects exclusively for the purpose of mitigation, i.e, measures aimed at reducing the risk, impact or effect of a disaster or threatening disaster situation a separate fund called National Disaster Mitigation Fund has to be constituted<sup class="reference">[[#ref5|[5]]]</sup>.<br />
<br />
In fact, the hitherto existing [http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund] (NCCF) was renamed as National Disaster Response Fund (NDRF) on [http://finmin.nic.in/TFC/Guidelines%20for%20National%20Disaster%20Response%20Fund%20(NDRF).pdf 28 September 2010] with the enactment of the [http://www.ndma.gov.in/images/ndma-pdf/DM_act2005.pdf Disaster Management Act] in 2005 and consequent changes in the design and structure of disaster management in India. <br />
<br />
The National Executive Committee (NEC) of the National Disaster Management Authority takes decisions on the expenses from National Disaster Response Fund, in accordance with the guidelines laid down by the Central Government in consultation with the National Authority. The revised norms for assistance from NDRF were issued on [http://www.ndma.gov.in/images/pdf/SDRF.pdf 8 April 2015].<br />
<br />
<br />
'''Sources of Financing NDRF'''<br />
<br />
Like its predecessor, NCCF, the NDRF is financed through the levy of a cess on certain items, chargeable to excise and customs duty, and approved annually through the [http://arthapedia.in/index.php?title=Finance_Bill_or_Finance_Act Finance Bill]. The requirement for funds beyond what is available under the NDRF is met through general budgetary resources.<br />
<br />
Currently, a National Calamity Contingency Duty (NCCD) is levied to finance the NDRF and additional budgetary support is provided as and when necessary. A provision also exists in the DM Act to encourage any person or institution to make a contribution to the NDRF. However, this source has not yet been tapped<sup class="reference">[[#ref6|[6]]]</sup>.<br />
<br />
The financing of the NDRF has so far been almost wholly through the levy of cess on selected items, but if the cesses are discontinued or when they are subsumed under the [http://www.arthapedia.in/index.php?title=Goods_and_Services_Tax goods and services tax (GST)] in future, 14th Finance Commission (FC-XIV) recommended that the Union Government should consider ensuring an assured source of funding for the NDRF.<br />
<br />
Currently, funds contributed to the Prime Minister's Relief Fund or the State Chief Minister's Relief Fund are exempt from income tax. The Ministry of Home Affairs has informed 14th FC that modalities are being explored for the extension of tax exemptions to private contributions to the NDRF as well, which was supported by the FC.<br />
<br />
The Union Government was also asked to explore the possibility of incorporating in these rules on financing of the NDRF, expenditures that are categorised under the head of corporate social responsibility (CSR) under Section 135 of the Companies Act of 2013. Schedule VII of the Companies (Corporate Social Responsibility Policy) Rules 2014 relating to CSR states that companies may provide funds for the Prime Minister's Relief Fund or 'any other fund set up by the Central Government or the State Governments for socio-economic development and relief'. FC recommended that the Union Government should consider invoking the use of this as an enabling provision for financing the NDRF.<br />
<br />
<br />
'''Features of NDRF'''<br />
<br />
*The primary purpose of NDRF is to supplement the SDRF, in case there is a calamity of “severe nature” which requires assistance over and above the funds available under SDRF.<br />
*NDRF is located in the "[http://www.arthapedia.in/index.php?title=Public_Accounts Public Accounts]" of Government of India under "Reserve Funds not bearing interest"<br />
*Department of Agriculture and Cooperation under [http://agricoop.nic.in/ Ministry of Agriculture] (MoA) monitors relief activities for calamities associated with drought, hailstorms, pest attacks and cold wave /frost while rest of the natural calamities are monitored by [http://mha.nic.in/ Ministry of Home Affairs] (MHA).<br />
*The memorandum of the state government for additional assistance from NDRF is examined by the MHA/MoA as the case may be, and in case there is any shortage, a central team is deputed for making an on the spot assessment. The recommendations of the central team are examined and the extent of assistance and expenditures which can be funded from the NDRF is recommended by the National Executive Committee (NEC) constituted for this purpose under the DM Act. Based on these recommendations, a high level committee (HLC) approves the quantum of immediate relief to be released from NDRF. The HLC is constituted with Home Minister, Finance Minister, Agriculture Minister and Planning Minister / Vice Chairman of [http://www.arthapedia.in/index.php?title=NITI_Aayog_(National_Institution_for_Transforming_India) NITI Aayog] as members. HLC is serviced by the Disaster Management Division of MHA. Upon approval of HLC, the Ministry of Finance releases the assistance from NDRF to states. <br />
*The State Executive Committee constituted by the State Government under Section 20 of the DM Act, 2005 will be responsible for ensuring that NDRF expenditures are as per specifications. <br />
*The financial assistance from NDRF is for providing immediate relief and is not compensation for loss/damage to properties /crops<sup class="reference">[[#ref7|[7]]]</sup>. Further, the provision for disaster preparedness, restoration, reconstruction and mitigation are not a part of NDRF (The DM Act specifies that for such activities a separate fund called Disaster Mitigation Fund has to be constituted). In the absence of a Disaster Mitigation Fund, such activities have to be borne out of the budget of the government concerned. <br />
*[http://www.cag.gov.in/ Comptroller and Auditor General of India] (CAG) audits the accounts of NDRF<br />
<br />
<br />
'''Background'''<br />
<br />
A dedicated fund for calamity relief was first recommended by the 9th Finance Commission (FC-IX; submitted its report in 1990). Prior to this, the Commissions set apart specific amounts under the 'margin money' scheme (which envisaged setting apart specific amounts by states in order to meet the expenditure on relief measures), recommended by the FC-II (submitted its report in 1957) to meet expenditures on relief measures. The FC-IX recommended the establishment of a [http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Fund] (CRF) in each State, with 75 per cent contribution by the Union Government and 25 per cent by the State. For calamities of rare severity, the Union Government was asked to render assistance and support beyond that envisaged in the CRF.<br />
<br />
The FC-X (submitted its report in 1995) put in place a formal mechanism and recommended the setting up of a National Fund for Calamity Relief (NFCR) to assist a State affected by a `calamity of rare severity' through contributions from the Union and State Governments. The fund was to be managed by a National Calamity Relief Committee with representation from both the Union and State Governments. The FC-XI modified this and recommended the setting up of a [http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund] (NCCF) with an initial corpus of Rs. 500 crore. The funds were to be recouped by levying a special surcharge on Central taxes. The FC-XII (submitted its report in 2004) continued with this arrangement.<br />
<br />
With the enactment of the Disaster Management Act in 2005 and consequent changes in the design and structure of disaster management, the FC-XIII (submitted its report in 2009) recommended the merger and transfer of NCCF balances, as on 31 March 2010, to the NDRF which was accepted and notified by the Union Government. Thus, based on the recommendations of the FC-XIII, the available balances in the NCCF on 1 April 2010 were merged with the NDRF. In the event of a disaster of 'a severe nature', in which the funds needed for relief operations exceeded the balances in the SDRF account, additional assistance would be provided from the NDRF after following prescribed procedures.<br />
<br />
<br />
<span class="small_footernote" id="ref4">4. In fact, life/property /crop insurance is the financial tool to insure people against crop losses or damages to life and property. Government also runs certain micro insurance and crop insurance schemes. Under the insurance schemes claims are paid to only those who insured their crops/property/life and paid premium under any of the notified insurance scheme. Admissible claims are worked out and paid as per the provisions of the respective schemes. </span><br />
<br />
<span class="small_footernote" id="ref5">5. Section 2(i) of the DM Act defines “mitigation” to mean measures aimed at reducing the risk, impact or effect of a disaster or threatening disaster situation. However, the fund is yet to be constituted. The Supreme Court on 11 May 2016 has given a direction to the Government of India to constitute the same at the earliest.</span><br />
<br />
<span class="small_footernote" id="ref6">6. As informed by Ministry of Home Affairs to 14th Finance Commission</span><br />
<br />
<span class="small_footernote" id="ref7">7. On the other hand, life/property /crop insurance is a financial tool to insure people against crop losses or damages to life and property on payment of admissible premium to the insurance company. Under the insurance schemes claims are paid to only those who insured their crops/property/life and paid premium under any of the notified insurance scheme. Admissible claims are worked out and paid as per the provisions of the respective schemes.</span><br />
<br />
<br />
==Also See==<br />
*[http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Fund (CRF)]<br />
*[http://arthapedia.in/index.php?title=State_Disaster_Response_Fund_(SDRF) State Disaster Response Fund (SDRF)]<br />
*[http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund (NCCF)]<br />
*[http://www.arthapedia.in/index.php?title=Drought Drought]<br />
*[http://www.ndmindia.nic.in/guidelines NDMA Guidelines]<br />
<br />
<br />
==References ==<br />
*[http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/discussion/report23.pdf A study by NIDM for the 13th Finance Commission] - Financing Disaster Management in India , August 2009<br />
*Chapter 11 of [http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/tfc/Chapter11.pdf 13th Finance Commission Report]<br />
*Chapter 10 of [http://finmin.nic.in/14fincomm/14fcreng.pdf 14th Finance Commission Recommendations] in respect of handling disaster management funds <br />
*Various [http://fincomindia.nic.in/default.aspx Finance Commission Reports]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|NationalDisasterResponseFund(NDRF)]]</div>Rosemary.ahttp://arthapedia.in/index.php/State_Disaster_Response_Fund_(SDRF)State Disaster Response Fund (SDRF)2018-09-05T12:28:24Z<p>Rosemary.a: </p>
<hr />
<div>The State Disaster Response Fund (SDRF) is the primary fund available with States for disaster response and is constituted under Section 48 of the [http://www.ndma.gov.in/images/ndma-pdf/DM_act2005.pdf Disaster Management Act, 2005] (DM Act). <br />
<br />
The SDRF is used for meeting expenditures for providing immediate relief to the victims of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack, and frost and cold wave. Besides, for providing immediate relief to the victims of State-specific disaster within the local context, which are not included in the list of the above notified natural calamities, [http://mha.nic.in/ Ministry of Home Affairs] has authorized the State Governments to incur an expenditure of 10% of funds available under SDRF, subject to the procedures laid down therein. This flexibility is applicable only after the state has listed the natural disasters for inclusion and has notified clear and transparent guidelines for relief, in case such disasters occur.<br />
<br />
Any amount spent by the state for such disasters over and above the specified ceiling would have to be borne out of its own resources and it would be subject to the same accounting norms.<br />
<br />
If the amount available under the SDRF is not sufficient, states can request for making available assistance from a similar fund managed by the central Government - [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund] (NDRF).<br />
<br />
The financial assistance from SDRF/NDRF is for providing immediate relief and is not compensation for loss/damage to properties /crops<sup class="reference">[[#ref1|[1]]]</sup>. Further, the provision for disaster preparedness, restoration, reconstruction and mitigation are not a part of SDRF (The DM Act specifies that for such activities a separate fund called Disaster Mitigation Fund has to be constituted). However, 5% of the annual allocation to SDRF can be kept for specified capacity building activities by the states in the area of disaster management.<br />
<br />
The norms of assistance, is reviewed comprehensively after the award of successive [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commissions], taking into account various factors, including the price rise.<br />
<br />
The Disaster Management Act, 2005 mandates that States shall constitute SDRF once the constitution of the State Disaster Management Authority is notified.<br />
<br />
<br />
'''Source of Financing SDRF'''<br />
<br />
The hitherto existing [http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) calamity relief Fund] (CRF) / Disaster Relief Funds with the state Government was renamed as State Disaster Response Fund (SDRF) by the 13th Finance Commission and the balance in the former was merged with SDRF with effect from 1 April 2010.<br />
<br />
While the DM Act clearly provides two sources of financing the NDRF, no source has been laid down for the SDRF. It is implied that the corpus of the SDRF will be the grant recommended by the Finance Commission (FC) under [http://indiacode.nic.in/coiweb/welcome.html Article 275 (1) of the Constitution].<br />
<br />
Thus, financing of the SDRF is based on the recommendations of the [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commissions], which determine the annual size of the Funds as well as the respective contributions of the Union and State Governments<sup class="reference">[[#ref2|[2]]]</sup>. <br />
<br />
Since financial year 2010-11, the Union Government has been financing the NDRF through the levy of a cess and the SDRF as grants-in-aid. The FC-XIII (Submitted the report in 2009) had recommended differential State shares, with general category States contributing 25 per cent and special category States contributing 10 per cent, and the balance being contributed by the Union Government as grants-in-aid. Even though the FC –XIV (submitted its report in Feb 2015) had recommended 10% contribution for all state Governments, irrespective of being general or [http://www.arthapedia.in/index.php?title=Special_Category_States special category], the central Government continued with the existing formula of 75:25 for general category states and 90:10 for [http://www.arthapedia.in/index.php?title=Special_Category_States special category states]. <br />
<br />
FC- XIV also recommended that in view of the very wide responsibility cast on governments at different levels by the statute, the Union Government should expedite the development and scientific validation of the Hazard Vulnerability Risk Profiles of States based on which future allocations of SDRF could be done.<br />
<br />
In the post GST era, with regard to the contribution of states and the centre in SDRF, it has been decided to implement the 14th FC recommendation (para 10.40 of Chapter 10(Vol.-I)) w.e.f 01.04.2018. Accordingly, all states will contribute 10 per cent to the SDRF and rest 90 per cent will be contributed by the Union Government during 2018-19 and 2019-20 as per the recommended allocation by 14th FC. Currently the allocation pattern is 90:10 (center : state). <br />
<br />
<br />
'''Features of SDRF'''<br />
<br />
*SDRF is located in the [http://www.arthapedia.in/index.php?title=Public_Accounts ‘Public Account’] under ‘Reserve Fund’. (But direct expenditures are not made from Public Account.)<br />
*State Government has to pay interest on a half yearly basis to the funds in SDRF, at the rate applicable to overdrafts. <br />
*The aggregate size of the SDRF for each state, for each year, is as per the recommendations of the [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commission]. <br />
*Government of India (GoI) used to contribute 75% of the SDRF of the general category states and 90% of the [http://www.arthapedia.in/index.php?title=Special_Category_States special category states] in the form of a non-plan grant, made in two instalments - in June and December. The balance was contributed by the state government within 15 days from the receipt of central share. (If the state government delays its contribution, interest rate at the rate of [http://www.arthapedia.in/index.php?title=Bank_Rate bank rate] will have to be paid for the number of days of delay) <sup class="reference">[[#ref3|[3]]]</sup>.<br />
*Currently the allocation pattern is 90:10 (center : state) for all states. <br />
*The share of GoI to the SDRF is treated as a ‘grant in aid’. <br />
*Ministry of Home Affairs (MHA) can recommend an earlier release of 25% of the central share due to a state in the following year, if the exigencies of the particular calamity so warrants. This advance release is adjusted against future instalments due from the center. <br />
*The accretions to the SDRF together with the income earned on investment are to be invested in central government securities or in interest earning deposits with banks, which when needed are liquidated. <br />
*The financing of relief measures out of SDRF are decided by the State Executive Committee (SEC) constituted under Section 20 of the DM Act. SEC is responsible for the overall administration of the SDRF. However, the administrative expenses of SEC are borne by the State Government from its normal budgetary provisions and not from the SDRF or NDRF. <br />
*The norms regarding the amount to be incurred on each approved item of expenditure (type of disaster) are fixed by the Ministry of Home Affairs with the concurrence of Ministry of Finance. Any excess expenditure has to be borne out of the budget of the state government. <br />
*In the wake of natural calamities, a state Government is empowered to undertake necessary relief measures from SDRF, which is readily available with them. If additional financial assistance is required from National Disaster Response Fund ((NDRF) they have to submit a memorandum for the same and in the mean time utilize contingency fund of the State, if SDRF is exhausted. <br />
*Ministry of Home Affairs is the nodal ministry for overseeing the operation of the SDRF and monitors compliance with prescribed processes. <br />
*State Government has to furnish to Ministry of Home Affairs twice in a year –in the months of April and October-, the details of amount credited to SDRF along with the expenditures incurred and balance available in the SDRF. Further, an Annual Report has to be submitted in September based on which the December instalment of the central government is released. <br />
*[http://www.cag.gov.in/ Comptroller and Auditor General of India] (CAG) audit the SDRF every year. <br />
<br />
<br />
'''Background'''<br />
<br />
A dedicated fund for calamity relief was first recommended by the 9th Finance Commission (FC-IX; submitted its report in 1990). Prior to this, the Commissions set apart specific amounts under the 'margin money' scheme (which envisaged setting apart specific amounts by states in order to meet the expenditure on relief measures), recommended by the FC-II (submitted its report in 1957) to meet expenditures on relief measures. FC-VI was the first to be given a formal term of reference relating to the financing of relief expenditure. However the existing system was recommended to be continued till the 9th Finance Commission. The FC-IX (submitted its report in 1990) recommended the establishment of a [http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Fund] (CRF) in each State, with 75% contribution by the Union Government and 25% by the State. For calamities of ‘rare severity’, the Union Government was asked to render assistance and support beyond that envisaged in the CRF. <br />
<br />
The FC-X (submitted its report in 1995) put in place a formal mechanism and recommended the setting up of a National Fund for Calamity Relief (NFCR) to assist a State affected by a `calamity of rare severity' through contributions from the Union and State Governments. The fund was to be managed by a National Calamity Relief Committee with representation from both the Union and State Governments. The FC-XI modified this and recommended the setting up of a [http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund] (NCCF) with an initial corpus of Rs. 500 crore. The funds were to be recouped by levying a special surcharge on Central taxes. The FC-XII (submitted its report in 2004) continued with this arrangement.<br />
<br />
With the enactment of the Disaster Management Act in 2005 and consequent changes in the design and structure of disaster management, the FC-XIII (submitted its report in 2009) recommended the merger and transfer of NCCF balances, as on 31 March 2010, to the NDRF which was accepted and notified by the Union Government. Thus, based on the recommendations of the FC-XIII, the available balances in the NCCF on 1 April 2010 were merged with the NDRF. Similarly the funds lying with CRF were merged with State Disaster Response Funds. <br />
<br />
<br />
'''Present Status'''<br />
<br />
CRF ceased to exist from 1 April 2010 onwards. The SDRF, which has substituted CRF was reconstituted on the basis of [http://finmin.nic.in/14fincomm/14thFinanceCommission.htm 14th Finance Commission's] (report submitted in Feb 2015) recommendations on [http://ndmindia.nic.in/NDRFSDRF_300715.pdf 30 July 2015]. The revised norms for assistance from SDRF were issued on [http://www.ndma.gov.in/images/pdf/SDRF.pdf 8 April 2015].<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. In fact, life/property /crop insurance is the financial tool to insure people against crop losses or damages to life and property. Government also runs certain micro insurance and crop insurance schemes. Under the insurance schemes claims are paid to only those who insured their crops/property/life and paid premium under any of the notified insurance scheme. Admissible claims are worked out and paid as per the provisions of the respective schemes. </span><br />
<br />
<span class="small_footernote" id="ref2">2. The DM Act provides that like state and national level funds, there shall be analogous provision for the district disaster response funds (DDRFs). Presently, there are 660 districts in the country and the Disaster Management Act requires as many DDRFs to be constituted. However, the setting up of DDRFs in each district may, in some cases, lock up funds and lead to a fragmentation of resources across districts. Considering that technology has made it possible to move funds quickly wherever needed, their utility may be limited in States with adequate penetration of technology. The 14th FC was, therefore, in agreement with the views of the FC-XIII that the decision of constituting DDRFs shall best be left to the wisdom of the State Governments, and hence, did not recommend separate grants for the financing of DDRFs.</span><br />
<br />
<span class="small_footernote" id="ref3">3. The July 2015 Guidelines specify that central share to the SDRF would be provided only when the state constitutes a state executive committee (SEC) as per Section 20 of the DM Act, with Chief Secretary of the State as its ex-officio Chairperson, for the management of the fund and upon certification that they have put in place the required accounting reforms specified by the central government in this regard.</span><br />
<br />
<br />
<br />
==Also See==<br />
*[http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Funds (CRF)]<br />
*[http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund (NCCF)]<br />
*[http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]<br />
*[http://www.arthapedia.in/index.php?title=Drought Drought]<br />
*[http://www.ndmindia.nic.in/guidelines NDMA Guidelines]<br />
<br />
==References==<br />
*[http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/discussion/report23.pdf A study by NIDM for the 13th Finance Commission] - Financing Disaster Management in India , August 2009<br />
*Chapter 11 of [http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/tfc/Chapter11.pdf 13th Finance Commission Report] on Disaster Relief<br />
*Chapter 10 of [http://finmin.nic.in/14fincomm/14fcreng.pdf 14th Finance Commission Recommendations] in respect of handling disaster management funds<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|StateDisasterResponseFund(SDRF)]]</div>Rosemary.ahttp://arthapedia.in/index.php/State_Disaster_Response_Fund_(SDRF)State Disaster Response Fund (SDRF)2018-09-05T12:27:25Z<p>Rosemary.a: </p>
<hr />
<div>The State Disaster Response Fund (SDRF) is the primary fund available with States for disaster response and is constituted under Section 48 of the [http://www.ndma.gov.in/images/ndma-pdf/DM_act2005.pdf Disaster Management Act, 2005] (DM Act). <br />
<br />
The SDRF is used for meeting expenditures for providing immediate relief to the victims of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack, and frost and cold wave. Besides, for providing immediate relief to the victims of State-specific disaster within the local context, which are not included in the list of the above notified natural calamities, [http://mha.nic.in/ Ministry of Home Affairs] has authorized the State Governments to incur an expenditure of 10% of funds available under SDRF, subject to the procedures laid down therein. This flexibility is applicable only after the state has listed the natural disasters for inclusion and has notified clear and transparent guidelines for relief, in case such disasters occur.<br />
<br />
Any amount spent by the state for such disasters over and above the specified ceiling would have to be borne out of its own resources and it would be subject to the same accounting norms.<br />
<br />
If the amount available under the SDRF is not sufficient, states can request for making available assistance from a similar fund managed by the central Government - [http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund] (NDRF).<br />
<br />
The financial assistance from SDRF/NDRF is for providing immediate relief and is not compensation for loss/damage to properties /crops<sup class="reference">[[#ref1|[1]]]</sup>. Further, the provision for disaster preparedness, restoration, reconstruction and mitigation are not a part of SDRF (The DM Act specifies that for such activities a separate fund called Disaster Mitigation Fund has to be constituted). However, 5% of the annual allocation to SDRF can be kept for specified capacity building activities by the states in the area of disaster management.<br />
<br />
The norms of assistance, is reviewed comprehensively after the award of successive [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commissions], taking into account various factors, including the price rise.<br />
<br />
The Disaster Management Act, 2005 mandates that States shall constitute SDRF once the constitution of the State Disaster Management Authority is notified.<br />
<br />
<br />
'''Source of Financing SDRF'''<br />
<br />
The hitherto existing [http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) calamity relief Fund] (CRF) / Disaster Relief Funds with the state Government was renamed as State Disaster Response Fund (SDRF) by the 13th Finance Commission and the balance in the former was merged with SDRF with effect from 1 April 2010.<br />
<br />
While the DM Act clearly provides two sources of financing the NDRF, no source has been laid down for the SDRF. It is implied that the corpus of the SDRF will be the grant recommended by the Finance Commission (FC) under [http://indiacode.nic.in/coiweb/welcome.html Article 275 (1) of the Constitution].<br />
<br />
Thus, financing of the SDRF is based on the recommendations of the [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commissions], which determine the annual size of the Funds as well as the respective contributions of the Union and State Governments<sup class="reference">[[#ref2|[2]]]</sup>. <br />
<br />
Since financial year 2010-11, the Union Government has been financing the NDRF through the levy of a cess and the SDRF as grants-in-aid. The FC-XIII (Submitted the report in 2009) had recommended differential State shares, with general category States contributing 25 per cent and special category States contributing 10 per cent, and the balance being contributed by the Union Government as grants-in-aid. Even though the FC –XIV (submitted its report in Feb 2015) had recommended 10% contribution for all state Governments, irrespective of being general or [http://www.arthapedia.in/index.php?title=Special_Category_States special category], the central Government continued with the existing formula of 75:25 for general category states and 90:10 for [http://www.arthapedia.in/index.php?title=Special_Category_States special category states]. <br />
<br />
FC- XIV also recommended that in view of the very wide responsibility cast on governments at different levels by the statute, the Union Government should expedite the development and scientific validation of the Hazard Vulnerability Risk Profiles of States based on which future allocations of SDRF could be done.<br />
<br />
In the post GST era, with regard to the contribution of states and the centre in SDRF, it has been decided to implement the 14th FC recommendation (para 10.40 of Chapter 10(Vol.-I)) w.e.f 01.04.2018. Accordingly, all states will contribute 10 per cent to the SDRF and rest 90 per cent will be contributed by the Union Government during 2018-19 and 2019-20 as per the recommended allocation by 14th FC. Currently the allocation pattern is 90:10 (center : state). <br />
<br />
<br />
'''Features of SDRF'''<br />
<br />
*SDRF is located in the [http://www.arthapedia.in/index.php?title=Public_Accounts ‘Public Account’] under ‘Reserve Fund’. (But direct expenditures are not made from Public Account.)<br />
*State Government has to pay interest on a half yearly basis to the funds in SDRF, at the rate applicable to overdrafts. <br />
*The aggregate size of the SDRF for each state, for each year, is as per the recommendations of the [http://www.arthapedia.in/index.php?title=Finance_commission Finance Commission]. <br />
*Government of India (GoI) used to contribute 75% of the SDRF of the general category states and 90% of the [http://www.arthapedia.in/index.php?title=Special_Category_States special category states] in the form of a non-plan grant, made in two instalments - in June and December. The balance was contributed by the state government within 15 days from the receipt of central share. (If the state government delays its contribution, interest rate at the rate of [http://www.arthapedia.in/index.php?title=Bank_Rate bank rate] will have to be paid for the number of days of delay) <sup class="reference">[[#ref3|[3]]]</sup>.<br />
*Currently the allocation pattern is 90:10 (center : state) for all states. <br />
*The share of GoI to the SDRF is treated as a ‘grant in aid’. <br />
*Ministry of Home Affairs (MHA) can recommend an earlier release of 25% of the central share due to a state in the following year, if the exigencies of the particular calamity so warrants. This advance release is adjusted against future instalments due from the center. <br />
*The accretions to the SDRF together with the income earned on investment are to be invested in central government securities or in interest earning deposits with banks, which when needed are liquidated. <br />
*The financing of relief measures out of SDRF are decided by the State Executive Committee (SEC) constituted under Section 20 of the DM Act. SEC is responsible for the overall administration of the SDRF. However, the administrative expenses of SEC are borne by the State Government from its normal budgetary provisions and not from the SDRF or NDRF. <br />
*The norms regarding the amount to be incurred on each approved item of expenditure (type of disaster) are fixed by the Ministry of Home Affairs with the concurrence of Ministry of Finance. Any excess expenditure has to be borne out of the budget of the state government. <br />
*In the wake of natural calamities, a state Government is empowered to undertake necessary relief measures from SDRF, which is readily available with them. If additional financial assistance is required from National Disaster Response Fund ((NDRF) they have to submit a memorandum for the same and in the mean time utilize contingency fund of the State, if SDRF is exhausted. <br />
*Ministry of Home Affairs is the nodal ministry for overseeing the operation of the SDRF and monitors compliance with prescribed processes. <br />
*State Government has to furnish to Ministry of Home Affairs twice in a year –in the months of April and October-, the details of amount credited to SDRF along with the expenditures incurred and balance available in the SDRF. Further, an Annual Report has to be submitted in September based on which the December instalment of the central government is released. <br />
*[http://www.cag.gov.in/ Comptroller and Auditor General of India] (CAG) audit the SDRF every year. <br />
<br />
<br />
'''Background'''<br />
<br />
A dedicated fund for calamity relief was first recommended by the 9th Finance Commission (FC-IX; submitted its report in 1990). Prior to this, the Commissions set apart specific amounts under the 'margin money' scheme (which envisaged setting apart specific amounts by states in order to meet the expenditure on relief measures), recommended by the FC-II (submitted its report in 1957) to meet expenditures on relief measures. FC-VI was the first to be given a formal term of reference relating to the financing of relief expenditure. However the existing system was recommended to be continued till the 9th Finance Commission. The FC-IX (submitted its report in 1990) recommended the establishment of a [http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Fund] (CRF) in each State, with 75% contribution by the Union Government and 25% by the State. For calamities of ‘rare severity’, the Union Government was asked to render assistance and support beyond that envisaged in the CRF. <br />
<br />
The FC-X (submitted its report in 1995) put in place a formal mechanism and recommended the setting up of a National Fund for Calamity Relief (NFCR) to assist a State affected by a `calamity of rare severity' through contributions from the Union and State Governments. The fund was to be managed by a National Calamity Relief Committee with representation from both the Union and State Governments. The FC-XI modified this and recommended the setting up of a [http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund] (NCCF) with an initial corpus of Rs. 500 crore. The funds were to be recouped by levying a special surcharge on Central taxes. The FC-XII (submitted its report in 2004) continued with this arrangement.<br />
<br />
With the enactment of the Disaster Management Act in 2005 and consequent changes in the design and structure of disaster management, the FC-XIII (submitted its report in 2009) recommended the merger and transfer of NCCF balances, as on 31 March 2010, to the NDRF which was accepted and notified by the Union Government. Thus, based on the recommendations of the FC-XIII, the available balances in the NCCF on 1 April 2010 were merged with the NDRF. Similarly the funds lying with CRF were merged with State Disaster Response Funds. <br />
<br />
<br />
'''Present Status'''<br />
<br />
CRF ceased to exist from 1 April 2010 onwards. The SDRF, which has substituted CRF was reconstituted on the basis of [http://finmin.nic.in/14fincomm/14thFinanceCommission.htm 14th Finance Commission's] (report submitted in Feb 2015) recommendations on [http://ndmindia.nic.in/NDRFSDRF_300715.pdf 30 July 2015]. The revised norms for assistance from SDRF were issued on [http://www.ndma.gov.in/images/pdf/SDRF.pdf 8 April 2015].<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. In fact, life/property /crop insurance is the financial tool to insure people against crop losses or damages to life and property. Government also runs certain micro insurance and crop insurance schemes. Under the insurance schemes claims are paid to only those who insured their crops/property/life and paid premium under any of the notified insurance scheme. Admissible claims are worked out and paid as per the provisions of the respective schemes. </span><br />
<br />
<span class="small_footernote" id="ref2">2. The DM Act provides that like state and national level funds, there shall be analogous provision for the district disaster response funds (DDRFs). Presently, there are 660 districts in the country and the Disaster Management Act requires as many DDRFs to be constituted. However, the setting up of DDRFs in each district may, in some cases, lock up funds and lead to a fragmentation of resources across districts. Considering that technology has made it possible to move funds quickly wherever needed, their utility may be limited in States with adequate penetration of technology. The 14th FC was, therefore, in agreement with the views of the FC-XIII that the decision of constituting DDRFs shall best be left to the wisdom of the State Governments, and hence, did not recommend separate grants for the financing of DDRFs.</span><br />
<br />
<span class="small_footernote" id="ref3">3. The July 2015 Guidelines specify that central share to the SDRF would be provided only when the state constitutes a state executive committee (SEC) as per Section 20 of the DM Act, with Chief Secretary of the State as its ex-officio Chairperson, for the management of the fund and upon certification that they have put in place the required accounting reforms specified by the central government in this regard.</span><br />
<br />
<br />
<br />
==Also See==<br />
*[http://arthapedia.in/index.php?title=Calamity_Relief_Funds_(CRF) Calamity Relief Funds (CRF)]<br />
*[http://arthapedia.in/index.php?title=National_Calamity_Contingency_Fund_(NCCF) National Calamity Contingency Fund (NCCF)]<br />
*[http://arthapedia.in/index.php?title=National_Disaster_Response_Fund_(NDRF) National Disaster Response Fund (NDRF)]<br />
*[http://www.arthapedia.in/index.php?title=Drought Drought]<br />
<br />
==References==<br />
*[http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/discussion/report23.pdf A study by NIDM for the 13th Finance Commission] - Financing Disaster Management in India , August 2009<br />
*Chapter 11 of [http://fincomindia.nic.in/writereaddata%5Chtml_en_files%5Coldcommission_html/fincom13/tfc/Chapter11.pdf 13th Finance Commission Report] on Disaster Relief<br />
*Chapter 10 of [http://finmin.nic.in/14fincomm/14fcreng.pdf 14th Finance Commission Recommendations] in respect of handling disaster management funds<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|StateDisasterResponseFund(SDRF)]]</div>Rosemary.ahttp://arthapedia.in/index.php/Saansad_Adarsh_Gram_Yojana_(SAANJHI)Saansad Adarsh Gram Yojana (SAANJHI)2018-07-13T17:15:22Z<p>Rosemary.a: </p>
<hr />
<div>[http://saanjhi.gov.in/ Saansad Adarsh Gram Yojana (SAGY)] is a village development project launched by Government of India in October 2014, under which each Member of Parliament will take the responsibility of developing physical and institutional infrastructure in three villages by 2019. The goal is to develop three Adarsh Grams or model villages by March 2019, of which one would be achieved by 2016. Thereafter, five such Adarsh Grams (one per year) will be selected and developed by 2024. (Saansad means Sansad Sadasya or Member of Parliament, Adarsh refers to model, Gram refers to village and Yojna means Scheme)<br />
<br />
The Project was launched on the occasion of birth anniversary of Lok Nayak Jai Prakash Narayan and is inspired by the principles and values of Mahatma Gandhi. It aims to provide rural India with quality access to basic amenities and opportunities. <br />
<br />
The Scheme has a holistic approach towards development. It envisages integrated development of the selected village across multiple areas such as agriculture, health, education, sanitation, environment, livelihoods etc. Far beyond mere infrastructure development, SAGY aims at instilling and nurturing values of national pride, patriotism, community spirit, self-confidence people's participation, dignity of women, etc. in the people. <br />
<br />
The scheme is implemented through Members of Parliament (MPs) with District Collector being the nodal officer. The MP would be free to identify a suitable gram panchayat for being developed as Adarsh Gram, other than his/her own village or that of his/her spouse. Gram Panchayat, which has a population of 3000-5000 in plain areas and 1000-3000 in hilly, tribal and difficult areas, would be the basic unit for development.<br />
<br />
A village development plan would be prepared for every identified gram panchayat with special focus on enabling every poor household to come out of poverty. The [http://arthapedia.in/index.php?title=Member_of_Parliament_Local_Area_Development_Scheme_(MPLADS) constituency fund, MPLADS], would be available to fill critical financing gaps. The outcomes include 100% immunization, 100% institutional delivery, reduced infant mortality rate, maternal mortality rate, reduction in malnutrition among children etc. <br />
<br />
If each MP adopts three villages, the scheme will be able to develop 2,379 gram panchayats over the next five years. (The Lok Sabha has 543 MPs and the Rajya Sabha 250, of which 12 are nominated. There are 2,65,000 gram panchayats in India. )<br />
<br />
Prior to this, a scheme called [http://pmagyonline.in/ Pradhan Mantri Adarsh Gram Yojana (PMAGY)] was launched in March, 2010 on a pilot basis, for the integrated development of 1000 villages each with more than 50% scheduled caste (SC) population. Under this Scheme, each village would be able to avail gap funding of Rs.10 lakh over and above the allocations under Rural Development and Poverty Alleviation Schemes. The scheme was being implemented in five States of the Country viz Assam (100-villages), Bihar (225-villages), Himachal Pradesh (225-villages), Rajasthan (225-villages) and Tamil Nadu (225-villages). The expected time-frame for implementation of the pilot phase was 3 years. Expansion of the scheme was to be based on successful implementation of the pilot phase. PMAGY also focuses on basic needs- housing, sanitation, water supply, electricity, communications, banking, infrastructure connectivity, health care, nutrition etc. and aims for convergence of existing programs in these sectors. <br />
<br />
For more details see the guidelines [http://saanjhi.gov.in/ here].<br />
<br />
<br />
==References==<br />
* [http://www.saanjhi.gov.in/aboutus.aspx About SAANJHI]<br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|SaansadAdarshGramYojana]]</div>Rosemary.ahttp://arthapedia.in/index.php/E-CommerceE-Commerce2018-05-30T08:14:54Z<p>Rosemary.a: </p>
<hr />
<div><p><br />
Electronic Commerce or e-commerce means buying and selling of goods and services including digital products over digital and electronic networks like networked computers, television channels, mobiles or any other internet based application used in an automated manner such as [https://en.wikipedia.org/wiki/Extranet extranets], etc. In other words, it refers to online, internet-based selling and buying using a digital instrument like, computer or mobile or tablet. </p><br />
<p> The above definition has been adopted by the [http://dipp.nic.in/English/Investor/FDI_Policies/FDI_policy.aspx Department of Industrial Policy and Promotion] (DIPP), Ministry of Commerce and Industry, Government of India in respect of allowing foreign direct investment (FDI) in such companies. The same was notified on [http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf 29 March 2016 (Press Note No. 3).]</p><br />
<br />
<p>E-commerce activities are governed by number of Regulations/Acts of the Government like the Shop and Establishment Act, Sales of Goods Act, Companies Act, Income Tax Laws, Information Technology Act, the Competition Act, the Consumer Protection Act, etc. </p><br />
<br />
<p>IT Act provides legal recognition for these activities. The Consumer Protection Act, 1986, addresses the interests of the consumers. It covers all goods and services and all mode of transactions including e-commerce. [The Consumer Protection Bill, 2018, already introduced in Parliament, intends to replace the existing Act and seeks to provide for establishment of a Central Consumer Protection Authority (CCPA) to deal with unfair trade practices and misleading advertisements and to promote, protect and enforce the rights of the consumers, CCPA will be empowered to investigate, recall, refund and impose penalties. The salient features of the bill include provision for product liability action in cases of personal injury, death, or property damage caused by or resulting from any product; provision for mediation as an Alternate Dispute Resolution (ADR) making the process of dispute adjudication simpler and quicker and simplification of the process of adjudication by the Consumer Fora. The provisions of the Bill will cover the whole country.]</p><br />
<br />
<p>A Committee was constituted to examine various issues relating to e-commerce under the Chairmanship of CEO, NITI Aayog. The Committee inter-alia comprises representatives from Department of Industrial Policy & Promotion, Department of Economic Affairs, Department of Electronics & Information Technology, Department of Consumer Affairs and certain State Governments namely Assam, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Punjab.</p> <br />
<br />
<p>In 2018, a Think tank on the Framework for National Policy on E-commerce has been established by the Department of Commerce. It will provide a credible forum for an inclusive and fact-based dialogue leading to informed policy making, so that the country is adequately prepared to take advantage of the opportunities, and meet the challenges, that would arise from the next wave of advancements in the digital economy.</p><br />
<br />
<p>The think tank on the Framework for National Policy on E-commerce will seek to collectively deliberate on the challenges confronting India in the arena of digital economy with a view to developing recommendations for a comprehensive and overarching national policy on e-commerce. Some of the issues that will be discussed by the think tank include the following aspects of e-commerce and digital economy: physical and digital infrastructure, regulatory regime, taxation policy, data flows, server localisation, intellectual property rights protection, FDI, technology flows, responding to disruptions in industrial organisation, need for skill development and trade-related aspects. Developments on e-commerce at the WTO and evolving appropriate national position on the underlying issues, would be another important dimension of the discussions of the think tank on the Framework for National Policy on E-commerce. The think tank will explore options for providing a fillip to entrepreneurship in digital economy. It will identify specific policy interventions for nurturing domestic firms and create jobs in e-commerce.</p><br />
<br />
<p>One of the key outcomes of the first meeting of the think tank in April 2018 was the decision to constitute a task force for preparing recommendations for India's national policy on e-commerce. The task force will be divided into various sub-groups, comprising representation from the Government of India, e-commerce industry and experts with domain knowledge. The task force will finalise its recommendations within six months.</p><br />
<p>&nbsp;</p><br />
<p><strong>In what context e-commerce is permitted in India?</strong><br /><br />
E-commerce may be carried out for both wholesale trade<sup class="reference">[[#ref1|[1]]]</sup> or for retail trade (sale towards final consumption). It can be either Business to Business (B2B) trading<sup class="reference">[[#ref2|[2]]]</sup> or Business to Consumers (B2C) trading. There is no restriction on conducting e-commerce per se in India. However, certain restrictions exist, if e-commerce is being done by companies receiving FDI. </p><br />
<p> In India, 100% FDI under automatic route<sup class="reference">[[#ref3|[3]]]</sup> is allowed in Business to Business e-commerce since 2000<sup class="reference">[[#ref4|[4]]]</sup>. When it comes to business to consumers (B2C) trade or retail trade, a distinction is made between single brand retail (selling products of a single brand) and multi-brand retail with respect to permission for FDI and e-commerce<sup class="reference">[[#ref5|[5]]]</sup>. </p><br />
<p> In the business to consumers (B2C) multi-brand retail segment, if the trade is happening on &lsquo;marketplaces&rsquo;, as defined in the subsequent section below, 100% FDI under automatic route is permitted in the entity providing that marketplace. Further, FDI is permitted in Business to Consumers e-commerce retail segment In India, only in the following circumstances. </p><br />
<ul><br />
<li>A manufacturer is permitted to sell its products manufactured in India through e-commerce retail. i.e., Any product manufactured in India whether by foreign entities or domestic entities can be sold through e-commerce. FDI is permissible in such manufacturing entities as per the extant sectoral permissions for FDI. </li><br />
<li>A single brand retail trading entity, (means an entity, whether foreign or domestic, which sells only products of one particular brand) operating through brick and mortar stores is permitted to undertake retail trading through e-commerce. 100% FDI is allowed in single brand retail since 2012, with upto 49% under automatic route. FDI beyond that would require prior Government / RBI approval. </li><br />
<li>Retail trading, in any form, by means of e-commerce, would not be permissible, for brick and Mortar companies with FDI, engaged in the activity of multi-brand retail trading. </li><br />
<li>An Indian manufacturer (which means that more than 50% shareholding is with the Indian entity and rest can be with a foreign entity) is permitted to sell its own single brand products through e-commerce retail. The Indian manufacturer should be owner of that Indian brand and manufactures, in terms of value, at least 70% of its products in-house and can source at most 30% from Indian manufacturers (eg.FabIndia or Reliance may be producing some of its branded products in its own manufacturing facilities located in India. But it may also be sourcing some of these products from other manufacturing entities in India while putting the brand name /label of FabIndia or Reliance on it. Here outside sourcing from other Indian manufacturers is limited to 30% of the products sold). In this instance, even though the entity is actually engaged in multi-brand retailing, FDI is permissible in such cases and is treated similar to Category I entities mentioned above. Here, there is no need for a brick and mortar retail presence by the manufacturer. All his manufactured items may be sold through e-commerce provided it is all coming under a single brand and conforms to the sourcing norms. </li><br />
</ul><br />
<p><br><br />
Thus, e-commerce mode with FDI is permitted for: </p><br />
<ul><br />
<li>Any B2B transaction </li><br />
<li>Any B2C transaction in products made in India by its manufacturer (whether foreign or domestic)</li><br />
<li>Any B2C transaction by a brick and mortar single brand retail company </li><br />
<li>Any B2C transaction by an Indian manufacturer, without any brick and mortar presence and using one single brand, provided 70% of his single brand products are manufactured in India or at most 30% is sourced from India</li><br />
<li>Any B2C &lsquo;marketplace&rsquo; transaction</li><br />
</ul><br />
<p><br><br />
E-commerce, would not be permissible, for brick and Mortar companies with FDI, engaged in the activity of multi-brand retail trading.<strong></strong></p><br />
<p>&nbsp;</p><br />
<p><strong>Types of e-commerce in the B2C multi-brand retail trading, as recognised in India:</strong></p><br />
<ul><br />
<li><strong>Inventory based model of e-commerce:</strong> which means an e-commerce activity where inventory of goods and services is owned by the e-commerce entity and is sold to the consumers directly. eg. Third party stores which stock up others products of a specific nature and sell online to consumers (eg. Grocery items but of different brands). </li><br />
</ul><br />
<p><br><br />
FDI is not permitted in inventory based model of e-commerce. </p><br />
<ul><br />
<li><strong>Marketplace based model of e-commerce: </strong>which means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. In other words, it refers to an online aggregator /platform which matches the interest of buyers and sellers, who are distinct from the entity providing and operating that platform. Eg. [http://www.flipkart.com/ Flipkart,] [http://www.snapdeal.com/ Snapdeal,] [http://www.amazon.in/ Amazone] etc. </li><br />
</ul><br />
<p><strong>&nbsp;</strong></p><br />
<p>Such marketplaces can provide support services to sellers in respect of warehousing logistics, order fulfilment, call center services, payment collection and other services. However, they cannot exercise ownership over the inventory of goods purported to be sold. For the same reason, post sales on the e-commerce site, ultimate delivery of goods to the customers, ensuring his satisfaction, implementation of any warrantee / guarantee etc. will be the responsibility of the seller. If there is any ownership over the inventory, it will render the business into inventory based model of e-commerce. To ensure that the marketplace does not own the inventory, it is stipulated that name, address and contact details of the sellers should be clearly made available while displaying the nature and price of these goods on the online platform. </p><br />
<p>Further, e-commerce entities/marketplace provider cannot directly or indirectly influence the sale price of goods and services and has to maintain the level playing field with other brick and mortar retailers in the country. That is, the marketplace provider cannot offer any discount on their own unless the original seller is giving it. </p><br />
<p>A marketplace provider can enter into transactions with sellers registered on its platform on a business to business (B2B) basis. However, it cannot source more than 25% of the sales affected on its platform from a single vendor or their group companies. This is to ensure that a variety of sellers are available on the order matching platform. </p><br />
<p>Payments effected on the marketplace have to conform to the RBI guidelines issued in this regard. </p><br />
<p>Subject to the above conditions, 100% FDI under automatic route is allowed in this model of e-commerce. </p><br />
<br />
<br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. Wholesale trade means sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales.</span><br />
<br />
<span class="small_footernote" id="ref2">2. Business to business (B To B or B2B) refers to a transaction that exists between businesses, such as those involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business refers to business that is conducted between companies, rather than between a company and individual consumers.</span><br />
<br />
<span class="small_footernote" id="ref3">3. That means prior approval either of the Government or the Reserve Bank of India is not required</span><br />
<br />
<span class="small_footernote" id="ref4">4. 100% FDI was allowed in cash and carry wholesale trading since [http://eaindustry.nic.in/handbk/chap008.pdf 1997]. In 2000 ([http://dipp.nic.in/English/policy/changes/press2_00.htm 11 Feb 2000 press note No. 2]), India allowed 100% FDI in B2B ecommerce subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world.</span><br />
<br />
<span class="small_footernote" id="ref5">5. The Government decided to allow FDI up to 51%, with prior Government approval, in retail trade of &lsquo;Single Brand&rsquo; products in 2006 ([http://dipp.nic.in/English/policy/changes/pn3_2006.pdf Press Note No. 3 dated 10 February 2006]). Later, government removed this 51% cap on FDI in January 2012 ([http://dipp.nic.in/English/acts_rules/Press_Notes/pn1_2012.pdf Press Note No. 1 dated 10 January 2012]), and opened the single-brand retail market fully to foreign investors by permitting 100 % foreign investment under government approval route subject to certain conditions like mandatory sourcing of 30% of the products from Indian small industries in case FDI is beyond 51% etc.. In [http://dipp.nic.in/English/acts_rules/Press_Notes/pn6_2013.pdf August 2013] (Press Note No.6) upto 49% of FDI was made permissible under the automatic route and certain conditions were clarified /modified further.<br> <br />
FDI, up to 51%, under the Government route, in Multi-Brand Retail Trading was permitted in September 2012, subject to many specified conditions and excluding certain sectors ([http://dipp.nic.in/english/acts_rules/Press_Notes/pn5_2012.pdf Press Note No. 5/2012 dated 20 September 2012]). Some of these conditions were fine tuned in [http://dipp.nic.in/English/acts_rules/Press_Notes/pn5_2013.pdf August 2013] (press Note No. 5 dated 22 August 2013).</span><br />
<br />
<br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Marketplace Marketplace]<br />
<br />
<br />
<br />
==References==<br />
*[Notification by Ministry of Commerce dated *[http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf 29 March 2016.] <br />
*[http://dipp.nic.in/English/Investor/FDI_Policies/FDI_policy.aspx Consolidated FDI Policy of the Government]<br />
*[http://dipp.nic.in/English/acts_rules/Press_Notes.aspx Various Press Notes issued by Department of Industrial Policy and Promotion] as linked in this write up.<br />
<br />
<br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham] (IES 2006) and [http://ies.gov.in/myaccount-profile-view.php?memid=283 Ms. Reetu Jain] (IES 2001)<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in] and [mailto:reetuj@nic.in reetuj@nic.in]<br />
<br />
<br />
[[Category:concepts|E-Commerce]]</div>Rosemary.ahttp://arthapedia.in/index.php/E-CommerceE-Commerce2018-05-30T08:13:37Z<p>Rosemary.a: </p>
<hr />
<div><p><br />
Electronic Commerce or e-commerce means buying and selling of goods and services including digital products over digital and electronic networks like networked computers, television channels, mobiles or any other internet based application used in an automated manner such as [https://en.wikipedia.org/wiki/Extranet extranets], etc. In other words, it refers to online, internet-based selling and buying using a digital instrument like, computer or mobile or tablet. </p><br />
<p> The above definition has been adopted by the [http://dipp.nic.in/English/Investor/FDI_Policies/FDI_policy.aspx Department of Industrial Policy and Promotion] (DIPP), Ministry of Commerce and Industry, Government of India in respect of allowing foreign direct investment (FDI) in such companies. The same was notified on [http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf 29 March 2016 (Press Note No. 3).]<br />
<br />
E-commerce activities are governed by number of Regulations/Acts of the Government like the Shop and Establishment Act, Sales of Goods Act, Companies Act, Income Tax Laws, Information Technology Act, the Competition Act, the Consumer Protection Act, etc. <br />
<br />
IT Act provides legal recognition for these activities. The Consumer Protection Act, 1986, addresses the interests of the consumers. It covers all goods and services and all mode of transactions including e-commerce. [The Consumer Protection Bill, 2018, already introduced in Parliament, intends to replace the existing Act and seeks to provide for establishment of a Central Consumer Protection Authority (CCPA) to deal with unfair trade practices and misleading advertisements and to promote, protect and enforce the rights of the consumers, CCPA will be empowered to investigate, recall, refund and impose penalties. The salient features of the bill include provision for product liability action in cases of personal injury, death, or property damage caused by or resulting from any product; provision for mediation as an Alternate Dispute Resolution (ADR) making the process of dispute adjudication simpler and quicker and simplification of the process of adjudication by the Consumer Fora. The provisions of the Bill will cover the whole country.]<br />
<br />
A Committee was constituted to examine various issues relating to e-commerce under the Chairmanship of CEO, NITI Aayog. The Committee inter-alia comprises representatives from Department of Industrial Policy & Promotion, Department of Economic Affairs, Department of Electronics & Information Technology, Department of Consumer Affairs and certain State Governments namely Assam, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Punjab. <br />
<br />
In 2018, a Think tank on the Framework for National Policy on E-commerce has been established by the Department of Commerce. It will provide a credible forum for an inclusive and fact-based dialogue leading to informed policy making, so that the country is adequately prepared to take advantage of the opportunities, and meet the challenges, that would arise from the next wave of advancements in the digital economy.<br />
<br />
The think tank on the Framework for National Policy on E-commerce will seek to collectively deliberate on the challenges confronting India in the arena of digital economy with a view to developing recommendations for a comprehensive and overarching national policy on e-commerce. Some of the issues that will be discussed by the think tank include the following aspects of e-commerce and digital economy: physical and digital infrastructure, regulatory regime, taxation policy, data flows, server localisation, intellectual property rights protection, FDI, technology flows, responding to disruptions in industrial organisation, need for skill development and trade-related aspects. Developments on e-commerce at the WTO and evolving appropriate national position on the underlying issues, would be another important dimension of the discussions of the think tank on the Framework for National Policy on E-commerce. The think tank will explore options for providing a fillip to entrepreneurship in digital economy. It will identify specific policy interventions for nurturing domestic firms and create jobs in e-commerce.<br />
<br />
One of the key outcomes of the first meeting of the think tank in April 2018 was the decision to constitute a task force for preparing recommendations for India's national policy on e-commerce. The task force will be divided into various sub-groups, comprising representation from the Government of India, e-commerce industry and experts with domain knowledge. The task force will finalise its recommendations within six months.</p><br />
<p>&nbsp;</p><br />
<p><strong>In what context e-commerce is permitted in India?</strong><br /><br />
E-commerce may be carried out for both wholesale trade<sup class="reference">[[#ref1|[1]]]</sup> or for retail trade (sale towards final consumption). It can be either Business to Business (B2B) trading<sup class="reference">[[#ref2|[2]]]</sup> or Business to Consumers (B2C) trading. There is no restriction on conducting e-commerce per se in India. However, certain restrictions exist, if e-commerce is being done by companies receiving FDI. </p><br />
<p> In India, 100% FDI under automatic route<sup class="reference">[[#ref3|[3]]]</sup> is allowed in Business to Business e-commerce since 2000<sup class="reference">[[#ref4|[4]]]</sup>. When it comes to business to consumers (B2C) trade or retail trade, a distinction is made between single brand retail (selling products of a single brand) and multi-brand retail with respect to permission for FDI and e-commerce<sup class="reference">[[#ref5|[5]]]</sup>. </p><br />
<p> In the business to consumers (B2C) multi-brand retail segment, if the trade is happening on &lsquo;marketplaces&rsquo;, as defined in the subsequent section below, 100% FDI under automatic route is permitted in the entity providing that marketplace. Further, FDI is permitted in Business to Consumers e-commerce retail segment In India, only in the following circumstances. </p><br />
<ul><br />
<li>A manufacturer is permitted to sell its products manufactured in India through e-commerce retail. i.e., Any product manufactured in India whether by foreign entities or domestic entities can be sold through e-commerce. FDI is permissible in such manufacturing entities as per the extant sectoral permissions for FDI. </li><br />
<li>A single brand retail trading entity, (means an entity, whether foreign or domestic, which sells only products of one particular brand) operating through brick and mortar stores is permitted to undertake retail trading through e-commerce. 100% FDI is allowed in single brand retail since 2012, with upto 49% under automatic route. FDI beyond that would require prior Government / RBI approval. </li><br />
<li>Retail trading, in any form, by means of e-commerce, would not be permissible, for brick and Mortar companies with FDI, engaged in the activity of multi-brand retail trading. </li><br />
<li>An Indian manufacturer (which means that more than 50% shareholding is with the Indian entity and rest can be with a foreign entity) is permitted to sell its own single brand products through e-commerce retail. The Indian manufacturer should be owner of that Indian brand and manufactures, in terms of value, at least 70% of its products in-house and can source at most 30% from Indian manufacturers (eg.FabIndia or Reliance may be producing some of its branded products in its own manufacturing facilities located in India. But it may also be sourcing some of these products from other manufacturing entities in India while putting the brand name /label of FabIndia or Reliance on it. Here outside sourcing from other Indian manufacturers is limited to 30% of the products sold). In this instance, even though the entity is actually engaged in multi-brand retailing, FDI is permissible in such cases and is treated similar to Category I entities mentioned above. Here, there is no need for a brick and mortar retail presence by the manufacturer. All his manufactured items may be sold through e-commerce provided it is all coming under a single brand and conforms to the sourcing norms. </li><br />
</ul><br />
<p><br><br />
Thus, e-commerce mode with FDI is permitted for: </p><br />
<ul><br />
<li>Any B2B transaction </li><br />
<li>Any B2C transaction in products made in India by its manufacturer (whether foreign or domestic)</li><br />
<li>Any B2C transaction by a brick and mortar single brand retail company </li><br />
<li>Any B2C transaction by an Indian manufacturer, without any brick and mortar presence and using one single brand, provided 70% of his single brand products are manufactured in India or at most 30% is sourced from India</li><br />
<li>Any B2C &lsquo;marketplace&rsquo; transaction</li><br />
</ul><br />
<p><br><br />
E-commerce, would not be permissible, for brick and Mortar companies with FDI, engaged in the activity of multi-brand retail trading.<strong></strong></p><br />
<p>&nbsp;</p><br />
<p><strong>Types of e-commerce in the B2C multi-brand retail trading, as recognised in India:</strong></p><br />
<ul><br />
<li><strong>Inventory based model of e-commerce:</strong> which means an e-commerce activity where inventory of goods and services is owned by the e-commerce entity and is sold to the consumers directly. eg. Third party stores which stock up others products of a specific nature and sell online to consumers (eg. Grocery items but of different brands). </li><br />
</ul><br />
<p><br><br />
FDI is not permitted in inventory based model of e-commerce. </p><br />
<ul><br />
<li><strong>Marketplace based model of e-commerce: </strong>which means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. In other words, it refers to an online aggregator /platform which matches the interest of buyers and sellers, who are distinct from the entity providing and operating that platform. Eg. [http://www.flipkart.com/ Flipkart,] [http://www.snapdeal.com/ Snapdeal,] [http://www.amazon.in/ Amazone] etc. </li><br />
</ul><br />
<p><strong>&nbsp;</strong></p><br />
<p>Such marketplaces can provide support services to sellers in respect of warehousing logistics, order fulfilment, call center services, payment collection and other services. However, they cannot exercise ownership over the inventory of goods purported to be sold. For the same reason, post sales on the e-commerce site, ultimate delivery of goods to the customers, ensuring his satisfaction, implementation of any warrantee / guarantee etc. will be the responsibility of the seller. If there is any ownership over the inventory, it will render the business into inventory based model of e-commerce. To ensure that the marketplace does not own the inventory, it is stipulated that name, address and contact details of the sellers should be clearly made available while displaying the nature and price of these goods on the online platform. </p><br />
<p>Further, e-commerce entities/marketplace provider cannot directly or indirectly influence the sale price of goods and services and has to maintain the level playing field with other brick and mortar retailers in the country. That is, the marketplace provider cannot offer any discount on their own unless the original seller is giving it. </p><br />
<p>A marketplace provider can enter into transactions with sellers registered on its platform on a business to business (B2B) basis. However, it cannot source more than 25% of the sales affected on its platform from a single vendor or their group companies. This is to ensure that a variety of sellers are available on the order matching platform. </p><br />
<p>Payments effected on the marketplace have to conform to the RBI guidelines issued in this regard. </p><br />
<p>Subject to the above conditions, 100% FDI under automatic route is allowed in this model of e-commerce. </p><br />
<br />
<br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. Wholesale trade means sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales.</span><br />
<br />
<span class="small_footernote" id="ref2">2. Business to business (B To B or B2B) refers to a transaction that exists between businesses, such as those involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business refers to business that is conducted between companies, rather than between a company and individual consumers.</span><br />
<br />
<span class="small_footernote" id="ref3">3. That means prior approval either of the Government or the Reserve Bank of India is not required</span><br />
<br />
<span class="small_footernote" id="ref4">4. 100% FDI was allowed in cash and carry wholesale trading since [http://eaindustry.nic.in/handbk/chap008.pdf 1997]. In 2000 ([http://dipp.nic.in/English/policy/changes/press2_00.htm 11 Feb 2000 press note No. 2]), India allowed 100% FDI in B2B ecommerce subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world.</span><br />
<br />
<span class="small_footernote" id="ref5">5. The Government decided to allow FDI up to 51%, with prior Government approval, in retail trade of &lsquo;Single Brand&rsquo; products in 2006 ([http://dipp.nic.in/English/policy/changes/pn3_2006.pdf Press Note No. 3 dated 10 February 2006]). Later, government removed this 51% cap on FDI in January 2012 ([http://dipp.nic.in/English/acts_rules/Press_Notes/pn1_2012.pdf Press Note No. 1 dated 10 January 2012]), and opened the single-brand retail market fully to foreign investors by permitting 100 % foreign investment under government approval route subject to certain conditions like mandatory sourcing of 30% of the products from Indian small industries in case FDI is beyond 51% etc.. In [http://dipp.nic.in/English/acts_rules/Press_Notes/pn6_2013.pdf August 2013] (Press Note No.6) upto 49% of FDI was made permissible under the automatic route and certain conditions were clarified /modified further.<br> <br />
FDI, up to 51%, under the Government route, in Multi-Brand Retail Trading was permitted in September 2012, subject to many specified conditions and excluding certain sectors ([http://dipp.nic.in/english/acts_rules/Press_Notes/pn5_2012.pdf Press Note No. 5/2012 dated 20 September 2012]). Some of these conditions were fine tuned in [http://dipp.nic.in/English/acts_rules/Press_Notes/pn5_2013.pdf August 2013] (press Note No. 5 dated 22 August 2013).</span><br />
<br />
<br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Marketplace Marketplace]<br />
<br />
<br />
<br />
==References==<br />
*[Notification by Ministry of Commerce dated *[http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf 29 March 2016.] <br />
*[http://dipp.nic.in/English/Investor/FDI_Policies/FDI_policy.aspx Consolidated FDI Policy of the Government]<br />
*[http://dipp.nic.in/English/acts_rules/Press_Notes.aspx Various Press Notes issued by Department of Industrial Policy and Promotion] as linked in this write up.<br />
<br />
<br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham] (IES 2006) and [http://ies.gov.in/myaccount-profile-view.php?memid=283 Ms. Reetu Jain] (IES 2001)<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in] and [mailto:reetuj@nic.in reetuj@nic.in]<br />
<br />
<br />
[[Category:concepts|E-Commerce]]</div>Rosemary.ahttp://arthapedia.in/index.php/Inflation_Targeting_In_IndiaInflation Targeting In India2018-05-28T14:35:36Z<p>Rosemary.a: </p>
<hr />
<div><p>Inflation targeting is a monetary policy strategy used by Central Banks for maintaining price level at a certain level or within a range. It indicates the primacy of price stability as the key objective of monetary policy. The argument for price stability stems from the fact that rising prices create uncertainties in decision making, adversely affecting savings and encouraging speculative investments. Inflation targeting brings in more predictability and transparency in deciding monetary policy. If the central banks could ensure price stability, households and companies can plan ahead, negotiating wages on the basis of expecting low and stable inflation. Various advanced economies including United States, Canada and Australia have been using inflation targeting as a strategy in their monetary policy framework. The case for inflation targeting has been made in India as the country has been experiencing a high level of inflation till recently. </p><br />
<p> The Reserve Bank of India and Government of India signed a [https://www.finmin.nic.in/sites/default/files/MPFAgreement28022015.pdf Monetary Policy Framework Agreement] on 20th February 2015. As per terms of the agreement, the objective of monetary policy framework would be primarily to maintain price stability, while keeping in mind the objective of growth. The monetary policy framework would be operated by the RBI. RBI would aim to contain consumer price inflation within 6 percent by January 2016 and within 4 percent with a band of (+/-) 2 percent for all subsequent years. </p><br />
<p> The central bank would be seen as failing to meet the targets, if retail inflation is more than 6 per cent for three consecutive quarters from 2015-16 and less than 2 per cent for three consecutive quarters from 2016-17. If this happens, RBI will have to explain the reason for its failure to meet as well as give a timeframe within which it will achieve it. RBI will publish the operating targets as well as operating procedure for the monetary policy though which the target for the monetary policy will be achieved. The RBI will also be required to bring a document every six months to explain the sources of inflation and forecast for inflation for next 6-18 months. </p><br />
<p> RBI has been using headline CPI (Combined) inflation as the nominal anchor for monetary policy stance from April 2014 onwards. </p><br />
<br />
RBI in its [https://rbi.org.in/scripts/PublicationsView.aspx?id=16216 Monetary Policy Report in April 2015] stated that this flexible inflation targeting (FIT) framework greatly enhances the credibility and effectiveness of monetary policy, and particularly, the pursuit of the inflation targets that have been set. The commitment of the Government to this framework enhances credibility significantly since it indicates that the Government will do its part on the fiscal side and on supply constraints to reduce the burden on monetary policy in achieving price stability.<br />
<br />
Management of monetary policy and the express objective of inflation targeting has been enshrined as the responsibility of RBI by amending the preamble of the RBI Act, 1934 through the Finance Act 2016 (Chapter XII). Thus, ensuring price stability through inflation targeting is a legal responsibility of RBI since 2016. A new Chapter (Chapter IIIF, Section 45Z) was introduced in the RBI Act, through this Finance Bill, 2016, for detailing the operation of a [http://www.arthapedia.in/index.php?title=Monetary_Policy_Committee_(MPC) Monetary Policy Committee (MPC)], which would be the institutional arrangement at the disposal of RBI for targeting inflation. <br />
<br />
Under Section 45ZA(1) of the RBI Act, 1934, the Central Government determines the inflation target in terms of the Consumer Price Index, once in every five years in consultation with the RBI. This target would be notified in the [http://egazette.nic.in/(S(usu15wrw2xvbxj1yn325gtsh))/default.aspx?AcceptsCookies=yes Official Gazette]. Amongst other measures, RBI targets inflation primarily by changing the [http://www.arthapedia.in/index.php?title=Policy_Rate "Policy Rate”] which means the rate for repo-transactions as defined under sub-section (12AB) of section 17 of the RBI Act.<br />
<br />
Factors constituting failure to meet inflation target under the MPC Framework was notified on [http://finmin.nic.in/MPC_notification27062016.pdf 27 June 2016]. In exercise of the powers conferred by section 45ZN of the RBI Act, 1934, the Central Government notified the following as factors that constitute failure to achieve the inflation target, namely:—<br />
<br />
(a) the average inflation is more than the upper tolerance level of the inflation target notified under section 45ZA of the RBI Act for any three consecutive quarters; or<br />
<br />
(b) the average inflation is less than the lower tolerance level of the inflation target notified under section 45ZA of the RBI Act for any three consecutive quarters.<br />
<br />
<br />
The provisions of the RBI Act relating to the chapter on Monetary Policy have been brought into force through a Notification in the Gazette of India on 27.6.2016. The Rules governing the Procedure for Selection of Members of Monetary Policy Committee and Terms and Conditions of their Appointment and factors constituting failure to meet inflation target under the MPC Framework have also been notified in the Gazette on 27.6.2016. The Government,<br />
in consultation with the RBI, has notified the inflation target in the Gazette of India dated 5th August 2016, for the five year period beginning from the date of publication of this notification <br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=234 P K Abdul Kareem (IES 1996)]<br />
*Email- [mailto:pkakareem@yahoo.com pkakareem@yahoo.com]<br />
<br />
[[Category:concepts|InflationTargetingInIndia]]</div>Rosemary.ahttp://arthapedia.in/index.php/Monetary_Policy_Framework_AgreementMonetary Policy Framework Agreement2018-05-28T14:35:11Z<p>Rosemary.a: </p>
<hr />
<div><p>Monetary Policy Framework Agreement is an agreement reached between Government and the central bank in India – The [https://www.rbi.org.in/ Reserve Bank of India] (RBI) - on the maximum tolerable inflation rate that RBI should target to achieve price stability.</p><br />
<p>&nbsp;</p><br />
<p><strong>Background </strong><br><br />
The Reserve Bank of India and Government of India signed the&nbsp;[https://www.finmin.nic.in/sites/default/files/MPFAgreement28022015.pdf Monetary Policy Framework Agreement]&nbsp;on 20 February 2015 which made [http://www.arthapedia.in/index.php?title=Inflation_Targeting_In_India inflation targeting] and achieving price stability the responsibilities of RBI. Subsequently, the government, while unveiling the [http://indiabudget.nic.in/ Union Budget for 2016-17] in the Parliament, proposed to amend the [https://www.rbi.org.in/scripts/OccasionalPublications.aspx?head=Reserve%20Bank%20of%20India%20Act Reserve Bank of India (RBI) Act, 1934] for giving a statutory backing to the aforementioned Monetary Policy Framework Agreement and for setting up a [http://arthapedia.in/index.php?title=Monetary_Policy_Committee_(MPC) Monetary Policy Committee (MPC)]. Vide this amendment, it was written into the preamble of the RBI Act that the primary objective of the monetary policy is to maintain price stability, while keeping in mind the objective of growth, and to meet the challenge of an increasingly complex economy, RBI would operate a Monetary Policy Framework. Thus, the amendment provides a statutory basis for a Monetary Policy Framework Agreement and the Monetary Policy Committee. India thereby formally joined the list of nations which tasks its central bank with the responsibility for [http://www.arthapedia.in/index.php?title=Inflation_Targeting_In_India inflation targeting]. This amendment to RBI Act was carried out through the [http://indiabudget.nic.in/bill.asp Finance Bill, 2016] presented along with the Union Budget documents. A new Chapter (Chapter IIIF, Section 45Z) was introduced in the RBI Act, through this Finance Bill, 2016, for formalising the inflation targeting regime. The provisions in the Bill become effective once it is passed and notified as an Act of Parliament.</p><br />
<p>&nbsp;</p><br />
<p><strong>Contents of the present Monetary Policy Framework Agreement </strong><br><br />
Under the present Monetary Policy Framework Agreement signed on 20 February 2015, the RBI will be responsible for containing inflation targets at 4% (with a standard deviation of 2%) in the medium term (For more details see [http://www.arthapedia.in/index.php?title=Inflation_Targeting_In_India here]). Under Section 45ZA(1) of the RBI Act, 1934, the Central Government determines the inflation target in terms of the [http://www.arthapedia.in/index.php?title=Consumer_Price_Index Consumer Price Index], once in every five years in consultation with the RBI. This target would be notified in the [http://egazette.nic.in/(S(usu15wrw2xvbxj1yn325gtsh))/default.aspx?AcceptsCookies=yes Official Gazette]. </p><br />
<p> Though the central bank already had a monetary framework and was implementing the monetary policy, the newly designed statutory framework would mean that the RBI would have to give an explanation in the form of a report to the Central Government, if it failed to reach the specified inflation targets. In the report it shall give reasons for failure, remedial actions as well as estimated time within which the inflation target shall be achieved. Further, RBI is mandated to publish a Monetary Policy Report every six months, explaining the sources of inflation and the forecasts of inflation for the coming period of six to eighteen months. </p><br />
<br />
<br />
<br />
<br />
==Also See ==<br />
<ul><br />
<li>[http://www.arthapedia.in/index.php?title=Inflation_Targeting_In_India Inflation Targeting in India]</li><br />
<li>[http://arthapedia.in/index.php?title=Monetary_Policy_Committee_(MPC) Monetary Policy Committee (MPC)] </li><br />
<li>[http://www.arthapedia.in/index.php?title=Monetary_Policy_Dilemmas:_Some_RBI_Perspectives_(Dr._D._subbarao,_Governor,_RBI) Monetary Policy Dilemmas: Some RBI Perspectives (Dr. D. subbarao, Former Governor, RBI)]</li><br />
</ul><br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=568 Mr. Abhishek Anand (IES 2014)]<br />
*Email- [mailto:abhishek_anand444@yahoo.com abhishek_anand444@yahoo.com]<br />
<br />
[[Category:concepts|MonetaryPolicyFrameworkAgreement]]</div>Rosemary.ahttp://arthapedia.in/index.php/Crypto_Currency_/_Virtual_Currency_/_Digital_CurrencyCrypto Currency / Virtual Currency / Digital Currency2018-05-15T09:01:17Z<p>Rosemary.a: </p>
<hr />
<div><p> Financial Action Task Force (FATF), which is the global body fighting money laundering and terrorist financing has [http://www.fatf-gafi.org/media/fatf/documents/reports/Virtual-currency-key-definitions-and-potential-aml-cft-risks.pdf defined Virtual currency] as a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not generally have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction. As on date, it is not issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the virtual currency. </p><br />
<p> Virtual currency is distinguished from fiat currency (a.k.a. &ldquo;real currency,&rdquo; &ldquo;real money,&rdquo; or &ldquo;national currency&rdquo;), which is the coin and paper money of a country that is designated as its legal tender; circulates; and is customarily used and accepted as a medium of exchange in the issuing country. It is distinct from e-money, which is a digital representation of fiat currency used to electronically transfer value denominated in fiat currency. E-money is a digital transfer mechanism for fiat currency - i.e., it electronically transfers value that has legal tender status. </p><br />
<p> Digital currency can mean a digital representation of either virtual currency (non-fiat) or e-money (fiat) and thus is often used interchangeably with the term &ldquo;virtual currency&rdquo;.</p><br />
<p> Cryptocurrency is a digital currency which makes use of encryption techniques to regulate the generation of units of currency and to verify the transfer of funds, operating independently of a central bank. This is a math-based, decentralised convertible virtual currency that is protected by cryptography.</p><br />
<p>&nbsp;</p><br />
<p> <strong>Types of virtual currencies </strong> </p><br />
<p> Convertible (or open) virtual currency has an equivalent value in real currency and can be exchanged back-and-forth for real currency. The notion of &ldquo;convertible currency&rdquo; does not in any way imply an ex officio convertibility (e.g. in the case of gold standard), but rather a de facto convertibility (e.g. because a market exists). Thus, a virtual currency is &ldquo;convertible&rdquo; only as long as some private participants make offers and others accept them, since the &ldquo;convertibility&rdquo; is not guaranteed at all by law.</p><br />
<p> Non-convertible virtual currencies cannot be exchanged against fiat currency. It is specific to a particular virtual domain or world (say Amazon). It is possible that an unofficial, secondary black market may arise that provides an opportunity to exchange the &ldquo;non-convertible&rdquo; virtual currency for fiat currency or another virtual currency.</p><br />
<p> Centralised Virtual Currencies have a single administrating authority (administrator) - i.e., a third party that controls the system. An administrator issues the currency; establishes the rules for its use; maintains a central payment ledger; and has authority to redeem the currency (withdraw it from circulation). The exchange rate for a convertible virtual currency may be either floating - i.e., determined by market supply and demand for the virtual currency--or pegged - i.e., fixed by the administrator at a set value measured in fiat currency or another real-world store of value, such as gold or a basket of currencies. Currently, the vast majority of virtual currency payments transactions involve centralised virtual currencies.</p><br />
<p> Decentralised Virtual Currencies (a.k.a. crypto-currencies) are distributed, open-source, math-based peer-to-peer virtual currencies that have no central administrating authority, and no central monitoring or oversight. Examples: Bitcoin; liteCoin; and Ripple.</p><br />
<p> Virtual currencies are a worldwide phenomenon that have captured the imagination of millions across rungs of businesses, banks and governments. [https://www.investopedia.com/terms/b/bitcoin.asp Bitcoin], launched in 2009 by Satoshi Nakamoto was the first decentralised convertible virtual currency, and the first cryptocurrency. Bitcoin's success has spawned a number of competing cryptocurrencies, such as [https://litecoin.org/ litecoin], Namecoin, PPCoin, [https://www.ethereum.org/ Ethereum], [https://ripple.com/ Ripple], Monero, Dash, Augur,NEM,etc. A comparative table of major virtual currencies alongwith with their market cap may be seen [https://coinmarketcap.com/ here]. </p><br />
<p> Virtual currency exchange /exchanger is a person or entity engaged in the business of exchange of virtual currency for real currency, funds, or other forms of virtual currency and also precious metals, and vice versa, for a fee (commission). Individuals typically use exchangers to deposit and withdraw money from virtual currency accounts.</p><br />
<p> Users can obtain virtual currency in several ways. For example, they can (1) purchase virtual currency, using real money (from a virtual currency exchange or, for certain centralised virtual currencies, directly from the administrator/issuer); (2) engage in specific activities that earn virtual currency payments (e.g., respond to a promotion, complete an online survey, provide a real or virtual good or service); (3) in case of decentralised virtual currencies (e.g., Bitcoin), self-generate units of the currency by &quot;mining&quot; them and receive them as gifts, rewards, or as part of a free initial distribution.</p><br />
<p> Of late, considering the global interest in digital currencies, some central banks have initiated works on introducing Digital Currencies </p><br />
<p> The Committee on Payments and Market Infrastructures and the Markets Committee of Bank of International Settlements (BIS) has in March 2018 completed a [https://www.bis.org/cpmi/publ/d174.pdf work on central bank digital currencies] (CBDCs). CBDC is potentially a new form of digital central bank money that can be distinguished from reserves or settlement balances held by commercial banks at central banks. There are various design choices for a CBDC, including: access (widely vs restricted); degree of anonymity (ranging from complete to none); operational availability (ranging from current opening hours to 24 hours a day and seven days a week); and interest bearing characteristics (yes or no). A general purpose CBDC might turn out to be an alternative to cash in some situations, thereby reducing the printing and associated costs to the central banks. </p><br />
<p>&nbsp;</p><br />
<p> <U><strong>Genesis of cryptocurrency:</strong></U> Satoshi Nakamoto never intended to invent a currency. In his announcement of Bitcoin in late 2008, Satoshi said he developed &ldquo;a peer-to-peer electronic cash system&rdquo;. It was a decentralized digital cash system like a[https://en.wikipedia.org/wiki/Peer-to-peer_file_sharing &nbsp;peer-to-peer network]&nbsp;for file sharing. Any digital cash payment network hinges upon a record of accounts, balances and transactions and aims to intercept double spending i.e. to prevent one entity from spending the same amount twice. In case of conventional payment networks, this is done by a central server which keeps record about the balances. However, cryptocurrencies&rsquo; self-reliance comes from their system of limited entries in a database that no one can change without fulfilling specific conditions.</p><br />
<p> Anyone can download the free, open-source software from a website to send, receive, and store bitcoins and monitor Bitcoin transactions. Users can also obtain Bitcoin addresses, which function like accounts, at a Bitcoin exchanger or online wallet service. Transactions (fund flows) are publicly available in a shared transaction register and identified by the Bitcoin address, a string of letters and numbers that is not systematically linked to an individual. Therefore, Bitcoin is said to be &ldquo;pseudoanonymous&rdquo;. The underlying technology used by bitcoin for securing the transactions is known as &ldquo;block chain&rdquo;. This technology has many other applications even though bitcoin may not be acceptable. Distributed ledger system or the block chain technology allows organization of any chain of records or transactions without the need of intermediaries.</p><br />
<p>&nbsp;</p><br />
<p> <U><strong>The mechanism</strong></U><strong>:</strong> A cryptocurrency consists of a network of peers where each of the peer has a record of the complete history of all transactions and thus of the balance of every account. A transaction is a file that says, &ldquo;A gives x Bitcoin to B&rdquo; and is signed by A&rsquo;s private key. After being signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is based on the system of public-key cryptography, or asymmetric cryptography which is an encryption scheme that uses two mathematically related keys - a public key and a private key. The public key is used to encrypt and the private key is used to decrypt. Each public key is published and the corresponding private key is kept secret. In general, to send encrypted data to someone, it is encrypted with the recipient&rsquo;s public key, and then the recipient decrypts the data with the corresponding private key. Public key cryptography enables the following:</p><br />
<ul><br />
<li>Encryption and decryption, which allow two communicating parties to disguise data that they send to each other. The sender encrypts, or scrambles, the data before sending it. The receiver decrypts, or unscrambles, the data after receiving it. While in transit, the encrypted data is not understood by an intruder.</li><br />
<li> Nonrepudiation, which prevents:<br />
<ul><br />
<li>The sender of the data from claiming, at a later date, that the data was never sent</li><br />
<li>The data from being altered.</li><br />
</ul><br />
</li><br />
</ul><br />
<br />
<br />
<br />
<p> When a transaction is confirmed it can&rsquo;t be reversed and it becomes a part of an unalterable record of historical transactions i.e.&nbsp;[http://blockgeeks.com/guides/what-is-blockchain-technology-a-step-by-step-guide-than-anyone-can-understand/ blockchain].</p><br />
<p>&nbsp;</p><br />
<p> <U><strong>Role of a miner:</strong></U> A miner is an individual or entity that participates in a decentralised virtual currency network by running special software to solve complex algorithms in a distributed proof-of-work or other distributed proof system used to validate transactions in the virtual currency system. Miners may be users, if they self-generate a convertible virtual currency solely for their own purposes, e.g., to hold for investment or to use to pay an existing obligation or to purchase goods and services. Miners may also participate in a virtual currency system as exchangers, creating the virtual currency as a business in order to sell it for fiat currency or other virtual currency.</p><br />
<p> The job of a miner in a cryptocurrency transaction is to confirm the transactions by stamping them and spreading them across the network of nodes. The nodes then have to add it to their database to make it a part of the blockchain. The exercise entails rewards for the miners in terms of the cryptocurrency itself. Since the role of a miner is crucial to ensure a fair network and prevent forged transactions, the miners have to find a hash, a product of a cryptographic function, that connects the new block with its predecessor. This is called the&nbsp;&lsquo;[https://blockgeeks.com/guides/proof-of-work-vs-proof-of-stake/ Proof-of-Work]&rsquo;. A hash is a string of random-looking characters that uniquely identifies the data in question. Transactions are bundled together into what we call a block and it is the miners who have to verify that transactions within each block are legitimate. Legitimacy of the transactions is ascertained by miners by solving a mathematical puzzle known as proof-of-work problem and only subsequently the transaction is stored in the blockchain. The first miner to solve the puzzle is rewarded for verifying the transaction and in the form of a reward, the miner has the right to add a coinbase transaction that give him/her a specific number of bitcoins. This is how new bitcoins are created. Solving a cryptographic puzzle with high difficulty entails high computer power that the miner&rsquo;s invest. Thus, only a limited amount of cryptocurrency can be created in a given amount of time. Further, all cryptocurrencies control the supply of the token by a schedule written in the code.</p><br />
<p>&nbsp;</p><br />
<p> <U><strong>Bouquets and brickbats:</strong></U> FATF identifies the following advantages for virtual currencies. </p><br />
<UL><br />
<li><br />
<p> Virtual currency has the potential to improve payment efficiency and reduce transaction costs for payments and fund transfers. Being a global currency it can avoid exchange fees, and is currently processed with lower fees/charges than traditional credit and debit cards.</p><br />
<li><br />
<p> Virtual currency may also facilitate micro-payments, allowing businesses to monetise very low-cost goods or services sold on the Internet, such as onetime game or music downloads. </p><br />
<li><br />
<p> Virtual currency may also facilitate international remittances and support financial inclusion in other ways, as new virtual currency-based products and services are developed that may potentially serve the under- and un-banked. </p><br />
<li><br />
<p> Virtual currency may also be held for investment. </p><br />
</UL><br />
<p> It needs to be seen whether the claimed cost advantages will remain, if virtual currency becomes subject to regulatory requirements similar to those that apply to other payments methods, and/or if exchange fees for cashing out into fiat currency are factored in, and whether volatility, consumer protection and other factors limit their potential for financial inclusion.</p><br />
<p> Cryptocurrencies are being touted as digital gold that seem promising enough to increase their value overtime. Further, they are a fast and comfortable means of payment with a worldwide scope. Cryptocurrencies have given birth to an expanding and dynamic market for investors and speculators. Springing up of crowd funding projects and cryptocurrency exchanges have lent depth to the cryptocurrency market. Recently futures contracts were introduced by [http://www.cmegroup.com/trading/bitcoin-futures.html Chicago Mercantile Exchange] over bitcoin. </p><br />
<p> However, the world of cryptocurrencies is marred by clouds of doubt. While cryptocurrencies are being used for payment, their use as a means of store of value and speculation, with volatility imbued, dwarfs their potential of being used as a medium of exchange. The innate anonymity associated with cryptocurrencies make them highly susceptible to be used as a means of payment in black markets, darknet markets and illegitimate activities. FATF has identified many potential money laundering and terrorist financing risks associated with virtual currency&rsquo;s global reach. There is no central oversight body, and no anti-money laundering software currently available to monitor and identify suspicious transaction patterns. Law enforcement cannot target one central location or entity (administrator) for investigative or asset seizure purposes (although authorities can target individual exchangers for client information that the exchanger may collect). Customer and transaction records may be held by different entities, often in different jurisdictions, making it more difficult for law enforcement and regulators to access them. </p><br />
<p> FATF has issued a risk based approach in its [http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-RBA-Virtual-Currencies.pdf guidance on virtual currency payment products and services.] </p><br />
<p> The markets for cryptocurrencies is fast expanding and is continuously taking increasing number of people in its fold. But, whether cryptocurrency is here to stay or not, only time will tell.</p><br />
<p>&nbsp;</p><br />
<p><U><strong>India&rsquo;s Stance:</strong></U> </p><br />
<p>Central banks across the world are exploring the option of introducing fiat digital currencies due to the rapid strides being made by online payments technology and rising cost of maintaining fiat paper/metallic currency. Also, technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the &#64257;nancial system. In view of the same, [https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=43574 Reserve Bank of India has set up an interdepartmental group] to recommend the feasibility of introducing a digital currency. The Report is due to be submitted by June 2018. </p><br />
<p>Notwithstanding, RBI has always been wary of the concerns related to consumer protection, market integrity and money laundering, among others. Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. </p><br />
<p>In the [https://www.indiabudget.gov.in/ub2018-19/bs/bs.pdf Union Budget 2018-19], in para 112, Hon&rsquo;ble Finance Minister stated that the Government does not consider crypto-currencies as legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system. However, the Government promised to explore the use of block chain technology proactively for ushering in digital economy.</p><br />
<p>Subsequently on 6 April 2018, [https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11243&Mode=0 RBI issued a circular] stating that entities regulated by the Reserve Bank shall not deal in virtual currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs. Regulated entities which already provide such services were asked to exit the relationship within three months from the date of the circular.</p><br />
<br />
<p>The RBI noti&#64257;cation means that crypto exchanges /exchangers operating within the country would be left without banking support and payment gateways which are regulated by RBI. Crypto-exchanges will therefore need to work independently of the banking support which means that mode of transaction will have to be tweaked from fiat-crypto to crypto-crypto i.e. exchanging cryptos for each other without any role for fiat currency. This has been done by RBI to steer clear the banking system of the risks associated with cryptocurrencies. . </p><br />
<p>Regulatory approaches of some major countries are outlined in the [http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-RBA-Virtual-Currencies.pdf FATF Guidance Note]. </p><br />
<br />
<br />
<br />
<br />
==References==<br />
<ul><br />
<li>[http://www.fatf-gafi.org/media/fatf/documents/reports/Virtual-currency-key-definitions-and-potential-aml-cft-risks.pdf Virtual Currencies &ndash; Key definitions], FATF, June 2014</li><br />
<li>[https://bitcoin.org/bitcoin.pdf Bitcoin: A Peer-to-Peer Electronic Cash System], Satoshi Nakamoto</li><br />
<li>[https://www.bis.org/cpmi/publ/d174.pdf Central bank digital currencies], Committee on Payments and Market Infrastructures Markets Committee, BIS, March 2018</li><br />
<li>[https://www.bis.org/cpmi/publ/d137.pdf Digital Currency], BIS, November 2015</li><br />
</ul><br />
<br />
<br />
<br />
==Contributed by==<br />
*Dilasha Vasudev a (IES 2015)<br />
<br />
[[Category:concepts|CryptoCurrency/VirtualCurrency/DigitalCurrency]]</div>Rosemary.ahttp://arthapedia.in/index.php/Payment_SystemPayment System2018-05-14T17:33:47Z<p>Rosemary.a: </p>
<hr />
<div><p><br />
A &ldquo;payment system&rdquo; means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them.</p><br />
<p>[http://www.investopedia.com/terms/c/clearing.asp <strong>Clearing</strong>]<strong> </strong>refers to the process wherein the payment service provider acts as the counterparty between the buyer and seller by calculating the obligations between them and guaranteeing its settlement. <strong>Settlement </strong>relates to the final act of changing the records of ownership of the asset transacted, either after [http://www.investopedia.com/terms/n/netting.asp netting] all the cross obligations or for each one transaction individually on gross terms.</p><br />
<p> A &ldquo;payment system&rdquo; as understood in India, can include the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or such similar operations. All entities operating such systems (money transfer systems or card payment systems or similar systems) are known as payment system providers. To decide whether a particular entity operates the payment system, it must perform either the clearing or settlement or payment function or all of them.</p><br />
<p> The [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86706.pdf Payment and Settlement Systems Act, 2007] (PSS Act, 2007)&nbsp;which came into force with effect from 12 August 2008, provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India (Reserve Bank) as the authority for that purpose and all related matters. The Act excludes stock/commodity exchanges and their clearing corporations from the purview of the Act, even though they constitute payment systems. Stock /commodity exchanges and Clearing Corporations are regulated by the securities market regulator – SEBI -in India. </p><br />
<p> Reserve Bank of India has issued Certificates of Authorisation under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India. The names of entities which have received such certificates and the names of their payment facilities are given on the [https://rbi.org.in/scripts/publicationsview.aspx?id=12043 website of RBI]. </p><br />
<br />
<br />
'''Data'''<br />
<br />
Data on payment system indicators (extent of digital wallet payments etc.) are given in the RBI Bulletin. <br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Unified_Payments_Interface_(UPI) Unified Payments Interface]<br />
* [http://arthapedia.in/index.php?title=Pre-paid_Payment_Instruments_(PPIs) Prepaid Payment Instruments (PPIs)]<br />
* [http://arthapedia.in/index.php?title=Payment_System Payment System]<br />
* [http://www.arthapedia.in/index.php?title=Digital_/_Electronic_Wallet_(e-wallet) Digital Electronic Wallet]<br />
<br />
==References==<br />
[https://www.rbi.org.in/scripts/FAQView.aspx?Id=73 FAQ of RBI] on Payment and Settlement Systems Act, 2007<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|PaymentSystem]]</div>Rosemary.ahttp://arthapedia.in/index.php/Payment_SystemPayment System2018-05-14T17:33:28Z<p>Rosemary.a: </p>
<hr />
<div><p><br />
A &ldquo;payment system&rdquo; means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them.</p><br />
<p>[http://www.investopedia.com/terms/c/clearing.asp <strong>Clearing</strong>]<strong> </strong>refers to the process wherein the payment service provider acts as the counterparty between the buyer and seller by calculating the obligations between them and guaranteeing its settlement. <strong>Settlement </strong>relates to the final act of changing the records of ownership of the asset transacted, either after [http://www.investopedia.com/terms/n/netting.asp netting] all the cross obligations or for each one transaction individually on gross terms.</p><br />
<p> A &ldquo;payment system&rdquo; as understood in India, can include the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or such similar operations. All entities operating such systems (money transfer systems or card payment systems or similar systems) are known as payment system providers. To decide whether a particular entity operates the payment system, it must perform either the clearing or settlement or payment function or all of them.</p><br />
<p> The [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86706.pdf Payment and Settlement Systems Act, 2007] (PSS Act, 2007)&nbsp;which came into force with effect from 12 August 2008, provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India (Reserve Bank) as the authority for that purpose and all related matters. The Act excludes stock/commodity exchanges and their clearing corporations from the purview of the Act, even though they constitute payment systems. Stock /commodity exchanges and Clearing Corporations are regulated by the securities market regulator – SEBI -in India. </p><br />
<p> Reserve Bank of India has issued Certificates of Authorisation under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India. The names of entities which have received such certificates and the names of their payment facilities are given on the [https://rbi.org.in/scripts/publicationsview.aspx?id=12043 website of RBI]. </p><br />
<br />
<br />
'''Data'''<br />
Data on payment system indicators (extent of digital wallet payments etc.) are given in the RBI Bulletin. <br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Unified_Payments_Interface_(UPI) Unified Payments Interface]<br />
* [http://arthapedia.in/index.php?title=Pre-paid_Payment_Instruments_(PPIs) Prepaid Payment Instruments (PPIs)]<br />
* [http://arthapedia.in/index.php?title=Payment_System Payment System]<br />
* [http://www.arthapedia.in/index.php?title=Digital_/_Electronic_Wallet_(e-wallet) Digital Electronic Wallet]<br />
<br />
==References==<br />
[https://www.rbi.org.in/scripts/FAQView.aspx?Id=73 FAQ of RBI] on Payment and Settlement Systems Act, 2007<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|PaymentSystem]]</div>Rosemary.ahttp://arthapedia.in/index.php/Priority_Sector_Lending_Certificates_(PSLC)Priority Sector Lending Certificates (PSLC)2018-05-14T17:27:27Z<p>Rosemary.a: </p>
<hr />
<div><p><br />
Priority Sector Lending Certificates (PSLCs) are tradable certificates issued against [http://www.arthapedia.in/index.php?title=Priority_Sector_Lending_(PSL) priority sector loans] of banks so as to enable banks to achieve their specified target and sub-targets for priority sector lending through purchase of these instruments in the event of a shortfall and at the same time incentivizing the surplus banks to lend more to these sectors. </p><br />
<p> It is mandated in India that Priority sector lending (PSL) should constitute 40 percent of Adjusted Net Bank Credit<sup class="reference">[[#ref1|[1]]]</sup> [ANBC] or Credit Equivalent Amount of Off-Balance Sheet Exposure<sup class="reference">[[#ref2|[2]]]</sup>, whichever is higher. Sub-targets are specified for certain sectors like 18% to agriculture with 8% to small and marginal farmers, 7.5% to micro units etc. PSLCs are intended to enhance lending to these activities under priority sector. For more details on priority sector lending please see [http://www.arthapedia.in/index.php?title=Priority_Sector_Lending_(PSL) here]. </p><br />
<p> Government of India vide [http://egazette.nic.in/(S(rsqcv0bopi31wnuy111jlxtc))/Default.aspx?AcceptsCookies=yes Notification dated February 04, 2016] has specified &ldquo;Dealing in Priority Sector Lending Certificates (PSLCs) in accordance with the Guidelines issued by Reserve Bank of India&rdquo; as a form of business under Section 6 (1)(o) of the Banking Regulation Act, 1949 for banks to engage in.</p><br />
<br />
<p>&nbsp;</p><br />
<p><strong>Background &amp; Rationale </strong><br /><br />
The idea of issuing priority sector lending certificates first appeared in the Report of the Dr. Raghu Ram Rajan led Committee on Financial Sector Reforms – [http://www.planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf <em>A Hundred Small Steps</em>]. The Committee proposed the PSLC scheme to allow a more efficient implementation of the priority sector lending mandate (with similar schemes extending to possible financial service mandates also). Any registered lender (including microfinance institutions, cooperative banks, banking correspondents, etc.) who has made loans to eligible categories would get &lsquo;Priority Sector Lending Certificates&rsquo; (PSLC) for the amount of these loans. A market would then be opened up for these certificates, where deficient banks can buy certificates to compensate for their shortfall in lending. Importantly, the loans would still be on the books of the original lender, and the deficient bank would only be buying a right to undershoot its priority sector-lending requirement by the amount of the certificate. If the loans default, for example, no loss would be borne by the certificate buyer. The merit of this scheme is that it would allow the most efficient lender to provide access to the poor, while finding a way for banks to fulfil their norms at lower cost. Essentially the PSLC will be a market-driven interest subsidy to those who make priority sector loans. It is an innovative instrument designed in a market friendly way for achieving a socialistic / welfare goal. </p><br />
<p> The Reserve Bank of India, under the governorship of Dr. Raghu Ram Rajan, later comprehensively [https://rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&amp;Mode=0 revised the priority sector guidelines] in April 2015 which provided for the introduction of PSLCs as a mechanism to incentivize banks having surplus in their lending to different categories of priority sector. On lines of [http://unfccc.int/kyoto_protocol/mechanisms/emissions_trading/items/2731.php carbon credit trading]<sup class="reference">[[#ref3|[3]]]</sup>, the goal of PSLCs is to allow market mechanism to drive priority sector lending by leveraging the comparative strength of different banks. For instance, a bank with an expertise in lending to small farmers can over perform there and get benefit by selling its over performance through PSLCs. Another bank that is better at lending to small industry can buy these certificates while selling PSLCs for micro enterprise loans.</p><br />
<p>&nbsp;</p><br />
<p><strong>Types of PSLCs: </strong><br /><br />
There would be four kinds of PSLCs :–</p><br />
<ul><br />
<li>PSLC Agriculture: Counting for achievement towards the total agriculture lending target.</li><br />
<li>PSLC SF/MF: Counting for achievement towards the sub-target for lending to Small and Marginal Farmers<sup class="reference">[[#ref4|[4]]]</sup>.</li><br />
<li>PSLC Micro Enterprises: Counting for achievement towards the sub target for lending to [http://www.arthapedia.in/index.php?title=Micro_Enterprise Micro Enterprises].</li><br />
<li>PSLC General: Counting for achievement towards the overall priority sector target. </li><br />
</ul><br />
<p>&nbsp;</p><br />
<table border="0" cellspacing="0" cellpadding="0" width="100%" class="table_formatting"><br />
<tr><br />
<td><strong>S.No.</strong></td><br />
<td><strong>Type of PSLCs</strong></td><br />
<td><strong>Representing</strong></td><br />
<td><strong>Counting for</strong></td><br />
</tr><br />
<tr><br />
<td valign="top">1.</td><br />
<td valign="top">PSLC - Agriculture</td><br />
<td valign="top">All eligible Agriculture loans except loans to Small and marginal farmers (SF/MF) for which separate certificates are available</td><br />
<td valign="top">Achievement of agriculture target and overall PSL target</td><br />
</tr><br />
<tr><br />
<td valign="top">2.</td><br />
<td valign="top">PSLC - SF/MF</td><br />
<td valign="top">All eligible loans to small/marginal farmers</td><br />
<td valign="top">Achievement of SF/MF sub-target, agriculture target and overall PSL target</td><br />
</tr><br />
<tr><br />
<td valign="top">3.</td><br />
<td valign="top">PSLC - Micro Enterprises</td><br />
<td valign="top">All eligible Loans to Micro Enterprises</td><br />
<td valign="top">Achievement of micro-enterprise sub-target and overall PSL target</td><br />
</tr><br />
<tr><br />
<td valign="top">4.</td><br />
<td valign="top">PSLC - General</td><br />
<td valign="top">The residual priority sector loans i.e. other than loans to agriculture and micro enterprises for which separate certificates are available</td><br />
<td valign="top">Achievement of overall PSL target</td><br />
</tr><br />
</table><br />
<br />
<p><br><br />
All PSLCs will expire by March 31st and will not be valid beyond the reporting date (March 31st), irrespective of the date it was first sold.</p><br />
<p>&nbsp;</p><br />
<p><strong>Trading in PSLC </strong><br /><br />
On [https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10339&amp;Mode=0 7 April 2016,] RBI issued instructions on trading in Priority Sector Lending Certificates. Reserve Bank also launched a platform to enable trading in the certificates through its Core Banking Solution (CBS) portal ([http://www.arthapedia.in/index.php?title=E-Kuber e-Kuber]). All Scheduled Commercial Banks (including [http://www.arthapedia.in/index.php?title=Regional_Rural_Banks Regional Rural Banks]), Urban Co-operative Banks, [http://www.arthapedia.in/index.php?title=Small_Finance_Bank Small Finance Banks] (when they become operational) and [http://www.arthapedia.in/index.php?title=Local_Area_Banks Local Area Banks] are eligible to participate in the trading.</p><br />
<p> Four kinds of PSLCs, namely, PSLC - Agriculture, PSLC – Small &amp; Marginal Farmers, PSLC – Micro Enterprises and PSLC - General can be bought and sold via the platform. Thus, a bank having shortfall in achievement of any sub-target (e.g. SF/MF, Micro), will have to buy the specific PSLC to achieve the target. However, if a bank is having shortfall in achievement of the overall target only, it may buy any of the available PSLCs. The buyer would pay a fee to the seller which will be market determined.</p><br />
<p> The certificates will have a standard lot size of ₹25 lakh and multiples thereof. There will be no transfer of credit risk on the underlying as there is no transfer of tangible assets or cash flow. The settlement of funds will be done through the e-Kuber portal. </p><br />
<br />
As per RBI's annual report, the PSLC platform recorded active participation from all the eligible entities including urban co-operative banks and small finance banks during 2016-17. In the first year itself, about ₹1,265 billion worth of offers were put on the PSLC platform, out of which roughly ₹498 billion worth of offers were settled. Among the four PSLC categories, the highest trading was observed in case of PSLC – Small & Marginal Farmer, and PSLC – General Categories, with the transaction volumes being ₹229.9 billion and ₹200.2 billion, respectively. An expected cyclical trend, however, was observed in the trading volume, which peaked mostly in the last month of every quarter. More than 15 per cent of trade happening under PSLCs is by Small Finance Banks (SFBs). <br />
<br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. Steps in the computation of Adjusted Net Bank Credit (ANBC) <br><table border="0" cellspacing="0" cellpadding="0" width="100%" class="table_formatting"><br />
<tr><br />
<td valign="top" width="60%"><br />
Bank Credit in India </td><br />
<td valign="top">I</td><br />
</tr><br />
<tr><br />
<td valign="top">Bills Rediscounted with RBI and other approved Financial Institutions </td><br />
<td valign="top">II</td><br />
</tr><br />
<tr><br />
<td valign="top">Net Bank Credit (NBC)* </td><br />
<td valign="top">III (I-II)</td><br />
</tr><br />
<tr><br />
<td valign="top">Bonds/debentures in Non-SLR (Statutory Liquidity Ratio) categories under Held to Maturity (HTM) category+ other investments eligible to be treated as priority sector lending +Outstanding Deposits under Rural Infrastructure Development Fund (RIDF) and other eligible funds with [https://www.nabard.org/english/home.aspx NABARD,] NHB, SIDBI and [http://www.arthapedia.in/index.php?title=Micro_Units_Development_Refinance_Agency_(MUDRA)_Bank MUDRA Ltd]. on account of priority sector shortfall + outstanding Priority Sector Lending Certificates (PSLCs) </td><br />
<td valign="top">IV</td><br />
</tr><br />
<tr><br />
<td valign="top">Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing. </td><br />
<td valign="top">V</td><br />
</tr><br />
<tr><br />
<td valign="top">Eligible advances extended in India against the incremental Foreign Currency Non Resident (FCNR) (B)/ Non-Resident External (NRE) deposits, qualifying for exemption from Cash Reserve Ratio (CRR)/Statutory Liquidity Ratio (SLR) requirements.</td><br />
<td valign="top">VI</td><br />
</tr><br />
<tr><br />
<td valign="top">ANBC</td><br />
<td valign="top">III+IV-V-VI</td><br />
</tr><br />
<tr><br />
<td colspan="2" valign="top">* For the purpose of priority sector computation only. </td><br />
</tr><br />
</table></span><br />
<br />
<br />
<span class="small_footernote" id="ref2">2. It refers to a method prescribed by the central bank to quantify the credit risk of off-balance sheet instruments such as interest rate or foreign exchange derivatives by translating the value of such instruments into risk equivalent credits. The credit equivalent risk of an instrument consists essentially of two elements: current exposure - mark-to-market value of the instrument and potential exposure - a statistically determined potential loss arising from likely movements in the value of the instrument during its remaining life. (Source [https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1319 RBI] &amp; [http://sovereign-consultancy.nl/en/glossary/credit-equivalent-amount Sovereign])</span><br />
<br />
<span class="small_footernote" id="ref3">3. Carbon trading is the trading of spare emission units available with any entity (savings from the assigned or permissible emission levels</span><br />
<br />
<span class="small_footernote" id="ref4">4. Those with landholdings below 2 hectares</span> <br />
<br />
<br />
<br />
==References==<br />
<ul><br />
<li>[https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10339&amp;Mode=0 Trading instructions for PSLC issued by RBI]</li><br />
<li>Report of the Dr. Raghu Ram Rajan led Committee on Financial Sector Reforms – [http://www.planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf <em>A Hundred Small Steps</em>]</li><br />
</ul><br />
<br />
<br />
<br />
==Also See==<br />
[http://www.arthapedia.in/index.php?title=Priority_Sector_Lending_(PSL) Priority Sector Lending (PSL)]<br />
<br />
<br />
<br />
==Contributed by== <br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
<br />
[[Category:concepts|PrioritySectorLendingCertificates(PSLC)]]</div>Rosemary.ahttp://arthapedia.in/index.php/Index_of_Eight_Core_IndustriesIndex of Eight Core Industries2018-05-10T11:57:27Z<p>Rosemary.a: </p>
<hr />
<div><p> The monthly Index of Eight Core Industries (ICI) is a production volume index <sup class="reference">[[#ref1|[1]]]</sup>. The objective of the ICI is to provide an advance indication on production performance of industries of &lsquo;core&rsquo; nature before the release of [http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production] (IIP) by Central Statistics Office. These industries are likely to impact on general economic activities as well as industrial activities. </p><br />
<p> ICI measures collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity. Components covered in these eight industries for the purpose of compilation of index are as follows:</p><br />
<UL><br />
<LI><strong>Coal –</strong> Coal Production excluding Coking coal.</LI><br />
<LI><strong>Crude Oil –</strong> Total Crude Oil Production.</LI><br />
<LI><strong>Natural Gas –</strong> Total Natural Gas Production.</LI><br />
<LI><strong>Refinery Products –</strong> Total Refinery Production (<strong>in terms of Crude Throughput</strong>).</LI><br />
<LI><strong>Fertilizer –</strong> Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).</LI><br />
<LI><strong>Steel –</strong> Production of Alloy and Non-Alloy Steel only.</LI><br />
<LI><strong>Cement –</strong> Production of Large Plants and Mini Plants.</LI><br />
<LI><strong>Electricity –</strong> Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.</LI><br />
</UL><br />
<br />
<p> The Index is compiled and released by [http://eaindustry.nic.in/ Office of the Economic Adviser] (OEA), Department of Industrial Policy &amp; Promotion (DIPP), Ministry of Commerce &amp; Industry, Government of India. </p><br />
<p>&nbsp;</p><br />
<br />
<p> <strong>History &amp; origin</strong></p><br />
<p> Among the industries that go into the IIP basket, in order to provide an indication of how the industries whose production performance was &lsquo;core&rsquo; in nature (because of their likely impact on general economic activity as well as other industrial activity) are performing, the exercise of bringing out an Index of Core Industries was initiated in the Office of the Economic Adviser, with six industries, viz. Coal, Cement, Electricity, Crude Oil, Refinery products, and Steel.&nbsp;</p><br />
<p> The Index of <strong>Six</strong> Core industries had a combined weight of 26.7 per cent in the earlier series of the IIP with base year 1993-94. When the base year for IIP was revised to 2004-05, the base year for the Index of Core Industries was also revised to 2004-05, along with a revised weighting diagram. In the new series, two new additions, i. e. of Natural Gas and Fertilizers were made to make it an Index of <strong>Eight</strong> Core Industries accounting for 37.9 percent weight in the Index of Industrial Production (IIP). This Index is available since 2007-08 and is available in the&nbsp;Official Website of the OEA.</p><br />
<br />
<p>&nbsp;</p><br />
<p><strong>Coverage and Scope of ICI</strong></p><br />
<p> The Eight Core Index broadly has a combined weight of 37.90 % in the Index of Industrial Production (IIP) and is published about 12 days prior to IIP. The weights of respective industries in IIP are - Coal 4.38 %, Crude Oil production 5.22 %, Natural Gas 1.71 %, Petroleum Refinery 5.94 %, Fertilizers 1.25 %, Steel 6.68 %, Cement production 2.41 % and Electricity generation 10.32 %.</p><br />
<br />
After the base revision to 2011, the Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP). The industry-wise weights indicated in the ICI are individual industry weight derived from IIP and blown up on pro rata basis to a combined weight of ICI equal to 100 - (Coal 10.33 %, Crude Oil production 8.98 %, Natural Gas 6.88%, Petroleum Refinery 28.04 %, Fertilizers 2.63 %, Steel 17.92 %, Cement production 5.37 % and Electricity generation 19.85%.) <br />
<br />
<p> The ICI is widely used by policy makers, including, Ministry of Finance, other Ministries and Departments, Banks financing Infrastructure projects, Reserve Bank of India (RBI) and Railway Board. </p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Frequency and Method of Calculation/Revision of ICI</strong></p><br />
<p> The Index of Eight Core Industries is a provisional index which is released every month. The index is calculated by using the Laspeyre&rsquo;s formula of weighted arithmetic mean of quantity relatives.</p><br />
<p> While compiling the ICI of a particular month, the data of the corresponding month of the previous year is also revised. The revised figures are taken as provided by the respective source agencies<sup class="reference">[[#ref2|[2]]]</sup>. Some source agencies incidentally publish this data on their official websites even before the release of ICI for that month. The monthly press release on ICI clarifies this method of revision through a footnote. Revision allows capturing of the entire production data as it flows in through the year, which would otherwise be lost. Further, a transparent process is followed whereby the data of actual production for each industry is also placed in public domain along with the ICI.</p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Dissemination of the ICI</strong></p><br />
<p> The index is released on last working day of every month at 5.00 P.M. If last day happens to be a holiday, it is released on first working day of next month. The index is released through Press Information Bureau (PIB) as well as on website of the Office of the Economic Adviser ([http://www.eaindustry.nic.in www.eaindustry.nic.in]). The press release to PIB includes both index and growth rates for each industry and at aggregate level for monthly, cumulative (current year and previous year) and annual (last five year).</p><br />
<p> The monthly, cumulative and annual data including actual production, index and growth rate for all eight industries since 2004-05 onward in Microsoft Excel is also uploaded every month on the website of Office of the Economic Adviser, which is unique to this index. The detailed excel sheet on monthly data is also uploaded on Government of India&rsquo;s data portal at <U>data.gov.in</U>.</p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Revision of the Index</strong></p><br />
<p> The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, has revised the base year of the all-India Index of Industrial Production (IIP) from 2004-05 to 2011-12. Accordingly, Index of core Industries has also been revised to align with the revised IIP. </p><br />
<br />
<br />
<span class="small_footernote" id="ref1"> 1. The Systems of National Accounts 1993 defines a volume index as that “measures the average of the proportionate changes in the quantities of a specified set of goods and services between two periods of time."</span><br />
<span class="small_footernote" id="ref2"> 2. Source Agencies<br><br />
The list of source agencies responsible for furnishing the production data to the Office is as below:<br />
<UL> <br />
<LI><strong>Coal-</strong> Office of the Coal Controller, Kolkata.</LI><br />
<LI><strong>Crude Petroleum- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Refinery Products- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Natural Gas- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Cement- </strong>Cement Section, Department of Industrial Policy &amp; Promotion.</LI><br />
<LI><strong>Steel-</strong> Joint Plant Committee, Kolkata.</LI><br />
<LI><strong>Fertilizers-</strong> Department of Fertilizers, Ministry of Chemicals and Fertilizers.</LI><br />
<LI><strong>Electricity-</strong> Central Electricity Authority.</LI><br />
</UL><br />
</span><br />
<br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production]<br />
*[http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production] (2011-12) series<br />
<br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=82 Dr. Seema Gaur (IES 1983)] &amp; [http://www.ies.gov.in/myaccount-profile-view.php?memid=21 Ms. Aditi Ray, IES (1979)]<br />
*Email: [mailto:seema.gaur@nic.in seema.gaur@nic.in]<br />
*Email-&nbsp;[mailto:aditisray@nic.in aditisray@nic.in]<br />
<br />
[[Category:concepts|IndexofEightCoreIndustries]]</div>Rosemary.ahttp://arthapedia.in/index.php/Index_of_Eight_Core_IndustriesIndex of Eight Core Industries2018-05-10T11:53:53Z<p>Rosemary.a: </p>
<hr />
<div><p> The monthly Index of Eight Core Industries (ICI) is a production volume index <sup class="reference">[[#ref1|[1]]]</sup>. The objective of the ICI is to provide an advance indication on production performance of industries of &lsquo;core&rsquo; nature before the release of [http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production] (IIP) by Central Statistics Office. These industries are likely to impact on general economic activities as well as industrial activities. </p><br />
<p> ICI measures collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity. Components covered in these eight industries for the purpose of compilation of index are as follows:</p><br />
<UL><br />
<LI><strong>Coal –</strong> Coal Production excluding Coking coal.</LI><br />
<LI><strong>Crude Oil –</strong> Total Crude Oil Production.</LI><br />
<LI><strong>Natural Gas –</strong> Total Natural Gas Production.</LI><br />
<LI><strong>Refinery Products –</strong> Total Refinery Production (<strong>in terms of Crude Throughput</strong>).</LI><br />
<LI><strong>Fertilizer –</strong> Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).</LI><br />
<LI><strong>Steel –</strong> Production of Alloy and Non-Alloy Steel only.</LI><br />
<LI><strong>Cement –</strong> Production of Large Plants and Mini Plants.</LI><br />
<LI><strong>Electricity –</strong> Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.</LI><br />
</UL><br />
<br />
<p> The Index is compiled and released by [http://eaindustry.nic.in/ Office of the Economic Adviser] (OEA), Department of Industrial Policy &amp; Promotion (DIPP), Ministry of Commerce &amp; Industry, Government of India. </p><br />
<p>&nbsp;</p><br />
<br />
<p> <strong>History &amp; origin</strong></p><br />
<p> Among the industries that go into the IIP basket, in order to provide an indication of how the industries whose production performance was &lsquo;core&rsquo; in nature (because of their likely impact on general economic activity as well as other industrial activity) are performing, the exercise of bringing out an Index of Core Industries was initiated in the Office of the Economic Adviser, with six industries, viz. Coal, Cement, Electricity, Crude Oil, Refinery products, and Steel.&nbsp;</p><br />
<p> The Index of <strong>Six</strong> Core industries had a combined weight of 26.7 per cent in the earlier series of the IIP with base year 1993-94. When the base year for IIP was revised to 2004-05, the base year for the Index of Core Industries was also revised to 2004-05, along with a revised weighting diagram. In the new series, two new additions, i. e. of Natural Gas and Fertilizers were made to make it an Index of <strong>Eight</strong> Core Industries accounting for 37.9 percent weight in the Index of Industrial Production (IIP). This Index is available since 2007-08 and is available in the&nbsp;Official Website of the OEA.</p><br />
<br />
<p>&nbsp;</p><br />
<p><strong>Coverage and Scope of ICI</strong></p><br />
<p> The Eight Core Index broadly has a combined weight of 37.90 % in the Index of Industrial Production (IIP) and is published about 12 days prior to IIP. The weights of respective industries in IIP are - Coal 4.38 %, Crude Oil production 5.22 %, Natural Gas 1.71 %, Petroleum Refinery 5.94 %, Fertilizers 1.25 %, Steel 6.68 %, Cement production 2.41 % and Electricity generation 10.32 %.</p><br />
<br />
After the base revision to 2011, the Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP). The industry-wise weights indicated in the ICI are individual industry weight derived from IIP and blown up on pro rata basis to a combined weight of ICI equal to 100 - (Coal 10.33 %, Crude Oil production 8.98 %, Natural Gas 6.88%, Petroleum Refinery 28.04 %, Fertilizers 2.63 %, Steel 17.92 %, Cement production 5.37 % and Electricity generation 19.85%.) <br />
<br />
<p> The ICI is widely used by policy makers, including, Ministry of Finance, other Ministries and Departments, Banks financing Infrastructure projects, Reserve Bank of India (RBI) and Railway Board. </p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Frequency and Method of Calculation/Revision of ICI</strong></p><br />
<p> The Index of Eight Core Industries is a provisional index which is released every month. The index is calculated by using the Laspeyre&rsquo;s formula of weighted arithmetic mean of quantity relatives.</p><br />
<p> While compiling the ICI of a particular month, the data of the corresponding month of the previous year is also revised. The revised figures are taken as provided by the respective source agencies<sup class="reference">[[#ref2|[2]]]</sup>. Some source agencies incidentally publish this data on their official websites even before the release of ICI for that month. The monthly press release on ICI clarifies this method of revision through a footnote. Revision allows capturing of the entire production data as it flows in through the year, which would otherwise be lost. Further, a transparent process is followed whereby the data of actual production for each industry is also placed in public domain along with the ICI.</p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Dissemination of the ICI</strong></p><br />
<p> The index is released on last working day of every month at 5.00 P.M. If last day happens to be a holiday, it is released on first working day of next month. The index is released through Press Information Bureau (PIB) as well as on website of the Office of the Economic Adviser ([http://www.eaindustry.nic.in www.eaindustry.nic.in]). The press release to PIB includes both index and growth rates for each industry and at aggregate level for monthly, cumulative (current year and previous year) and annual (last five year).</p><br />
<p> The monthly, cumulative and annual data including actual production, index and growth rate for all eight industries since 2004-05 onward in Microsoft Excel is also uploaded every month on the website of Office of the Economic Adviser, which is unique to this index. The detailed excel sheet on monthly data is also uploaded on Government of India&rsquo;s data portal at <U>data.gov.in</U>.</p><br />
<p>&nbsp;</p><br />
<br />
<p><strong>Revision of the Index</strong></p><br />
<p> The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, has revised the base year of the all-India Index of Industrial Production (IIP) from 2004-05 to 2011-12. Index of core Industries is also under revision to align with the revised IIP. </p><br />
<br />
<br />
<span class="small_footernote" id="ref1"> 1. The Systems of National Accounts 1993 defines a volume index as that “measures the average of the proportionate changes in the quantities of a specified set of goods and services between two periods of time."</span><br />
<span class="small_footernote" id="ref2"> 2. Source Agencies<br><br />
The list of source agencies responsible for furnishing the production data to the Office is as below:<br />
<UL> <br />
<LI><strong>Coal-</strong> Office of the Coal Controller, Kolkata.</LI><br />
<LI><strong>Crude Petroleum- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Refinery Products- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Natural Gas- </strong>Ministry of Petroleum and Natural Gas.</LI><br />
<LI><strong>Cement- </strong>Cement Section, Department of Industrial Policy &amp; Promotion.</LI><br />
<LI><strong>Steel-</strong> Joint Plant Committee, Kolkata.</LI><br />
<LI><strong>Fertilizers-</strong> Department of Fertilizers, Ministry of Chemicals and Fertilizers.</LI><br />
<LI><strong>Electricity-</strong> Central Electricity Authority.</LI><br />
</UL><br />
</span><br />
<br />
<br />
<br />
==Also See==<br />
*[http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production]<br />
*[http://www.arthapedia.in/index.php?title=Index_of_Industrial_Production Index of Industrial Production] (2011-12) series<br />
<br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=82 Dr. Seema Gaur (IES 1983)] &amp; [http://www.ies.gov.in/myaccount-profile-view.php?memid=21 Ms. Aditi Ray, IES (1979)]<br />
*Email: [mailto:seema.gaur@nic.in seema.gaur@nic.in]<br />
*Email-&nbsp;[mailto:aditisray@nic.in aditisray@nic.in]<br />
<br />
[[Category:concepts|IndexofEightCoreIndustries]]</div>Rosemary.ahttp://arthapedia.in/index.php/Unemployment_measurement_in_IndiaUnemployment measurement in India2018-05-10T11:43:01Z<p>Rosemary.a: </p>
<hr />
<div>The [http://mospi.nic.in/Mospi_New/site/inner.aspx?status=3&menu_id=31 National Sample Survey Organization (NSSO)],since its inception in 1950, does the measurement of employment / unemployment in India. <br />
<br />
The National Sample Survey Organization (NSSO) provides three different estimates of employment and unemployment based on different approaches / reference periods used to classify an individual’s activity status. These are the<br />
<br />
:#[http://arthapedia.in/index.php?title=Usual_Status_Unemployment Usual status approach] with a reference period of 365 days preceding the date of survey <br />
:#[http://arthapedia.in/index.php?title=Current_Weekly_Status_%28CWS%29_Unemployment Current weekly status approach] with a reference period of seven days preceding the date of survey<br />
:#[http://arthapedia.in/index.php?title=Current_Daily_Status_%28CDS%29_Unemployment Current daily status approach] with each day of the seven days preceding date of survey as the reference period.<br />
<br />
In order to find out whether an individual is employed or unemployed it needs to be first determined whether h/she belongs to the ‘Labour Force’ or not, which in turn depends on the '''Activity Status''' of the individual during the chosen reference period. <br />
<br />
Activity Status refers to the activity situation in which the individual is found during the reference period with respect to his participation in economic or non-economic activities. <br />
<br />
The NSSO defines following three broad Activity Status i) Working (engaged in an economic activity) i.e. ‘Employed’ ii) Seeking or available for work i.e. ‘Unemployed’ iii) Neither seeking nor available for work. <br />
<br />
All those individuals having a broad activity status as i) or ii) above are classified as being in the Labour Force and those having activity status iii) are classified as outside the Labour Force. Thus labour force constitutes of both employed and unemployed. <br />
<br />
<br />
In other words, '''Labor force''' (also called '''work force''') is the total number of people employed or seeking employment in a country or region.One is classified as ‘not in labour force’, if he or she was engaged in relatively longer period in any one of the non-gainful activities. <br />
<br />
'''Unemployment rate''' is the percent of the labor force that is without work.<br />
<br />
<br />
Unemployment rate = (Unemployed Workers / Total labor force) X 100<br />
<br />
<br />
As far as the situation in India was concerned, the longer the reference period, the smaller will be the rate of unemployment and the shorter the reference period, the larger the unemployment rate. <br />
<br />
The '''Work participation rate''' is also estimated which is defined as the percentage of total [http://arthapedia.in/index.php?title=Worker_(Census_Definition) workers] (main and marginal) to total population.<br />
<br />
<br />
[http://arthapedia.in/index.php?title=Worker_Population_Ratio Work participation rate] = (Total [http://arthapedia.in/index.php?title=Worker_(Census_Definition) Workers] (Main+Marginal) / Total Population) X 100<br />
<br />
<br />
The NSSO collected employment data based on ‘usual status (UPS)’ only upto its eighth round. However from 9th round onwards, it started collecting data based on ‘current weekly status (CWS)’ approach also. Planning Commission set up the Committee of Experts on Employment Estimates (Dantwala Committee) in 1960. The Committee recommended concepts and definitions for conducting such surveys. It recommended collection of data based on CDS in addition to UPS and CWS. Accordingly, beginning with the 27th round (1972-73),quinquennial(5-yearly) surveys were being conducted by NSSO to collect employment-unemployment data based on all the three approaches of UPS,CWS and CDS.<br />
<br />
In the annual survey rounds of NSSO, only employment-unemployment data based on ‘usual activity status’ and ‘current weekly status’ were collected up to 59th round. However in 60th round, a separate schedule was canvassed to collect employment and unemployment data on ‘current daily status’ also. In fact, since 60th round, NSSO is collecting data on employment and unemployment on current daily status also in its annual rounds.<br />
<br />
<br />
For NSSO reports please see the website of Ministry of Statistics and Programme Implementation<br />
<br />
[http://mospi.nic.in/Mospi_New/site/inner.aspx?status=3&menu_id=31 http://mospi.nic.in/Mospi_New/site/inner.aspx?status=3&menu_id=31]<br />
<br />
<br />
NSSO surveys are conducted on quinquennial basis. In order to measure employment-unemployment on an annual basis, Employment-Unemployment Survey is being conducted by Labour Bureau since 2009. This survey also captures the labour estimates in terms of usual principal status, usual principal and subsidiary status, current weekly status and current daily status. The findings of the survey may be viewed at [http://labourbureau.nic.in/rep_1.pdf http://labourbureau.nic.in/rep_1.pdf]<br />
<br />
<br />
Besides this, a quick quarterly enterprise level surveys([http://arthapedia.in/index.php?title=Quick_Employment_Survey Quick Employment Survey])are also conducted by Labour Bureau to capture the changes in the employment –unemployment scenario at much shorter interval. However the intent of this survey was to mainly assess the impact of global financial crisis on the Indian economy.<br />
<br />
The reports of these quarterly surveys may be accessed at [http://labourbureau.nic.in/reports.htm http://labourbureau.nic.in/reports.htm]<br />
<br />
<br />
''' Pay roll Data'''<br />
<br />
In 2018, India, for the first time, introduced monthly payroll reporting for the formal sector to facilitate analysis of new and continuing employment. <br />
The payroll data, categorized age-wise, for the months September, 2017 to February, 2018 has been released on 25th April, 2018.This is based on the data from Employees’ Provident Fund Organisation (EPFO), Employees’ State Insurance Corporation (ESIC) and the Pension fund Regulatory and Development Authority (PFRDA). The payroll data from these three organisations would now be released every month.<br />
<br />
==References==<br />
#Planning Commission (2001), Report of the task force on employment opportunities http://planningcommission.nic.in/aboutus/taskforce/tk_empopp.pdf<br />
#NSSO (2005), Employment unemployment situation in India (Part 1), 61st round (2004-2005).<br />
#Mohanan P.C., Background paper for the workshop on conceptual issues in measurement of employment and unemployment, NSC Secretariat. http://mospi.nic.in/Mospi_New/upload/nsc_background_paper_12jan09.pdf<br />
#J. Krishnamurthy, G.Raveendran (2008), Measures of labour force participation and utilization, working paper No. 1, National Commission for Enterprises in the Unorganized Sector. http://nceus.gov.in/working_paper_1.pdf<br />
#NSSO (2008), Review of concepts and measurement techniques in employment and unemployment surveys of NSSO, NSSO (SDRD) Occasional paper/1/2008. http://www.mospi.gov.in/nsc_paper_SDRD_12jan09.pdf<br />
#http://www.labourbureau.nic.in<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=361 Ms. Monica Thind, IES(2009)] and [http://ies.gov.in/myaccount-profile-view.php?memid=358 Mr. Manu J. Vettickan IES (2008)]<br />
*Email- [mailto:monica.dse@gmail.com monica.dse@gmail.com] and [mailto:manuvettickan@gmail.com manuvettickan@gmail.com]<br />
<br />
[[Category:concepts|UnemploymentmeasurementinIndia]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-05-07T11:35:32Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive fugitive] economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.<br />
<br />
A Fugitive Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act (PMLA), 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf '''Fugitive Economic Offenders Bill, 2018'''] and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. Offences under some 15 Acts are listed in the Schedule to the Bill. <br />
<br />
The word is defined in Section 2(1)(f) of the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament on 12 March 2018 may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here]. As this could not be passed in the Parliament in that session, the Union Cabinet, in its meeting held on 21 April, 2018, decided to promulgate the [https://dea.gov.in/sites/default/files/Fugitive%20Economic%20Offenders%20Ordinance%2C%202018%28%2012%20pages%29.pdf Fugitive Economic Offenders Ordinance, 2018] and the same was notified on 21 April 2018. The relevant [http://egazette.nic.in/WriteReadData/2018/184918.pdf Rules] were notified on 24 April 2018. <br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
placing the burden of proof for establishing that an individual is a fugitive economic offender is on the Director or the person authorised by the Director appointed under section 49(1) of PMLA. <br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf rule of law] with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-05-07T11:34:38Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive fugitive] economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.<br />
<br />
A Fugitive Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act (PMLA), 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf '''Fugitive Economic Offenders Bill, 2018'''] and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. Offences under some 15 Acts are listed in the Schedule to the Bill. <br />
<br />
The word is defined in Section 2(1)(f) of the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament on 12 March 2018 may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here]. As this could not be passed in the Parliament in that session, the Union Cabinet, in its meeting held on 21 April, 2018, decided to promulgate the [https://dea.gov.in/sites/default/files/Fugitive%20Economic%20Offenders%20Ordinance%2C%202018%28%2012%20pages%29.pdf Fugitive Economic Offenders Ordinance, 2018] on 21 April 2018. The relevant [http://egazette.nic.in/WriteReadData/2018/184918.pdf Rules] were notified on 24 April 2018. <br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
placing the burden of proof for establishing that an individual is a fugitive economic offender is on the Director or the person authorised by the Director appointed under section 49(1) of PMLA. <br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf rule of law] with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Foreign_Portfolio_Investor_(FPI)Foreign Portfolio Investor (FPI)2018-05-03T04:47:59Z<p>Rosemary.a: </p>
<hr />
<div>In India, the term “Foreign Portfolio Investor” refers to [http://arthapedia.in/index.php?title=Foreign_Institutional_Investor_%28FII%29 FIIs] or their [http://arthapedia.in/index.php?title=Foreign_Institutional_Investor_%28FII%29 sub-accounts], or [http://arthapedia.in/index.php?title=Foreign_Institutional_Investor_%28FII%29 qualified foreign investors (QFIs)] who are permitted to hold upto 10% stake in a company. <br />
<br />
<br />
'''Origin '''<br />
<br />
The term FPI was defined to align the nomenclature of categorizing investments of foreign investors in line with international practice. FPI stands for those investors who hold a short term view on the company, in contrast to Foreign Direct Investors (FDI). FPIs generally participate through the stock markets and gets in and out of a particular stock at much faster frequencies. Short term view is associated often with lower stake in companies. Hence, globally FPIs are defined as those who hold less than 10% in a company. In India, the hitherto existing closest possible definition to an FPI was [http://arthapedia.in/index.php?title=Foreign_Institutional_Investor_%28FII%29 Foreign Institutional Investor]. <br />
<br />
In the [http://indiabudget.nic.in/ Union Budget 2013-14], announced on 28 February 2013, vide para 95, Honourable Finance Minister announced his intention to go by the internationally accepted definition for foreign investors. <br />
<br />
Prior to this, in December 2012, [http://www.sebi.gov.in/sebiweb/ SEBI] had constituted a “Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments” under the chairmanship of Shri K. M. Chandrasekhar with a view to rationalize/harmonize various foreign portfolio investment routes and to establish a unified, simple regulatory framework. The Committee had submitted its [http://www.sebi.gov.in/cms/sebi_data/attachdocs/1372854491698.pdf report] in June, 2013 to the Government of India. <br />
<br />
Based on the committee report, on 7th January, 2014 the [http://www.sebi.gov.in/sebiweb/home/list/1/3/0/0/Regulations FPI Regulations, 2014] were notified in the Gazette of India. <br />
<br />
The new FPI Regime came into effect from '''1st June, 2014'''. The FAQs on FPI Regulations can be seen [http://www.sebi.gov.in/cms/sebi_data/attachdocs/1398831315278.pdf here].<br />
<br />
<br />
'''Features of FPI'''<br />
<br />
Portfolio Investment by any single investor or investor group cannot exceed 10% of the equity of an Indian company, beyond which it will now be treated as FDI.<br />
<br />
[http://arthapedia.in/index.php?title=Foreign_Institutional_Investor_%28FII%29 FIIs], [http://arthapedia.in/index.php?title=Sub-accounts Sub-Accounts] and [http://arthapedia.in/index.php?title=Qualified_Foreign_Investors_%28QFIs%29 QFIs] are merged together to form the new investor class, namely Foreign Portfolio Investors, with an aggregate investment limit of 24% which can be raised by the Company up to the applicable sectoral cap. <br />
<br />
All existing FIIs and Sub Accounts can continue to buy, sell or otherwise deal in securities under the FPI regime. <br />
<br />
All existing [http://arthapedia.in/index.php?title=Qualified_Foreign_Investors_%28QFIs%29 Qualified Foreign Investors (QFIs)] may continue to buy, sell or otherwise deal in securities only till the period of one year from the date of notification of the FPI Regulation. In the meantime, they have to obtain FPI registration. <br />
<br />
Non-Resident Indians (NRIs) and Foreign Venture Capital Investors (FVCI) are excluded from the purview of this definition.<br />
<br />
[http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries Designated Depository Participants] (DDPs) authorized by SEBI (as per prescribed norms) would henceforth register FPIs on behalf of SEBI subject to fulfillment of [http://arthapedia.in/index.php?title=Know_Your_Client_(KYC) KYC (Know Your Customer)] and due diligence norms. DDPs carry out necessary due diligence and obtain appropriate declarations and undertakings before registering an entity as FPI. The DDPs are either Authorized Dealer Category-1 bank authorized by Reserve Bank of India, or Depository Participant or a Custodian of Securities registered with SEBI. Existing SEBI approved Qualified Depository Participant who were registering the QFIs, but not meeting the DDP eligibility criteria, can operate as DDP only for a period of one year.<br />
<br />
<br />
'''Categories of FPI'''<br />
<br />
As part of Risk based approach towards customer identity verification (KYC), FPIs have been categorized into three major categories:<br />
*'''Category I (Low Risk)''' which would include Government and entities like Foreign Central banks, Sovereign wealth Funds, Multilateral Organizations, etc<br />
*'''Category II (Moderate Risk)''' which would include Regulated entities such as banks, Pension Funds, Insurance Companies, Mutual Funds, Investment Trusts, Asset Management Companies, University related endowments (already registered with SEBI)<br />
*'''Category III (High Risk)''' which would include all other FPIs not eligible to be included in the above two categories<br />
<br />
<br />
'''FPI Investment restrictions '''<br />
<br />
FPIs are not allowed to invest in unlisted shares. However, all existing investments made by the FIIs/Sub-accounts/QFIs are grandfathered. <br />
In respect of those securities, where FPIs are not allowed to invest no fresh purchase shall be allowed as FPI. They can only sell their existing investments in such securities.<br />
<br />
However, an exception has been made by permitting them to invest in unlisted non-convertible debentures/bonds issued by an Indian company in the [http://arthapedia.in/index.php?title=Infrastructure infrastructure] sector, where ‘infrastructure’ is defined in terms of the extant [http://rbi.org.in/Scripts/BS_ViewMasterCirculardetails.aspx External Commercial Borrowings (ECB) guidelines];<br />
<br />
FPIs are permitted to invest in Government Securities with a minimum residual maturity of one year. However, FPIs have been prohibited from investing in T-Bills.<br />
<br />
FPI can invest in privately placed bonds if it is listed within 15 days.<br />
<br />
The same debt allocation mechanism that is in place for FIIs/QFIs will be followed for FPIs.<br />
<br />
The debt investment limits as in June 2014 are as follows <br />
<br />
<br />
<table border="1" width="95%" cellspacing="0" cellpadding="5"><br />
<tr><br />
<td width="5%" align="center" bgcolor="#C0C0C0"><b>S.No.</b></td><br />
<td width="20%" align="center" bgcolor="#C0C0C0"><b>Type of Instrument</b></td><br />
<td width="12%" align="center" bgcolor="#C0C0C0"><b>Cap (USD bn)</b></td><br />
<td width="13%" align="center" bgcolor="#C0C0C0"><b>Cap (INR Crore)</b></td><br />
<td width="50%" align="center" bgcolor="#C0C0C0"><b>Remarks</b></td><br />
</tr><br />
<tr><br />
<td>1</td><br />
<td>Government Debt</td><br />
<td>20</td><br />
<td>99,546</td><br />
<td>Available on demand. Eligible investors may invest only in dated securities of residual maturity of one year and above, and existing investment in Treasury Bills will be allowed to taper off on maturity/sale.</td><br />
</tr> <br />
<tr><br />
<td>2</td><br />
<td>Government Debt</td><br />
<td>10</td><br />
<td>54,023</td><br />
<td>Available on demand for FIIs registered with SEBI as Sovereign Wealth Funds, Multilateral Agencies, Endowment funds, Insurance Funds, Pension Funds and Foreign Central Banks. Eligible investors may invest only in dated securities of residual maturity of one year and above.</td><br />
</tr> <br />
<tr><br />
<td>3</td><br />
<td>Corporate Debt</td><br />
<td>51</td><br />
<td>244,323</td><br />
<td>Available on demand. Eligible investors may invest in Commercial Papers only up to US$ 2 billion within the limit of US$ 51 billion.</td><br />
</tr> <br />
<tr><br />
<td>&nbsp;</td><br />
<td>Total</td><br />
<td><strong>81</strong></td><br />
<td>397,892</td><br />
<td></td><br />
</tr> <br />
</table><br />
<br />
<br />
FPIs belonging to Category III will not be allowed to issue Offshore Derivative Instruments (ODIs) and/or [http://arthapedia.in/index.php?title=Participatory_Notes_%28PNs%29 Participatory Notes] (PNs). However, issuers of ODIs and/or PNs shall directly report to SEBI.<br />
<br />
<br />
'''Monitoring of FPI Investments'''<br />
<br />
Since the commencement of the FPI regime from June 01, 2014, both the exchanges and the depositories have put in place a mechanism for the monitoring of the FPI investment limits for both equity and debt securities. The depositories ensure that the investment limits applicable to an FPI/ FPI group having common beneficial ownership, do not get breached. The designated depository participants provide on a daily basis, FPI-wise, ISIN-wise and Company-wise buy/sell information and any other transaction or any related information to their respective depositories on the same day i.e the day on which the transaction was carried out. The stock exchanges provide the details of FPI positions in derivatives instruments and also on paid up equity capital of all the listed companies, ISIN-wise, to the depositories periodically and also provide information regarding change in paid-up equity capital in any listed company. <br />
<br />
SEBI vide circular dated April 5, 2018 introduced a new system for Monitoring of Foreign Investment limits in listed Indian companies and prescribed guidelines w.r.t the necessary infrastructure, data to be provided by listed Indian companies and other related matters. Under the new system, disseminating of information regarding the foreign investment limits in listed companies will be operationalised through Depositories and stock exchanges. A company will have to appoint any one depository as its designated depository for the purpose of monitoring the foreign investment limits.<br />
Stock exchanges will provide the data on the paid-up equity capital of the company to its designated depository. This data includes the paid-up equity capital of the company on a fully diluted basis (total number of shares that would be outstanding if all possible sources of conversion are exercised).<br />
The depositories will provide an interface to the companies to provide and update information on foreign investments through thirteen broad parameters (Basic information about the company, Applicable Sector, Applicable Sectoral Cap, Permissible Aggregate Limit for investment by Foreign Portfolio Investor’s (FPI), Permissible Aggregate Limit for investment by NRI’s, Details of shares held by FPI, NRIs and other foreign investors on repatriable basis, in demat as well as in physical form etc). In an event of any change in any of the details pertaining to the company, such as increase or decrease of the aggregate FPI or NRI limits or the sectoral cap or a change of the sector of the company, the firm needs to inform such changes along with the supporting documentation to its designated depository. A red flag will be activated in case total foreign investment in a company is within 3 per cent or less than 3 per cent of the sectoral headroom (Earlier this cap was 2 percent). Once red flag is activated, depositories will inform the exchanges about the activation of the red flag for the identified scrip and exchanges will issue the necessary notifications on their respective websites. Once a red flag has been activated, the foreign investors shall be liable to disinvest the excess holding within five trading days. Such excess shares should be sold to domestic investors. If a breach of the investment limits has taken place by FPIs, and such FPIs have failed to disinvest within 5 trading days, then necessary action will be taken by Sebi against them.<br />
<br />
<br />
<br />
'''Data'''<br />
<br />
The depositories – [http://www.nsdl.co.in/Foreign_portfolio_Investor(FRI)_Regine.php NSDL] and [https://www.cdslindia.com/publications/FIIreports.html CDSL]- are required to maintain the data on FPIs. <br />
<br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=449 Tamanna Sinha, IES(2012)]<br />
*Email- [mailto:tamanna.sinha@yahoo.com tamanna.sinha@yahoo.com]<br />
<br />
[[Category:concepts|ForeignPortfolioInvestor(FPI)]]</div>Rosemary.ahttp://arthapedia.in/index.php/Securities_Transaction_Tax_(STT)Securities Transaction Tax (STT)2018-04-28T19:26:01Z<p>Rosemary.a: </p>
<hr />
<div>Securities Transaction Tax (STT) is a type of [http://en.wikipedia.org/wiki/Financial_transaction_tax financial transaction tax] levied in India on transactions done on the domestic stock exchanges. The rates of STT are prescribed by the Central / Union Government through its [http://indiabudget.nic.in/ Budget] from time to time. In tax parlance, this is categorised as a [http://en.wikipedia.org/wiki/Direct_tax direct tax]. <br />
<br />
The STT came into effect from October 1, 2004 pursuant to the enactment of the [http://indiabudget.nic.in/ub2004-05/bill.htm Finance Act, 2004] and notification of Securities Transaction Tax Rules, 2004 by the Government of India. Vide [http://www.incometaxindia.gov.in/Pages/acts/finance-acts.aspx Finance Act, 2016] it was stipulated that transactions carried out in a recognized stock exchange located in an International Financial Center, where the payments are carried out in terms of foreign currency, would be exempt from the payment of STT and capital gains. <br />
<br />
With charging of STT, long term [http://www.investopedia.com/terms/c/capital_gains_tax.asp capital gains tax] was made zero and short term capital gains tax was reduced to 10% (subsequently, changed to 15% since 2008). (See Income Tax Department’s [http://www.incometaxindia.gov.in/archive/how_to_compute_capital_gains_2008-09.pdf tax payers’ information series on capital gains tax]). However, w.e.f. 1 April 2018, the long term capital gains tax has been brought back @10% for those gains exceeding Rs. 1 lakh without any benefit of adjusting for inflation. (See [https://www.incometaxindia.gov.in/pages/acts/finance-acts.aspx Finance Act 2018]). <br />
<br />
The STT framework was subsequently reviewed by the Central Government in the year 2005, 2006, 2008, 2012and 2013. The STT rates were revised upwards in the year 2005 and 2006 while it was reduced for certain segments in 2012 and 2013.The STT provisions were altered in the year 2008 such that for professional traders (brokers),STT came to be treated as an expense which can be deducted from the income instead of treating the same as an advance tax paid. (The 2004 STT provisions provided that the STT payments of professional traders, whose “business income” arising from purchase and sale of securities could be set off against their total tax liability.) In 2016, Union Budget proposed to increase security transaction tax in case of ‘Options’ from 0.017 to 0.05 percent. Some minor modifications on settlement of options was carried out in the [https://www.incometaxindia.gov.in/pages/acts/finance-acts.aspx Finance Act 2018]. <br />
<br />
As on date, STT is not applicable in case of preference shares, Government securities, bonds, debentures, currency derivatives, units of mutual fund other than equity oriented mutual fund, and gold exchange traded funds and in such cases, tax treatment of short-term and long-term gains shall be as per normal provisions of law. Transactions of the shares of listed companies on the floor of the stock exchange or otherwise, mandated under the regulatory framework of [http://www.sebi.gov.in/sebiweb/ SEBI], such as [http://www.investopedia.com/terms/t/takeover.asp takeover], [http://www.investopedia.com/terms/b/buyback.asp buyback], [http://www.investopedia.com/terms/d/delisting.asp delisting offers] etc also does not come under STT framework. The off-market transactions of securities (which entails changes in ownership records at depositories) also does not attract STT.<br />
<br />
In India, STT is collected for government of India by the stock exchanges. <br />
<br />
<br />
'''International Practice'''<br />
<br />
See Table 3.1 in the research report [http://www.ids.ac.uk/idspublication/the-tobin-tax-a-review-of-the-evidence The Tobin Tax: A Review of the Evidence] of the Institute of Development Studies (Vol 2011, No 68, May 2011) for a comparison of transaction taxes applicable on securities in major economies. <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|SecuritiesTransactionTax]]</div>Rosemary.ahttp://arthapedia.in/index.php/Securities_Transaction_Tax_(STT)Securities Transaction Tax (STT)2018-04-28T19:23:28Z<p>Rosemary.a: </p>
<hr />
<div>Securities Transaction Tax (STT) is a type of [http://en.wikipedia.org/wiki/Financial_transaction_tax financial transaction tax] levied in India on transactions done on the domestic stock exchanges. The rates of STT are prescribed by the Central / Union Government through its [http://indiabudget.nic.in/ Budget] from time to time. In tax parlance, this is categorised as a [http://en.wikipedia.org/wiki/Direct_tax direct tax]. <br />
<br />
The STT came into effect from October 1, 2004 pursuant to the enactment of the [http://indiabudget.nic.in/ub2004-05/bill.htm Finance Act, 2004] and notification of Securities Transaction Tax Rules, 2004 by the Government of India. Vide [http://www.incometaxindia.gov.in/Pages/acts/finance-acts.aspx Finance Act, 2016] it was stipulated that transactions carried out in a recognized stock exchange located in an International Financial Center, where the payments are carried out in terms of foreign currency, would be exempt from the payment of STT and capital gains. <br />
<br />
With charging of STT, long term [http://www.investopedia.com/terms/c/capital_gains_tax.asp capital gains tax] was made zero and short term capital gains tax was reduced to 10% (subsequently, changed to 15% since 2008). (See Income Tax Department’s [http://www.incometaxindia.gov.in/archive/how_to_compute_capital_gains_2008-09.pdf tax payers’ information series on capital gains tax]). However, w.e.f. 1 April 2018, the long term capital gains tax has been brought back @10% for those gains exceeding Rs. 1 lakh without any benefit of adjusting for inflation. <br />
<br />
The STT framework was subsequently reviewed by the Central Government in the year 2005, 2006, 2008, 2012and 2013. The STT rates were revised upwards in the year 2005 and 2006 while it was reduced for certain segments in 2012 and 2013.The STT provisions were altered in the year 2008 such that for professional traders (brokers),STT came to be treated as an expense which can be deducted from the income instead of treating the same as an advance tax paid. (The 2004 STT provisions provided that the STT payments of professional traders, whose “business income” arising from purchase and sale of securities could be set off against their total tax liability.) In 2016, Union Budget proposed to increase security transaction tax in case of ‘Options’ from 0.017 to 0.05 percent. <br />
<br />
As on date, STT is not applicable in case of preference shares, Government securities, bonds, debentures, currency derivatives, units of mutual fund other than equity oriented mutual fund, and gold exchange traded funds and in such cases, tax treatment of short-term and long-term gains shall be as per normal provisions of law. Transactions of the shares of listed companies on the floor of the stock exchange or otherwise, mandated under the regulatory framework of [http://www.sebi.gov.in/sebiweb/ SEBI], such as [http://www.investopedia.com/terms/t/takeover.asp takeover], [http://www.investopedia.com/terms/b/buyback.asp buyback], [http://www.investopedia.com/terms/d/delisting.asp delisting offers] etc also does not come under STT framework. The off-market transactions of securities (which entails changes in ownership records at depositories) also does not attract STT.<br />
<br />
In India, STT is collected for government of India by the stock exchanges. <br />
<br />
<br />
'''International Practice'''<br />
<br />
See Table 3.1 in the research report [http://www.ids.ac.uk/idspublication/the-tobin-tax-a-review-of-the-evidence The Tobin Tax: A Review of the Evidence] of the Institute of Development Studies (Vol 2011, No 68, May 2011) for a comparison of transaction taxes applicable on securities in major economies. <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|SecuritiesTransactionTax]]</div>Rosemary.ahttp://arthapedia.in/index.php/Spot_ExchangesSpot Exchanges2018-04-28T19:20:35Z<p>Rosemary.a: </p>
<hr />
<div>In India, Spot Exchanges refer to electronic trading platforms which facilitate purchase and sale of specified commodities, including agricultural commodities, metals and bullion by providing [http://arthapedia.in/index.php?title=Spot_Contracts_/_Markets spot delivery contracts] in these commodities. <br />
<br />
This market segment functions like the equity segment in the main stock exchanges. Alternatively, this can be considered as a guaranteed direct marketing by sellers of the commodities. Spot Exchanges leverage on the latest technology available in the stock exchange framework for the trading of goods. This is an innovative Indian experiment in the trading of goods and is distinct from what is commonly known as “commodity exchanges” which trade in [http://en.wikipedia.org/wiki/Futures_contract futures contracts] in commodities. <br />
<br />
A restrictive definition of Spot Exchange is provided in the Regulation 2 (1) (ix) of the [http://wdra.gov.in/default.htm Warehousing Development and Regulatory Authority (Electronic Warehouse Receipts) Regulations, 2011]. Here “Spot Exchange” means a body corporate incorporated under the Companies Act, 1956 and engaged in assisting, regulating or controlling the business of trading in electronic [http://www.investopedia.com/terms/w/warehousereceipt.asp warehouse receipts]. However, this regulation is not in existence at the moment as it has been replaced by a new [https://wdra.gov.in/web/wdra/regulations Regulation in 2017] and the new regulation does not use the term spot exchange. <br />
<br />
However, present day spot exchange deals with not just warehouse receipts. This is an electronic market where a farmer or a trader can discover the prices of commodities on a national level and can buy or sell goods immediately to anyone across the country. All contracts on the Exchange are compulsory delivery contracts.i.e., here all outstanding positions at the end of the day are marked for delivery, which implies that seller has to give delivery and buyer has to take delivery, but on a net basis. ( i.e., intra-day [http://stockmarketterms.wordpress.com/2013/01/19/squaring-off/ squaring off] is allowed.). This permission for squaring off, however, ceased to exist from September 2014 onwards. <br />
<br />
The facilities provided by the spot exchange, like a normal stock exchange, include clearing and settlement of trades on multilateral [http://www.investopedia.com/terms/n/netting.asp netting] basis. Trades are settled on guaranteed basis (i.e., in case of default by any person exchange arranges for the payment of money / good) and the exchange collects various margin payments, to ensure this. The exchange also offers various other services such as quality certification, warehousing, [http://www.investopedia.com/terms/w/warehousereceipt.asp warehouse receipt] financing, etc.<br />
<br />
<br />
'''Advantages of Spot Exchanges'''<br />
<br />
It can lead to efficient price determination as price is determined by a wider cross-section of people from across the country, unlike the present scenario where price discovery for commodities happens only through local participation. This also ensures transparency in price discovery. <br />
<br />
Anonymity ensures convergence of different price perceptions,as the buyer or seller merely expresses their desire to trade without even meeting directly. <br />
<br />
If spot exchanges can ensure participation in large numbers by farmers, traders and processors across the country it can eliminate the possibility of cartelization and other such unhealthy practices prevalent in commodity markets.<br />
<br />
Spot Exchanges can also usher in some best Practices in commodity trading like, system of grading for quality, creating network of warehouses with [http://www.thefreedictionary.com/Assaying assaying] facilities, facilitating trading in relatively smaller quantities, lower transaction cost etc. <br />
<br />
Bank finance available against the goods in the warehouse on easier terms improves holding capacity and can actually in centivize farm production and hence reduce rural poverty. <br />
<br />
Since the trades are guaranteed, counter party risk is avoided.<br />
<br />
<br />
'''Spot Exchanges in India'''<br />
<br />
As on July 2013, there are four spot exchanges currently operating in the country. These exchanges are: <br />
#The [http://www.nationalspotexchange.com/ National Spot Exchange Ltd] (NSEL) is a national level commodity spot exchange promoted by Financial Technologies (India) Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED). NSEL commenced “Live” trading on October 15, 2008.<br />
#[http://www.ncdexspot.com/ NCDEX Spot Exchange Limited]. (established in October 2006)<br />
#[http://www.livemint.com/Money/VhoQcV38PIvfSr3553ruBJ/Reliance-Money-begins-trials-for-country8217s-third-spot.html Reliance Spot Exchange Limited]. (Yet to be operationalized)<br />
#[http://ibsxindia.com/aboutus-overview.php Indian Bullion Spot Exchange limited] (they have described themselves as online over the counter spot exchange)<br />
<br />
For the purpose implementing trading of agricultural produce on e-platform, the state of Karnataka has established a Special Purpose Vehicle (SPV), Rashtriya e Market Services Pvt. Ltd. (ReMS) as a joint venture company between Government of Karnataka and NCDEX Spot Exchange Ltd. In the last one year 55 markets have been linked to the platform and 21 lakh lots of 343 lakh quintals of agri-commodities of a total worth of Rs. 8500 crores traded on the platform as per a [http://pib.nic.in/newsite/AdvSearch.aspx press release] of Ministry of Agriculture dated 9 July 2015. <br />
<br />
<br />
'''Regulatory status of Spot Exchanges in india'''<br />
<br />
Spot Exchange is presently recognized by [http://consumeraffairs.nic.in/consumer/index.php Ministry of Consumer Affairs, Food & Public Distribution], Government of India. Further the spot exchanges have to obtain licenses from various state governments to facilitate online delivery based trading in various agri-commodities (spot transactions in commodities comes under the regulatory purview of provincial / state governments. In that sense the Exchange operations will be regulated in each state by the respective state governments and will be subjected to various laws of the land like the Companies Act, 1956 Stamp Act, Contracts Act, 1876, [http://agmarknet.nic.in/amrscheme/modelact.htm APMC Act] and others which impinge on its working.).<br />
<br />
Regulation 3(c) of the [http://wdra.nic.in/default.htm Warehousing Development and Regulatory Authority (Electronic Warehouse Receipts) Regulations, 2011] issued under Section 35 read with Section 51, of the [http://wdra.nic.in/ Warehousing (Development and Regulation) Act, 2007], provide for registration of Spot Exchanges by [http://wdra.nic.in/default.htm Warehousing Development and Regulatory Authority] (WDRA). As per this Regulation, no entity can organize trading in electronic warehouse receipts, unless it has obtained recognition as a Spot Exchange from the Authority under these regulations and holds a valid certificate of commencement of business issued by the WDRA. <br />
<br />
Eventhough Spot exchanges are trading in commodities, the [http://arthapedia.in/index.php?title=Spot_Contracts_/_Markets spot trades] are not covered under the [http://www.fmc.gov.in/index2.aspx?slid=45&sublinkid=36&langid=2 Forward Contracts (Regulation) Act 1952] (in short FCRA). This Act only covers forward contracts / commodity derivative contracts traded in a commodity derivative exchange like [http://www.mcxindia.com/ MCX] or [http://www.ncdex.com/ NCDEX]. <br />
<br />
The spot contracts of one day duration are exempted from the provisions of [http://www.fmc.gov.in/index2.aspx?slid=45&sublinkid=36&langid=2 Forward Contract (Regulation) Act, 1952] (FCRA), by Government of India, by [http://fmc.gov.in//WriteReadData/links/gazette_notification_fcra-712771626.pdf Gazette Notification dated June 05, 2007], subject to conditions, which includes – “complying with the regulations by authorities regulating spot trades in the areas where such trades takes place” and empowers the Government of India or its designated agency to call for information or returns related to trade and to impose additional conditions. Though the [http://arthapedia.in/index.php?title=Spot_Contracts_/_Markets spot trades] are not covered under the FCRA, the activities of the exchange are monitored by the [http://arthapedia.in/index.php?title=Forward_Markets_Commission_(FMC) Forward Market Commission] (FMC). For this purpose, the spot exchanges submit a monthly report to FMC about the trading and, delivery and settlement data. However, there does not appear to be any legal or statutory backing for the monitoring by the FMC.<br />
<br />
Following the [http://www.business-standard.com/category/specials-nsel-crisis-top-stories-1099501.htm settlement default issues in NSEL], the Ministry of Consumer Affairs on [http://fmc.gov.in/showfile.aspx?lid=729&langid=2&sublinkid=359 6th August 2013 issued a notification] stating that ''settlement of all outstanding one day forward contracts at National Spot Exchange Limited shall be done under the supervision of Forward Markets Commission and any order or direction issued by the Forward Markets Commission in this regard shall be binding upon the National Spot Exchange Limited and any person, intermediary or warehouse connected with the National Spot Exchange Limited, and for this purpose, the Forward Markets Commission is authorized to take such measures, as it deems fit.'' Later this exemption from from floating one day contracts which could be squared off for creating liquidity was withdrawn for all such exchanges in September 2014, due to the scam that unfolded in 2013 at National Spot Exchange Ltd. (NSEL). Hence, at present, their operations are limited to just delivery based trades. In 2015, following the NSEL crisis, FMC itself was decided to be merged with the securities market regulator - Securities and Exchange Board of India (SEBI). <br />
<br />
<br />
<br />
<br />
'''International Scenarios'''<br />
<br />
The warehouse receipt forms the basis for the creation ofa spot, or cash, market. If transactions involve the delivery of goods on a , warehouse receipts can form the basis for the creation of a forward market and for the delivery system in a commodity futures exchange.<br />
<br />
Some of the commodity futures exchanges also provide for spot contract trading, though the volumes are far less compared to the futures trading volumes. The popular spot contracts are available in currency, gold or electricity / power rather than in agriculture. <br />
<br />
Globally Spot Exchanges are known to be mostly localized entities with a regional presence. Successful national level spot exchanges are being developed. <br />
<br />
Bulgaria’s largest commodity exchange, the [http://www.sce-bg.com/ Sofia Commodity Exchange], is one of the few exchanges in the European and Central Asian countries offering spot and futures trading. Established in 1991, the exchange is using WHRs for its physical deliveries.<br />
<br />
In Poland, the Warsaw Commodity Exchange(WGT)’s agricultural spot commodity market, the InternetowaGieldaTowarowa (IGT), an electronic trading platform for the cash commodity market, and is known to be the largest B2Btrading platform in Poland and one of the large stagricultural spot markets in Europe.<br />
<br />
In December 2008, the Regional Financial Center of Almaty city together with the Russian Federation’sstock exchange, the Russian Trading System (RTS), announced the creation of a new commodity exchange, the [http://www.ets.kz/s164 Eurasian Trading System] (ETS).ETS was initially designed for spot and derivatives trading in raw materials and commodities. It started trading spot and forward grain contracts in March 2009. However, the spot volumes are known to be far less than futures volumes. <br />
<br />
Around 45 commodity exchanges are officially registered in Russia and almost all of them are spot markets trading a wide range of industrial goods and agricultural commodities. St Peters burg exchange is known to be the major spot exchange there. <br />
<br />
One spot exchange similar to the ones operating in India, is [http://www.nsenepal.com/webpages/profile_nsenepal.html Nepal Spot Exchange]. <br />
<br />
London Stock Exchange claims to have launched the world’s very first committed and distinct trading platform for commodities through [http://www.londonstockexchange.com/specialist-issuers/etps/etcbrochure.pdf Exchange Traded Commodities (ETCs) Platform]. However, this is not strictly a Spot exchange. Exchange Traded Commodities (ETCs) are investment vehicles (asset backed bonds)that track the performance of an under lying commodity index including total return indices based on a single commodity. <br />
<br />
<br />
==References==<br />
Commodity exchanges in Europe and Central Asia: A means for management of price risk (2011)FAO Working Paper prepared under the FAO/World Bank Cooperative Programme <br />
<br />
Emerging commodity exchanges database of UNCTAD: <br />
<br />
http://www.unctadxi.org/templates/Startpage____976.aspx<br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|SpotExchanges]]</div>Rosemary.ahttp://arthapedia.in/index.php/Electoral_BondElectoral Bond2018-04-23T07:04:14Z<p>Rosemary.a: </p>
<hr />
<div>Electoral Bond is a financial instrument (similar to a promissory note) for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.<br />
<br />
Electoral bond was announced in the [http://indiabudget.gov.in/ub2017-18/bs/bs.pdf Union Budget 2017-18]. Required amendments to the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf Reserve Bank of India Act, 1934] (Section 31(3)) and the [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf Representation of People Act, 1951] were made through Section 133 to 136 of [http://indiabudget.gov.in/ub2017-18/fb/bill.pdf Finance Bill, 2017].<br />
<br />
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. From the bonds, no details of the donor nor of the intended political beneficiary can be made out. So electoral bond cannot be identified or associated with any particular buyer or political party. However, some security features are encoded into the bonds to avoid issuance of fake /forged bonds. These include a random serial number invisible to the naked eye. However, the number is not noted by the SBI in any record associated with buyer or political party depositing a particular electoral bond. The number is not being used or can be used to track the donation or the buyer. The issuing bank is not sharing the serial number with anybody including the Government and users as per the [https://dea.gov.in/sites/default/files/Press%20Release%20on%20EBB.pdf press release] issued by Ministry of Finance on 17 April 2018. <br />
<br />
Government [http://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf notified] the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;<br />
<br />
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day. <br />
<br />
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.<br />
<br />
State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds initially at its [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176734 4 Authorised Branches]. The first issue of the Scheme was opened in March 2018. Accordingly, the first sale of Electoral Bonds commenced from 1 March 2018 for a period of 10 days i.e. up to 10 March 2018. <br />
<br />
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. <br />
<br />
As per Section 29C(1) of [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf The Representation of People Act, 1951], the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond. <br />
<br />
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.<br />
<br />
<br />
'''Also See''' <br />
<br />
[http://www.arthapedia.in/index.php?title=Electoral_Trust Electoral Trust] <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Electoral Bond]]</div>Rosemary.ahttp://arthapedia.in/index.php/Electoral_BondElectoral Bond2018-04-23T07:03:19Z<p>Rosemary.a: </p>
<hr />
<div>Electoral Bond is a financial instrument (similar to a promissory note) for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.<br />
<br />
Electoral bond was announced in the [http://indiabudget.gov.in/ub2017-18/bs/bs.pdf Union Budget 2017-18]. Required amendments to the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf Reserve Bank of India Act, 1934] (Section 31(3)) and the [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf Representation of People Act, 1951] were made through Section 133 to 136 of [http://indiabudget.gov.in/ub2017-18/fb/bill.pdf Finance Bill, 2017].<br />
<br />
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. From the bonds, no details of the donor nor of the intended political beneficiary can be made out. So electoral bond cannot be identified or associated with any particular buyer or political party. However, some security features are encoded into the bonds to avoid issuance of fake /forged bonds. These include a random serial number invisible to the naked eye. However, the number is not noted by the SBI in any record associated with buyer or political party depositing a particular electoral bond. The number is not being used or can be used to track the donation or the buyer. The issuing bank is not sharing the serial number with anybody including the Government and users as per the [https://dea.gov.in/sites/default/files/Press%20Release%20on%20EBB.pdf press release] issued by Ministry of Finance in April 2018. <br />
<br />
Government [http://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf notified] the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;<br />
<br />
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day. <br />
<br />
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.<br />
<br />
State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds initially at its [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176734 4 Authorised Branches]. The first issue of the Scheme was opened in March 2018. Accordingly, the first sale of Electoral Bonds commenced from 1 March 2018 for a period of 10 days i.e. up to 10 March 2018. <br />
<br />
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. <br />
<br />
As per Section 29C(1) of [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf The Representation of People Act, 1951], the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond. <br />
<br />
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.<br />
<br />
<br />
'''Also See''' <br />
<br />
[http://www.arthapedia.in/index.php?title=Electoral_Trust Electoral Trust] <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Electoral Bond]]</div>Rosemary.ahttp://arthapedia.in/index.php/Electoral_BondElectoral Bond2018-04-23T05:22:27Z<p>Rosemary.a: </p>
<hr />
<div>Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.<br />
<br />
Electoral bond was announced in the [http://indiabudget.gov.in/ub2017-18/bs/bs.pdf Union Budget 2017-18]. Required amendments to the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf Reserve Bank of India Act, 1934] (Section 31(3)) and the [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf Representation of People Act, 1951] were made through Section 133 to 136 of [http://indiabudget.gov.in/ub2017-18/fb/bill.pdf Finance Bill, 2017].<br />
<br />
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. <br />
<br />
Government [http://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf notified] the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;<br />
<br />
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day. <br />
<br />
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.<br />
<br />
State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds initially at its [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176734 4 Authorised Branches]. The first issue of the Scheme was opened in March 2018. Accordingly, the first sale of Electoral Bonds commenced from 1 March 2018 for a period of 10 days i.e. up to 10 March 2018. <br />
<br />
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. <br />
<br />
As per Section 29C(1) of [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf The Representation of People Act, 1951], the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond. <br />
<br />
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.<br />
<br />
<br />
'''Also See''' <br />
<br />
[http://www.arthapedia.in/index.php?title=Electoral_Trust Electoral Trust] <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Electoral Bond]]</div>Rosemary.ahttp://arthapedia.in/index.php/Peer_to_peer_(P2P)_lendingPeer to peer (P2P) lending2018-04-23T05:17:29Z<p>Rosemary.a: </p>
<hr />
<div>Peer to peer (P2P) lending is a form of [https://www.sebi.gov.in/sebi_data/attachdocs/1403005615257.pdf crowdfunding] used to raise unsecured loans which are re-paid with interest. Crowdfunding refers to financing of projects with small amounts of money raised from a large number of people, with a portal serving as an intermediary. It utilises an online platform which serves as a link between borrowers and lenders.<br />
<br />
In terms of international experience, it is observed that while countries such as Israel and Japan do not permit such lending, others such as Canada and the United Kingdom regulate it as an intermediary while countries such as Germany and Italy regulate these platforms as banks due to their credit intermediation functions.<br />
<br />
The borrower could be an individual or a legal person (such as a company). The companies generally follow a reverse auction model in which the lenders bid for a borrower's loan proposal and the borrower has the freedom to either accept or reject the same. Further, the interest rate could be determined by the platform or agreed to by the borrower and the lender. The said platform receives fees from the borrower and the lender and sometimes provides additional facilities like preliminary assessment of borrowers’ creditworthiness, collecting loan repayments /post-dated cheques etc. Some regulators specify that the money be transferred from the lender’s bank account straight to the borrower's account.<br />
<br />
<br />
'''P2P Platforms in India'''<br />
<br />
RBI vide a Notification on [http://www.arthapedia.in/images/4/4b/Peer_to_peer_lending_RBI_notification.pdf 24th August, 2017], enabled P2P entities as Non-Banking Financial Company (NBFC). However, an existing NBFC will not be able to operate as an NBFC-P2P. As per this Notification P2P lending platform shall mean the business of providing under a contract, the service of loan facilitation, via online medium or otherwise, to the participants who have entered into an arrangement with that platform to lend on it or to avail of loan facilitation services provided by it.<br />
<br />
RBI’s Master Directions for peer to peer (P2P) lending platforms were issued on [https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11137 4th October, 2017]. The Master Directions provide a framework for the registration and functioning of NBFC-P2Ps in India. They specify the process and eligibility criteria for registration of such platforms and also state that such lending platforms cannot be operated without obtaining a Certificate of Registration from the RBI.<br />
<br />
As per RBI’s Directions, these P2P platforms are to act as intermediaries providing an online platform to the participants. However, they are not allowed to raise deposits, provide loans, provide any credit enhancement or credit guarantee or facilitate or permit any secured lending. Further, the platforms are also not permitted to hold, on their balance sheet, funds received from lenders for lending, or funds received from borrowers for servicing loans. In addition, the platforms are also prohibited from permitting any international flow of funds.<br />
<br />
<br />
The responsibilities of these platforms, as stated in RBI’s Directions, include the following:<br />
<br />
* To undertake due diligence on the participants.<br />
* To undertake credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders.<br />
* To receive prior and explicit consent of the participant to access its credit information.<br />
* To undertake documentation of loan agreements and other documents.<br />
* To provide assistance in disbursement and repayment of loan amount.<br />
* To facilitate recovery of loans originating on the platform (by using fair means).<br />
<br />
<br />
Minimum networth requirement for these platforms is kept at Rs. 2 Cr. The borrower can either be an individual or a legal person (say a body of individuals, a HUF, a firm, a society or any artificial body, whether incorporated or not) requiring a loan.<br />
<br />
RBI Directions stipulate that the aggregate exposure of a lender across all P2P platforms should not exceed Rs.10 lakhs while the aggregate loans raised by a borrower across all P2P platforms should not be more than Rs. 10 lakhs. Further, the maximum exposure of a single lender to the same borrower is fixed at Rs.50,000. It is also stipulated that the maturity of the loans shall not exceed 36 months. The maximum exposure limits are set low, given that all loans raised on these platforms are of unsecured nature and also given that these platforms provide no guarantee of repayment of loans. The Fair Practices Code included in the Directions specifies that the platform shall not provide any assurance for the recovery of loans and that ''‘there exists a likelihood of loss of entire principal in case of default by a borrower’''.<br />
<br />
The interest rate is not to be fixed by the platform. The interest rate for each and every loan is to be fixed separately over the electronic platform by way of a mutual agreement between the borrower and lender. Fund transfer between participants on the P2P lending platform will happen through escrow account mechanisms. All fund transfers shall be through and from bank accounts, and cash transactions are strictly prohibited. <br />
<br />
With RBI regularising P2P, more lenders and borrowers will start using P2P for loans, which will expand the market in future. It is believed that this platform can bring the money lenders to a formal platform by making borrowing / lending through banking channels. Small lenders will get an avenue to lend the surplus funds in a transparent manner which will yield higher rate of return as compared to bank deposits. NBFC status brings in a lot of credit information into the system but compliances for these platforms would marginally go up as with any case of regulation.<br />
<br />
[https://www.faircent.com/ Faircent], [https://www.i2ifunding.com/ i2ifunding], [https://www.peerlend.in/ Peerlend], [https://www.lendbox.in/ Lendbox], [https://www.rupaiyaexchange.com/ Rupaiya Exchange], [https://www.lendenclub.com/ LenDen Club] are some of the existing P2P platforms in India. Existing platforms were given three months’ time to apply to RBI for registration.<br />
<br />
<br />
<br />
==References==<br />
* RBI’s [https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11137 Master Directions]<br />
* [https://rbi.org.in/scripts/FAQView.aspx?Id=124 FAQ on P2P Platforms]<br />
* [https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3164 Discussion Paper] issued by RBI<br />
<br />
<br />
<br />
==Contributed by ==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rose Mary K Abraham (IES 2006)] with inputs from Shalini Mahajan (IES 2013)<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
<br />
[[Category:concepts|Peertopeer(P2P)lending]]</div>Rosemary.ahttp://arthapedia.in/index.php/Goods_and_Services_TaxGoods and Services Tax2018-03-16T13:19:01Z<p>Rosemary.a: </p>
<hr />
<div>Goods and Services Tax (GST) refers to the single unified tax created by amalgamating a large number of Central and State taxes presently applicable in India. The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/consti-amend-act.pdf 101st constitution Amendment Act] of September 2016 made in this regard, inserted a definition of GST in Article 366 of the constitution by inserting a sub-clause 12A. As per that, GST means any tax on supply of goods, or services, or both, except taxes on supply of the alcoholic liquor for human consumption. And here, services are defined to mean anything other than goods. <br />
<br />
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages (set-off means making good the payments on account of prior-stage taxes for the transactions across the entire value chain). In other words, it follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management.<br />
<br />
Implementation of GST is one of the major indirect tax reforms in India and was put in place on 1 July 2017 during a special midnight session of the Parliament. The aforesaid Constitutional Amendment Act for introducing GST was passed in the Parliament on 8 August 2016 and notified on 8 September 2016. The Various other GST laws were passed on 6 April 2017 and notified on 12 April 2017. <br />
<br />
In September 2016, Government released an FAQ on GST which may be seen [http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf here]. The main features of GST as per the various Acts /Rules are summarized [http://pib.nic.in/newsite/PrintRelease.aspx?relid=161273 here]. <br />
<br />
The 14th Goods and Services Tax (GST) Council Meeting, held at Srinagar, Jammu and Kashmir on 18 May 2017 broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28%. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods. More details may be seen [http://www.cbec.gov.in/ here]. On [http://www.cbec.gov.in/resources//htdocs-cbec/gst/chapter-wise-rate-wise-gst-schedule-03.06.2017.pdf 3 June 2017] GST council declared that Natural or cultured pearls, precious or semi-precious stones, precious<br />
metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin etc. would attract 3% GST while rough diamond will attract 0.25%.<br />
<br />
Consequent to the GST Council’s recommendation, the Cabinet in its meeting on [http://pib.nic.in/newsite/erelease.aspx?relid=170376 30 August, 2017] approved promulgation of an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017, so as to increase the maximum rate, at which the Compensation cess can be levied from 15% to 25% on certain motor vehicles for transport of not more than thirteen persons , including the driver, like SUVs. <br />
<br />
<br />
'''Context & Genesis of GST'''<br />
<br />
Currently, fiscal powers between the Centre and the States are clearly demarcated in the [http://indiacode.nic.in/coiweb/welcome.html Constitution of India] with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax. Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportation from India, the Centre levies and collects this tax as additional duties of customs. This duty counterbalances excise duties, sales tax, State [http://en.wikipedia.org/wiki/Value-added_tax value added tax] (VAT) and other taxes levied on the like domestic product. Introduction of the GST would require amendments in the Constitution so as to concurrently empower the Centre and the States to levy and collect the GST. <br />
<br />
The tax unification process has been going on in India for some time now. There have been efforts to improve upon the Central excise duty and States sales tax regime starting with the introduction of MODVAT in 1986. CENVAT which replaced MODVAT, at the central level, is a valued added tax that provided credit on tax paid on inputs and it was an improvement over Central excise duty. At state level, the state VAT was an improvement over sales tax regime. However, there have been some problems associated with the present taxation system like; the CENVAT is confined only to the manufacturing stage and it has not included several Central taxes. Similarly, the State VAT is paid on the value of goods that includes the CENVAT already paid. It is thereby a “tax on tax”. There is also burden of Central Sales Tax (CST) on the inter-state movement of goods. Further, ‘setting-off’ service tax has been a difficult proposition especially at the state level and taxes like luxury tax, entertainment tax etc. are still out of the purview of State level VAT. The GST is thus an overarching and overhauling effort in the Indian taxation system to unify the process and reduce the multiplicity of taxes.<br />
<br />
The idea of moving towards the GST was first mooted by the then Union Finance Minister Shri P. Chidambaram in his [http://indiabudget.nic.in/ Budget for 2006-07]. This was based on the 2003 Report of the Kelkar Task Force on indirect taxes. Initially, it was proposed that GST would be introduced by 1st April, 2010. The Empowered Committee of State Finance Ministers (EC) which had formulated the design of State VAT was requested to come up with a roadmap and structure for the GST. Joint Working Groups of officials having representation of the States as well as the Centre were set up to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services and taxation of inter-State supplies. Based on discussions within and between it and the Central Government, the EC released its [http://finmin.nic.in/GST/Empowered%20Committee%20of%20SFM%20%20First%20Discussion%20paper.pdf First Discussion Paper (FDP)] on the GST in November, 2009. This spells out the features of the proposed GST and has formed the basis for discussion between the Centre and the States so far. <br />
<br />
The GST implementation took a lot of time as some States have been apprehensive about surrendering their taxation jurisdiction while others wanted to be adequately compensated.<br />
<br />
In the [http://indiabudget.nic.in/ Union Budget 2014-15] the Finance Minister indicated that the debate whether to introduce a Goods and Services Tax (GST) must now come to an end. Following the Budget presentation in July 2014, the Constitution Amendment Bill was placed in the Parliament in December 2014. This was passed by the lower House of the Parliament - Lok Sabha - on 6 May 2016. It was then referred to the Select Committee of Rajya Sabha (the upper house of the Parliament) which submitted its report on 22 July 2015. The Bill was passed with certain amendments in the Rajya Sabha on 4 August 2016. The amended bill was finally passed by Lok Sabha on 8 August 2016 and notified the same on 8 September 2016. <br />
<br />
Suitable legislation for the levy of GST (Central GST Bill and State GST Bills) drawing powers from the Constitution can be introduced in Parliament or the State Legislatures only after the enactment of the Constitution Amendment Bill. Unlike the Constitutional Amendment, the GST Bills would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after the GST law has been enacted by the respective legislatures. Also, unlike the State VAT, the date of commencement of this levy would have to be synchronized across the Centre and the States. This is because the IGST model cannot function unless the Centre and all the States participate simultaneously. <br />
<br />
A road map published by the Government subsequent to passage of Constitution amendment bill may be seen [http://pibphoto.nic.in/documents/rlink/2016/aug/p20168402.pdf here]. <br />
<br />
The Various other GST laws were passed on 6 April 2017 and notified on 12 April 2017 and rates for various commodities were fixed in May 2017. <br />
<br />
<br />
'''Advantages of GST'''<br />
<br />
Adam Smith, father of economics, has laid down four canons of taxation which are equality, certainty, convenience and economy. A tax can be tested on these four criteria. The Good and Services Tax (GST) qualifies for these four canons in a better manner. By amalgamating various taxes into a single tax, GST would mitigate cascading or double taxation (tax upon tax situations) in a major way and pave the way for a common national market. If implemented rightly, it can ensure that there is a single rate for a particular commodity across the states thereby increasing the ease of doing business. If the benefits are passed on fully, for consumers, this would mean 25%-30% reduction in the prices they pay, as tax burden on goods comes down<sup class="reference">[[#ref1|[1]]]</sup>. This can reduce the overall costs of production and hence, introduction of GST would also make Indian products more competitive in the domestic and international markets, with beneficial effects on economic growth. According to the implementing agency, [http://www.cbec.gov.in/ Central Board of Excise and Customs (CBEC)], this tax, because of its transparent character, would be easier to administer.It is designed in such way that all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent. [http://indiabudget.nic.in/bspeecha.asp Union Budget 2014-15] admitted that GST will streamline the tax administration, avoid harassment of the business and result in higher revenue collection, both for the Centre and the States. GST also helps in better tax collections, better tax compliance, less cases of tax evasion and litigation, more transparency, less harassment and corruption, according to Union Finance Minister, Shri Arun Jaitly<sup class="reference">[[#ref2|[2]]]</sup>. GST is estimated to increase the GDP growth by 1.5 to 2% (Source: PIB release dated [http://pib.nic.in/newsite/PrintRelease.aspx?relid=161273 25 April 2017]). <br />
<br />
<br />
'''Salient Features of GST as proposed in India'''<br />
<br />
The salient features of GST are as under: <br />
<br />
<ol style="list-style-type:lower-roman"><br />
<li>GST comes under the broad spectrum of what is known as [http://en.wikipedia.org/wiki/Value-added_tax Value Added Tax] which provides for input credits and taxes only the value addition that happened in the process of production / provision of service.</li><br />
<li>GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.</li> <br />
<li>GST would be a destination based tax as against the present concept of origin based tax. i.e, tax is imposed at the point of consumption. </li> <br />
<li>It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST, to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST). This is to protect the fiscal federalism of this country as both the levels of government have the constitutional mandate to levy and collect specific taxes. SGST would be applicable only if both the buyer and seller are located within the state. CGST does not have any such restriction regarding location.</li><br />
<li>The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.</li> <br />
<li>CGST and SGST would be levied at rates to be mutually agreed upon by the Centre and the States. </li> <br />
<li>Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST paid on inputs may be used only for paying SGST. In other words, the two streams of input tax credit cannot be mixed except in specified circumstances of inter-State sales. </li><br />
<li> However, cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model.</li><br />
<li>All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST (To include alcoholic liquor, which is a major source of revenue for the states, another constitution amendment would be required). Crude Petroleum and some petroleum products have also been Constitutionally brought under GST. However, it is provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period. </li><br />
<li>Tobacco and tobacco products would be subject to GST. In addition, the Centre could continue to levy Central Excise duty and the States can levy sales tax / VAT. </li><br />
<li>Exports would be [http://www.investopedia.com/terms/z/zero-rated-goods.asp zero-rated].The exporter shall have an option to either pay tax for his output and claim its refund or export under bond without tax and claim refund of Input Tax Credit. </li><br />
<li>Import of goods or services would be treated as inter-State supplies and therefore, would be subject to IGST in addition to the applicable customs duties. In other words, all imported goods will be charged integrated tax (IGST) which is equivalent to Central GST + State GST. This will bring equality with taxation on local products.</li><br />
<li>The list of exempted goods and services is attempted to be kept to a minimum and it would be harmonized for the Centre and the States as far as possible.</li> <br />
<li>A common threshold exemption would apply to both CGST and SGST. Dealers with a turnover below it would be exempt from tax. A compounding option (i.e.to pay tax at a flat rate without credits) would be available to small dealers below a certain threshold. The threshold exemption and compounding provision would be optional. For instance, taxpayers with an aggregate turnover in a financial year up to Rs.20 lakhs would be exempt from tax. Aggregate turnover will be computed on all India basis. For eleven Special Category States, like those in the North-East and the hilly States, the exemption threshold will be Rs. 10 lakhs. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Taxpayers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption. Similarly, small taxpayers with an aggregate turnover in a financial year up to Rest. 50 lakhs shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC. </li> <br />
<li>GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST. </li><br />
<li>The laws, regulations and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible. </li><br />
<li>A '''Goods & Services Tax Council''' which will be a joint forum of the Centre and the States will be created. This Council would function under the Chairmanship of the Union Finance Minister and will have Ministers in charge of Finance/Revenue or Minister nominated by each of the States & UTs with Legislatures, as members. Members have differential voting powers with votes of the central government having 1/3rd weightage and rest 2/3rd with states. Decisions can be taken only if it has more than 3/4th majority (i.e. Votes in Favour = 1/3 *Votes in favour by Center + [(2/3 * 1/No. of states present and Voting)*Votes in favour by States]). Such decisions will be immune from the deficiencies in the constitution of the GST council or appointment of its members or any procedural irregularity. The Council will make recommendations to the Union and the States on important issues like <br />
#taxes, cesses and surcharges levied by the Union, States and local bodies which may be subsumed in the GST<br />
#the goods and services that may be subjected to or exempted from GST<br />
#apportioning of the revenue between center and states in case of IGST <br />
#Framing of model GST laws <br />
#deciding the principles that govern the determination of place of supply, based on GST laws <br />
#decision on threshold limits of turnover below which goods and services may be exempted from GST, <br />
#creating special provisions for states like Jammu& Kashmir, North Eastern States including Assam, and hilly states like Himachal Pradesh and Uttarakhand, <br />
#decision on the date on which GST will be levied on crude petroleum, high speed diesel, petrol, natural gas, and ATF. <br />
#tax rates including the floor rates and bands, special rates /rates for a specified period to raise additional resources during a natural calamity or disaster<br />
#framing dispute resolution modalities. Rajya Sabha made this provision mandatory while passing the Bill in 2016. The GST Council will have to establish a mechanism to adjudicate any dispute arising out of its recommendations. Disputes can be between: (a) the centre vs. one or more states; (b) the centre and states vs. one or more states; (c) state vs. state. This implies that there will be a standing mechanism to resolve disputes.<br />
<li>GST levied and collected by Union Govt. except the tax apportioned with states in case of IGST shall also be distributable between Union and States as per the recommendations of the Finance Commission. </li><br />
<li>Union Government cannot impose surcharges (which usually goes to the consolidated fund of India) on articles which are covered under GST laws. </li><br />
<li>Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).Rajya Sabha while passing the Bill made the amendments in such a way to make it mandatory that center must provide compensation; compensation cannot be provided for more than five years, but allows to decide a shorter time period. </li><br />
</ol><br />
<br />
Valuation of goods will be done on the basis of transaction value i.e. the invoice price, which is the current practice under the Central Excise and Customs Laws. E-Commerce companies are required to collect tax at source in relation to any supplies made through their online platforms, under fulfilment model, at the rate notified by the Government. An anti-profiteering measure has been incorporated in the GST law to ensure that any benefits on account of reduction in tax rates results in commensurate reduction in prices of such goods/services. <br />
<br />
It was proposed in the 2014 bill to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce, except on those goods which are specifically exempted by the Central Government. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods will be assigned to the States from where such supplies originate. (Since GST is a destination based tax where the consuming state would receive the revenue, this provision has been built in to compensate the producer / manufacturing states, like say in case of petroleum products whose production constitutes a substantial portion of revenue for a few states). However, this provision was removed by the Rajya Sabha while passing the bill in August 2016. <br />
<br />
Some of the concessions made later by GST council may be seen [http://pib.nic.in/PressReleseDetail.aspx?PRID=1524878 here]<br />
<br />
<br />
'''Taxes subsumed in GST '''<br />
<br />
GST would replace the following taxes currently levied and collected by the Centre: <br />
<br />
#Central Excise duty <br />
#Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act 1955,<br />
#Additional Excise Duties (Goods of Special Importance) <br />
#Additional Excise Duties (Textiles and Textile Products) <br />
#Additional Customs Duty (commonly known as Countervailing duties or CVD) <br />
#Special Additional Duty of Customs (SAD) <br />
#Service Tax <br />
#Cesses and surcharges in so far as they relate to the supply of goods and services <br />
#Taxes on the sale or purchase of newspapers and on advertisements published therein.<br />
<br />
State taxes that would be subsumed within the GST are:<br />
<br />
#State VAT/ Sales Tax <br />
#Central Sales Tax (levied by the Center and collected by the States)<br />
#Luxury Tax <br />
#Octroi <br />
#Entry Tax i.e, taxes on the entry of goods into a local area for consumption, use or sale therein. (other than those in lieu of octroi) <br />
#Purchase Tax<br />
#Entertainment Tax which are not levied by the local bodies; i.e. panchayats, municipalities and District councils of autonomous districts can impose taxes on entertainment and amusements<br />
#Taxes on general advertisements <br />
#Taxes on lotteries, betting and gambling <br />
#State cesses and surcharges insofar as they relate to supply of goods or services <br />
<br />
GST does not subsume stamp duties and custom duties. <br />
<br />
<br />
'''Constitution Amendment Bills of 2011 & 2014'''<br />
<br />
The assignment of concurrent jurisdiction to the Centre and the States for the levy of GST would require a unique institutional mechanism that would ensure that decisions about the structure, design and operation of GST are taken jointly by the two. For it to be effective, such a mechanism also needs to have Constitutional force. <br />
<br />
To address all these and other issues, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha on 22.03.2011. The Bill was referred to the Parliamentary Standing Committee on Finance for examination and based on its report, certain official amendments were prepared. Subsequent to general elections and formation of a new Government, the Union Cabinet under Prime Minister Shri Narendra Modi approved on 17th December, 2014 the proposal for replacing the earlier bill of the erstwhile government with a similar bill alongwith some more amendments -The Constitution (122nd Amendment) (GST) Bill, 2014- to facilitate the introduction of GST. The Union Finance Minister Shri Arun Jaitley introduced the said Bill in the Lok Sabha on 19th December 2014.This was passed by the lower House of the Parliament - Lok Sabha - on 6 May 2016. The Bill was passed with certain amendments in the Rajya Sabha on 4 August 2016. The amended bill was finally passed by Lok Sabha on 8 August 2016. <br />
<br />
Constitution Amendment Bill confers concurrent powers to Parliament and the state Legislatures to make laws governing GST. <br />
<br />
The Constitution Amendment Bill needs to be passed by a two-third majority in both Houses of Parliament and subsequent ratification by at least half of the State Legislatures. After passage of the Bill by both Houses of Parliament, ratification by State legislatures and receipt of assent by the President, the process of enactment would be complete. The first state to ratify the Constitution Amendment Bill was Assam. The 101st Constitution Amendment Bill was notified on 8 September 2017. <br />
<br />
<br />
'''Implementation Progress'''<br />
<br />
Every Union Budget since its introduction of the idea in 2006-07 has been expressing the Government's commitments to go ahead with the GST implementation. GST is now expected to be implemented by April 2016. However, the work is still in progress. <br />
<br />
[http://www.gstn.org/index.php/about-us Goods and Services Tax Network (GSTN)] was formed as a Section 25 (not for profit), non-Government, private limited company on March 28, 2013 to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions.<br />
<br />
The Central Board of Excise and Customs (CBEC) is involved with the drafting of GST law and procedures, particularly the CGST and IGST law, which will be exclusive domain of the Central Government. CBEC also addresses the implementation challenges. A GST Cell has been created within CBEC which functions under the Joint Secretary TRU –II. The draft Model GST Law was released in [http://finmin.nic.in/reports/ModelGSTLaw_draft.pdf June 2016]. <br />
<br />
In 2013, four Committees were constituted by the Empowered Committee of State Finance Ministers (EC) to deal with the various aspects of work relating to the introduction of GST. The Committees are: <br />
<br />
<ol style="list-style-type:lower-roman"><br />
<li>The Committee on the Problem of Dual Control, Threshold and Exemptions in GST Regime;</li><br />
<li>The Committee on Revenue Neutral Rates for State GST & Central GST and Place of Supply Rules (A Sub-Committee has been constituted to examines issues relating to the Place of Supply Rules); </li><br />
<li>The Committee on IGST & GST on Imports (A Sub- Committee was set up to examine issues pertaining to IGST model);</li> <br />
<li>The Committee to draft model GST Law (Three Sub-Committees were constituted to draft various aspects of the model law). </li><br />
</ol><br />
A Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian on Possible Tax rates under GST submitted [http://finmin.nic.in/the_ministry/dept_revenue/Report_Revenue_Neutral_Rate.pdf its Report] to the Finance Minister on 4 December 2015. On the Revenue Neutral Rate (RNR), the Committee recommended the same in the range between 15 percent and 15.5 percent (Centre and states combined) with a preference for the lower end of that range.<br />
<br />
The GST law is still evolving and the dialogue continues between the Centre and the States on related issues. A number of procedural, legal and administrative issues relating to GST are under active discussions in various Committees / Sub-committees constituted by the EC and in various Groups constituted by the CBEC. <br />
<br />
The following four GST related Acts were passed by the Parliament on 6 April 2017 and notified on 12 April 2017:<br />
<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/cgst-act.pdf Central Goods and Services Tax Act 2017] (The CGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/igst-act.pdf Integrated Goods and Services Tax Act 2017] (The IGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/ut-gst-act.pdf Union Territory Goods and Services Tax Act 2017] (The UTGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/gst-compensation-to-states-act.pdf Goods and Services Tax (Compensation to the States) Act 2017] (The Compensation Act)<br />
<br />
The major features of these Acts may be seen [http://pib.nic.in/newsite/PrintRelease.aspx?relid=158845 here].<br />
<br />
The 14th Goods and Services Tax (GST) Council Meeting, held at Srinagar, Jammu and Kashmir on 18 May 2017 broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods. More details may be seen [http://www.cbec.gov.in/ here].On [http://www.cbec.gov.in/resources//htdocs-cbec/gst/chapter-wise-rate-wise-gst-schedule-03.06.2017.pdf 3 June 2017] GST council declared that Natural or cultured pearls, precious or semi-precious stones, precious<br />
metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin etc. would attract 3% GST while rough diamond will attract 0.25%.<br />
<br />
Consequent to the GST Council’s recommendation, the Cabinet in its meeting on [http://pib.nic.in/newsite/erelease.aspx?relid=170376 30 August, 2017] approved promulgation of an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017, so as to increase the maximum rate, at which the Compensation cess can be levied from 15% to 25% on certain motor vehicles for transport of not more than thirteen persons , including the driver, like SUVs. <br />
<br />
<br />
<br />
<br />
==References==<br />
#[http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf FAQ on GST]<br />
#[http://www.cbec.gov.in/htdocs-cbec/gst/index# CBEC site for GST]<br />
#[http://finmin.nic.in/GST/index.asp Discussion Paper by Empowered committee] <br />
#[http://www.fincomindia.nic.in/ShowContentOne.aspx?id=28&Section=1 Thirteenth Finance Commission, Chapter 5, “Goods and Services Tax”], pp-63-76 <br />
#[http://www.cbec.gov.in/deptt_offcr/gst-status-18032014.pdf Internal status note of CBEC]<br />
#[http://pib.nic.in/newsite/mainpage.aspx PIB release dated 22 December 2014]<br />
#[http://pib.nic.in/newsite/erelease.aspx?relid=148240 The Frequently Asked Questions] on the features of GST issued by the Government on 3 August 2016<br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. Central Board of Excise and Customs.</span><br><br />
<span class="small_footernote" id="ref2">2. PIB Press release dated 22 December 2014.</span><br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=376 Abhinash Dash, IES(2009)], [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:abinashdash349@gmail.com abinashdash349@gmail.com], [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|GoodsandServicesTax]]</div>Rosemary.ahttp://arthapedia.in/index.php/Goods_and_Services_TaxGoods and Services Tax2018-03-16T13:18:26Z<p>Rosemary.a: </p>
<hr />
<div>Goods and Services Tax (GST) refers to the single unified tax created by amalgamating a large number of Central and State taxes presently applicable in India. The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/consti-amend-act.pdf 101st constitution Amendment Act] of September 2016 made in this regard, inserted a definition of GST in Article 366 of the constitution by inserting a sub-clause 12A. As per that, GST means any tax on supply of goods, or services, or both, except taxes on supply of the alcoholic liquor for human consumption. And here, services are defined to mean anything other than goods. <br />
<br />
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages (set-off means making good the payments on account of prior-stage taxes for the transactions across the entire value chain). In other words, it follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management.<br />
<br />
Implementation of GST is one of the major indirect tax reforms in India and was put in place on 1 July 2017 during a special midnight session of the Parliament. The aforesaid Constitutional Amendment Act for introducing GST was passed in the Parliament on 8 August 2016 and notified on 8 September 2016. The Various other GST laws were passed on 6 April 2017 and notified on 12 April 2017. <br />
<br />
In September 2016, Government released an FAQ on GST which may be seen [http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf here]. The main features of GST as per the various Acts /Rules are summarized [http://pib.nic.in/newsite/PrintRelease.aspx?relid=161273 here]. <br />
<br />
The 14th Goods and Services Tax (GST) Council Meeting, held at Srinagar, Jammu and Kashmir on 18 May 2017 broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28%. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods. More details may be seen [http://www.cbec.gov.in/ here]. On [http://www.cbec.gov.in/resources//htdocs-cbec/gst/chapter-wise-rate-wise-gst-schedule-03.06.2017.pdf 3 June 2017] GST council declared that Natural or cultured pearls, precious or semi-precious stones, precious<br />
metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin etc. would attract 3% GST while rough diamond will attract 0.25%.<br />
<br />
Consequent to the GST Council’s recommendation, the Cabinet in its meeting on [http://pib.nic.in/newsite/erelease.aspx?relid=170376 30 August, 2017] approved promulgation of an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017, so as to increase the maximum rate, at which the Compensation cess can be levied from 15% to 25% on certain motor vehicles for transport of not more than thirteen persons , including the driver, like SUVs. <br />
<br />
<br />
'''Context & Genesis of GST'''<br />
<br />
Currently, fiscal powers between the Centre and the States are clearly demarcated in the [http://indiacode.nic.in/coiweb/welcome.html Constitution of India] with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax. Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportation from India, the Centre levies and collects this tax as additional duties of customs. This duty counterbalances excise duties, sales tax, State [http://en.wikipedia.org/wiki/Value-added_tax value added tax] (VAT) and other taxes levied on the like domestic product. Introduction of the GST would require amendments in the Constitution so as to concurrently empower the Centre and the States to levy and collect the GST. <br />
<br />
The tax unification process has been going on in India for some time now. There have been efforts to improve upon the Central excise duty and States sales tax regime starting with the introduction of MODVAT in 1986. CENVAT which replaced MODVAT, at the central level, is a valued added tax that provided credit on tax paid on inputs and it was an improvement over Central excise duty. At state level, the state VAT was an improvement over sales tax regime. However, there have been some problems associated with the present taxation system like; the CENVAT is confined only to the manufacturing stage and it has not included several Central taxes. Similarly, the State VAT is paid on the value of goods that includes the CENVAT already paid. It is thereby a “tax on tax”. There is also burden of Central Sales Tax (CST) on the inter-state movement of goods. Further, ‘setting-off’ service tax has been a difficult proposition especially at the state level and taxes like luxury tax, entertainment tax etc. are still out of the purview of State level VAT. The GST is thus an overarching and overhauling effort in the Indian taxation system to unify the process and reduce the multiplicity of taxes.<br />
<br />
The idea of moving towards the GST was first mooted by the then Union Finance Minister Shri P. Chidambaram in his [http://indiabudget.nic.in/ Budget for 2006-07]. This was based on the 2003 Report of the Kelkar Task Force on indirect taxes. Initially, it was proposed that GST would be introduced by 1st April, 2010. The Empowered Committee of State Finance Ministers (EC) which had formulated the design of State VAT was requested to come up with a roadmap and structure for the GST. Joint Working Groups of officials having representation of the States as well as the Centre were set up to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services and taxation of inter-State supplies. Based on discussions within and between it and the Central Government, the EC released its [http://finmin.nic.in/GST/Empowered%20Committee%20of%20SFM%20%20First%20Discussion%20paper.pdf First Discussion Paper (FDP)] on the GST in November, 2009. This spells out the features of the proposed GST and has formed the basis for discussion between the Centre and the States so far. <br />
<br />
The GST implementation took a lot of time as some States have been apprehensive about surrendering their taxation jurisdiction while others wanted to be adequately compensated.<br />
<br />
In the [http://indiabudget.nic.in/ Union Budget 2014-15] the Finance Minister indicated that the debate whether to introduce a Goods and Services Tax (GST) must now come to an end. Following the Budget presentation in July 2014, the Constitution Amendment Bill was placed in the Parliament in December 2014. This was passed by the lower House of the Parliament - Lok Sabha - on 6 May 2016. It was then referred to the Select Committee of Rajya Sabha (the upper house of the Parliament) which submitted its report on 22 July 2015. The Bill was passed with certain amendments in the Rajya Sabha on 4 August 2016. The amended bill was finally passed by Lok Sabha on 8 August 2016 and notified the same on 8 September 2016. <br />
<br />
Suitable legislation for the levy of GST (Central GST Bill and State GST Bills) drawing powers from the Constitution can be introduced in Parliament or the State Legislatures only after the enactment of the Constitution Amendment Bill. Unlike the Constitutional Amendment, the GST Bills would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after the GST law has been enacted by the respective legislatures. Also, unlike the State VAT, the date of commencement of this levy would have to be synchronized across the Centre and the States. This is because the IGST model cannot function unless the Centre and all the States participate simultaneously. <br />
<br />
A road map published by the Government subsequent to passage of Constitution amendment bill may be seen [http://pibphoto.nic.in/documents/rlink/2016/aug/p20168402.pdf here]. <br />
<br />
The Various other GST laws were passed on 6 April 2017 and notified on 12 April 2017 and rates for various commodities were fixed in May 2017. <br />
<br />
<br />
'''Advantages of GST'''<br />
<br />
Adam Smith, father of economics, has laid down four canons of taxation which are equality, certainty, convenience and economy. A tax can be tested on these four criteria. The Good and Services Tax (GST) qualifies for these four canons in a better manner. By amalgamating various taxes into a single tax, GST would mitigate cascading or double taxation (tax upon tax situations) in a major way and pave the way for a common national market. If implemented rightly, it can ensure that there is a single rate for a particular commodity across the states thereby increasing the ease of doing business. If the benefits are passed on fully, for consumers, this would mean 25%-30% reduction in the prices they pay, as tax burden on goods comes down<sup class="reference">[[#ref1|[1]]]</sup>. This can reduce the overall costs of production and hence, introduction of GST would also make Indian products more competitive in the domestic and international markets, with beneficial effects on economic growth. According to the implementing agency, [http://www.cbec.gov.in/ Central Board of Excise and Customs (CBEC)], this tax, because of its transparent character, would be easier to administer.It is designed in such way that all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent. [http://indiabudget.nic.in/bspeecha.asp Union Budget 2014-15] admitted that GST will streamline the tax administration, avoid harassment of the business and result in higher revenue collection, both for the Centre and the States. GST also helps in better tax collections, better tax compliance, less cases of tax evasion and litigation, more transparency, less harassment and corruption, according to Union Finance Minister, Shri Arun Jaitly<sup class="reference">[[#ref2|[2]]]</sup>. GST is estimated to increase the GDP growth by 1.5 to 2% (Source: PIB release dated [http://pib.nic.in/newsite/PrintRelease.aspx?relid=161273 25 April 2017]). <br />
<br />
<br />
'''Salient Features of GST as proposed in India'''<br />
<br />
The salient features of GST are as under: <br />
<br />
<ol style="list-style-type:lower-roman"><br />
<li>GST comes under the broad spectrum of what is known as [http://en.wikipedia.org/wiki/Value-added_tax Value Added Tax] which provides for input credits and taxes only the value addition that happened in the process of production / provision of service.</li><br />
<li>GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.</li> <br />
<li>GST would be a destination based tax as against the present concept of origin based tax. i.e, tax is imposed at the point of consumption. </li> <br />
<li>It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST, to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST). This is to protect the fiscal federalism of this country as both the levels of government have the constitutional mandate to levy and collect specific taxes. SGST would be applicable only if both the buyer and seller are located within the state. CGST does not have any such restriction regarding location.</li><br />
<li>The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.</li> <br />
<li>CGST and SGST would be levied at rates to be mutually agreed upon by the Centre and the States. </li> <br />
<li>Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST paid on inputs may be used only for paying SGST. In other words, the two streams of input tax credit cannot be mixed except in specified circumstances of inter-State sales. </li><br />
<li> However, cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model.</li><br />
<li>All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST (To include alcoholic liquor, which is a major source of revenue for the states, another constitution amendment would be required). Crude Petroleum and some petroleum products have also been Constitutionally brought under GST. However, it is provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period. </li><br />
<li>Tobacco and tobacco products would be subject to GST. In addition, the Centre could continue to levy Central Excise duty and the States can levy sales tax / VAT. </li><br />
<li>Exports would be [http://www.investopedia.com/terms/z/zero-rated-goods.asp zero-rated].The exporter shall have an option to either pay tax for his output and claim its refund or export under bond without tax and claim refund of Input Tax Credit. </li><br />
<li>Import of goods or services would be treated as inter-State supplies and therefore, would be subject to IGST in addition to the applicable customs duties. In other words, all imported goods will be charged integrated tax (IGST) which is equivalent to Central GST + State GST. This will bring equality with taxation on local products.</li><br />
<li>The list of exempted goods and services is attempted to be kept to a minimum and it would be harmonized for the Centre and the States as far as possible.</li> <br />
<li>A common threshold exemption would apply to both CGST and SGST. Dealers with a turnover below it would be exempt from tax. A compounding option (i.e.to pay tax at a flat rate without credits) would be available to small dealers below a certain threshold. The threshold exemption and compounding provision would be optional. For instance, taxpayers with an aggregate turnover in a financial year up to Rs.20 lakhs would be exempt from tax. Aggregate turnover will be computed on all India basis. For eleven Special Category States, like those in the North-East and the hilly States, the exemption threshold will be Rs. 10 lakhs. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Taxpayers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption. Similarly, small taxpayers with an aggregate turnover in a financial year up to Rest. 50 lakhs shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC. </li> <br />
<li>GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST. </li><br />
<li>The laws, regulations and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible. </li><br />
<li>A '''Goods & Services Tax Council''' which will be a joint forum of the Centre and the States will be created. This Council would function under the Chairmanship of the Union Finance Minister and will have Ministers in charge of Finance/Revenue or Minister nominated by each of the States & UTs with Legislatures, as members. Members have differential voting powers with votes of the central government having 1/3rd weightage and rest 2/3rd with states. Decisions can be taken only if it has more than 3/4th majority (i.e. Votes in Favour = 1/3 *Votes in favour by Center + [(2/3 * 1/No. of states present and Voting)*Votes in favour by States]). Such decisions will be immune from the deficiencies in the constitution of the GST council or appointment of its members or any procedural irregularity. The Council will make recommendations to the Union and the States on important issues like <br />
#taxes, cesses and surcharges levied by the Union, States and local bodies which may be subsumed in the GST<br />
#the goods and services that may be subjected to or exempted from GST<br />
#apportioning of the revenue between center and states in case of IGST <br />
#Framing of model GST laws <br />
#deciding the principles that govern the determination of place of supply, based on GST laws <br />
#decision on threshold limits of turnover below which goods and services may be exempted from GST, <br />
#creating special provisions for states like Jammu& Kashmir, North Eastern States including Assam, and hilly states like Himachal Pradesh and Uttarakhand, <br />
#decision on the date on which GST will be levied on crude petroleum, high speed diesel, petrol, natural gas, and ATF. <br />
#tax rates including the floor rates and bands, special rates /rates for a specified period to raise additional resources during a natural calamity or disaster<br />
#framing dispute resolution modalities. Rajya Sabha made this provision mandatory while passing the Bill in 2016. The GST Council will have to establish a mechanism to adjudicate any dispute arising out of its recommendations. Disputes can be between: (a) the centre vs. one or more states; (b) the centre and states vs. one or more states; (c) state vs. state. This implies that there will be a standing mechanism to resolve disputes.<br />
<li>GST levied and collected by Union Govt. except the tax apportioned with states in case of IGST shall also be distributable between Union and States as per the recommendations of the Finance Commission. </li><br />
<li>Union Government cannot impose surcharges (which usually goes to the consolidated fund of India) on articles which are covered under GST laws. </li><br />
<li>Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).Rajya Sabha while passing the Bill made the amendments in such a way to make it mandatory that center must provide compensation; compensation cannot be provided for more than five years, but allows to decide a shorter time period. </li><br />
</ol><br />
<br />
Valuation of goods will be done on the basis of transaction value i.e. the invoice price, which is the current practice under the Central Excise and Customs Laws. E-Commerce companies are required to collect tax at source in relation to any supplies made through their online platforms, under fulfilment model, at the rate notified by the Government. An anti-profiteering measure has been incorporated in the GST law to ensure that any benefits on account of reduction in tax rates results in commensurate reduction in prices of such goods/services. <br />
<br />
It was proposed in the 2014 bill to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce, except on those goods which are specifically exempted by the Central Government. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods will be assigned to the States from where such supplies originate. (Since GST is a destination based tax where the consuming state would receive the revenue, this provision has been built in to compensate the producer / manufacturing states, like say in case of petroleum products whose production constitutes a substantial portion of revenue for a few states). However, this provision was removed by the Rajya Sabha while passing the bill in August 2016. <br />
<br />
Some of the concessions made later by GST council may be seen [http://pib.nic.in/PressReleseDetail.aspx?PRID=1524878 here]<br />
'''Taxes subsumed in GST '''<br />
<br />
GST would replace the following taxes currently levied and collected by the Centre: <br />
<br />
#Central Excise duty <br />
#Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act 1955,<br />
#Additional Excise Duties (Goods of Special Importance) <br />
#Additional Excise Duties (Textiles and Textile Products) <br />
#Additional Customs Duty (commonly known as Countervailing duties or CVD) <br />
#Special Additional Duty of Customs (SAD) <br />
#Service Tax <br />
#Cesses and surcharges in so far as they relate to the supply of goods and services <br />
#Taxes on the sale or purchase of newspapers and on advertisements published therein.<br />
<br />
State taxes that would be subsumed within the GST are:<br />
<br />
#State VAT/ Sales Tax <br />
#Central Sales Tax (levied by the Center and collected by the States)<br />
#Luxury Tax <br />
#Octroi <br />
#Entry Tax i.e, taxes on the entry of goods into a local area for consumption, use or sale therein. (other than those in lieu of octroi) <br />
#Purchase Tax<br />
#Entertainment Tax which are not levied by the local bodies; i.e. panchayats, municipalities and District councils of autonomous districts can impose taxes on entertainment and amusements<br />
#Taxes on general advertisements <br />
#Taxes on lotteries, betting and gambling <br />
#State cesses and surcharges insofar as they relate to supply of goods or services <br />
<br />
GST does not subsume stamp duties and custom duties. <br />
<br />
<br />
'''Constitution Amendment Bills of 2011 & 2014'''<br />
<br />
The assignment of concurrent jurisdiction to the Centre and the States for the levy of GST would require a unique institutional mechanism that would ensure that decisions about the structure, design and operation of GST are taken jointly by the two. For it to be effective, such a mechanism also needs to have Constitutional force. <br />
<br />
To address all these and other issues, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha on 22.03.2011. The Bill was referred to the Parliamentary Standing Committee on Finance for examination and based on its report, certain official amendments were prepared. Subsequent to general elections and formation of a new Government, the Union Cabinet under Prime Minister Shri Narendra Modi approved on 17th December, 2014 the proposal for replacing the earlier bill of the erstwhile government with a similar bill alongwith some more amendments -The Constitution (122nd Amendment) (GST) Bill, 2014- to facilitate the introduction of GST. The Union Finance Minister Shri Arun Jaitley introduced the said Bill in the Lok Sabha on 19th December 2014.This was passed by the lower House of the Parliament - Lok Sabha - on 6 May 2016. The Bill was passed with certain amendments in the Rajya Sabha on 4 August 2016. The amended bill was finally passed by Lok Sabha on 8 August 2016. <br />
<br />
Constitution Amendment Bill confers concurrent powers to Parliament and the state Legislatures to make laws governing GST. <br />
<br />
The Constitution Amendment Bill needs to be passed by a two-third majority in both Houses of Parliament and subsequent ratification by at least half of the State Legislatures. After passage of the Bill by both Houses of Parliament, ratification by State legislatures and receipt of assent by the President, the process of enactment would be complete. The first state to ratify the Constitution Amendment Bill was Assam. The 101st Constitution Amendment Bill was notified on 8 September 2017. <br />
<br />
<br />
'''Implementation Progress'''<br />
<br />
Every Union Budget since its introduction of the idea in 2006-07 has been expressing the Government's commitments to go ahead with the GST implementation. GST is now expected to be implemented by April 2016. However, the work is still in progress. <br />
<br />
[http://www.gstn.org/index.php/about-us Goods and Services Tax Network (GSTN)] was formed as a Section 25 (not for profit), non-Government, private limited company on March 28, 2013 to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions.<br />
<br />
The Central Board of Excise and Customs (CBEC) is involved with the drafting of GST law and procedures, particularly the CGST and IGST law, which will be exclusive domain of the Central Government. CBEC also addresses the implementation challenges. A GST Cell has been created within CBEC which functions under the Joint Secretary TRU –II. The draft Model GST Law was released in [http://finmin.nic.in/reports/ModelGSTLaw_draft.pdf June 2016]. <br />
<br />
In 2013, four Committees were constituted by the Empowered Committee of State Finance Ministers (EC) to deal with the various aspects of work relating to the introduction of GST. The Committees are: <br />
<br />
<ol style="list-style-type:lower-roman"><br />
<li>The Committee on the Problem of Dual Control, Threshold and Exemptions in GST Regime;</li><br />
<li>The Committee on Revenue Neutral Rates for State GST & Central GST and Place of Supply Rules (A Sub-Committee has been constituted to examines issues relating to the Place of Supply Rules); </li><br />
<li>The Committee on IGST & GST on Imports (A Sub- Committee was set up to examine issues pertaining to IGST model);</li> <br />
<li>The Committee to draft model GST Law (Three Sub-Committees were constituted to draft various aspects of the model law). </li><br />
</ol><br />
A Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian on Possible Tax rates under GST submitted [http://finmin.nic.in/the_ministry/dept_revenue/Report_Revenue_Neutral_Rate.pdf its Report] to the Finance Minister on 4 December 2015. On the Revenue Neutral Rate (RNR), the Committee recommended the same in the range between 15 percent and 15.5 percent (Centre and states combined) with a preference for the lower end of that range.<br />
<br />
The GST law is still evolving and the dialogue continues between the Centre and the States on related issues. A number of procedural, legal and administrative issues relating to GST are under active discussions in various Committees / Sub-committees constituted by the EC and in various Groups constituted by the CBEC. <br />
<br />
The following four GST related Acts were passed by the Parliament on 6 April 2017 and notified on 12 April 2017:<br />
<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/cgst-act.pdf Central Goods and Services Tax Act 2017] (The CGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/igst-act.pdf Integrated Goods and Services Tax Act 2017] (The IGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/ut-gst-act.pdf Union Territory Goods and Services Tax Act 2017] (The UTGST Act)<br />
#The [http://www.cbec.gov.in/resources//htdocs-cbec/gst/gst-compensation-to-states-act.pdf Goods and Services Tax (Compensation to the States) Act 2017] (The Compensation Act)<br />
<br />
The major features of these Acts may be seen [http://pib.nic.in/newsite/PrintRelease.aspx?relid=158845 here].<br />
<br />
The 14th Goods and Services Tax (GST) Council Meeting, held at Srinagar, Jammu and Kashmir on 18 May 2017 broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods. More details may be seen [http://www.cbec.gov.in/ here].On [http://www.cbec.gov.in/resources//htdocs-cbec/gst/chapter-wise-rate-wise-gst-schedule-03.06.2017.pdf 3 June 2017] GST council declared that Natural or cultured pearls, precious or semi-precious stones, precious<br />
metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin etc. would attract 3% GST while rough diamond will attract 0.25%.<br />
<br />
Consequent to the GST Council’s recommendation, the Cabinet in its meeting on [http://pib.nic.in/newsite/erelease.aspx?relid=170376 30 August, 2017] approved promulgation of an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017, so as to increase the maximum rate, at which the Compensation cess can be levied from 15% to 25% on certain motor vehicles for transport of not more than thirteen persons , including the driver, like SUVs. <br />
<br />
<br />
<br />
<br />
==References==<br />
#[http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf FAQ on GST]<br />
#[http://www.cbec.gov.in/htdocs-cbec/gst/index# CBEC site for GST]<br />
#[http://finmin.nic.in/GST/index.asp Discussion Paper by Empowered committee] <br />
#[http://www.fincomindia.nic.in/ShowContentOne.aspx?id=28&Section=1 Thirteenth Finance Commission, Chapter 5, “Goods and Services Tax”], pp-63-76 <br />
#[http://www.cbec.gov.in/deptt_offcr/gst-status-18032014.pdf Internal status note of CBEC]<br />
#[http://pib.nic.in/newsite/mainpage.aspx PIB release dated 22 December 2014]<br />
#[http://pib.nic.in/newsite/erelease.aspx?relid=148240 The Frequently Asked Questions] on the features of GST issued by the Government on 3 August 2016<br />
<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. Central Board of Excise and Customs.</span><br><br />
<span class="small_footernote" id="ref2">2. PIB Press release dated 22 December 2014.</span><br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=376 Abhinash Dash, IES(2009)], [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:abinashdash349@gmail.com abinashdash349@gmail.com], [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|GoodsandServicesTax]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-16T13:12:24Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive fugitive] economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.<br />
<br />
A Fugitive Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act (PMLA), 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf '''Fugitive Economic Offenders Bill, 2018'''] and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. Offences under some 15 Acts are listed in the Schedule to the Bill. <br />
<br />
The word is defined in Section 2(1)(f) of the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament on 12 March 2018 may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here].<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
placing the burden of proof for establishing that an individual is a fugitive economic offender is on the Director or the person authorised by the Director appointed under section 49(1) of PMLA. <br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf rule of law] with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-16T13:10:24Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive fugitive] economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.<br />
<br />
A Fugitive Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act (PMLA), 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf '''Fugitive Economic Offenders Bill, 2018'''] and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. Offences under some 15 Acts are listed in the Schedule to the Bill. <br />
<br />
The word is defined in Section 2(1)(f) of the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament on 12 March 2018 may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here].<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
placing the burden of proof for establishing that an individual is a fugitive economic offender is on the Director or the person authorised by the Director appointed under section 49(1) of PMLA. <br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the rule of [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf law with] respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-16T13:07:38Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive fugitive] economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.<br />
<br />
A Fugitive Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act, 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf '''Fugitive Economic Offenders Bill, 2018'''] and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. Offences under some 15 Acts are listed in the Schedule to the Bill. <br />
<br />
The word is defined in Section 2(1)(f) of the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament on 12 March 2018 may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here].<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the rule of [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf law with] respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-16T12:56:57Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive Fugitive] Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The%20Prevention%20of%20Money-laudering%20Act,%202002.pdf Prevention of Money-laundering Act, 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to '''Fugitive Economic Offenders Bill, 2018''' and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.<br />
<br />
The word is defined in the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill as introduced in the Parliament may be seen [http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/79_2018_LS_Eng.pdf here].<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the rule of [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf law with] respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-07T13:35:37Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive Fugitive] Economic Offender is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The Prevention of Money-laudering Act, 2002.pdf Prevention of Money-laundering Act, 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to '''Fugitive Economic Offenders Bill, 2018''' and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.<br />
<br />
The word is defined in the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill is yet to be introduced in the Parliament.<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the rule of [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf law with] respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/Fugitive_Economic_OffenderFugitive Economic Offender2018-03-07T13:34:26Z<p>Rosemary.a: </p>
<hr />
<div>A [https://www.merriam-webster.com/dictionary/fugitive Fugitive Economic Offender] is a person declared so by a 'Special Court' set up under the [http://lawmin.nic.in/ld/P-ACT/2003/The Prevention of Money-laudering Act, 2002.pdf Prevention of Money-laundering Act, 2002], against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to '''Fugitive Economic Offenders Bill, 2018''' and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.<br />
<br />
The word is defined in the Fugitive Economic Offenders Bill, 2018 which lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. This Bill is yet to be introduced in the Parliament.<br />
<br />
The cases where the total value involved in such offences is Rs.100 crore (approx US$15 million) or more, will come under the purview of this Bill. Hence, a fugitive offender term applies only to those who owe more than Rs. 100 crore in the domestic territory of India.<br />
<br />
<br />
'''Implications of being a fugitive economic offender'''<br />
<br />
The property of a fugitive economic offender, resulting from the proceeds of crime, including [http://www.arthapedia.in/index.php?title=Benami_Property benami property], can be confiscated once he is declared so by the Court (Provisional attachment may happen before confiscation<sup class="reference">[[#ref1|[1]]]</sup>). Properties abroad are also liable for confiscation. Further, he would be disentitled from defending any civil claim. An Administrator will be appointed to manage and dispose of the confiscated property.<br />
<br />
However, if, at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.<br />
<br />
<br />
'''Background:'''<br />
<br />
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts hampers investigation in criminal cases, wastes precious time of courts of law and undermines the rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem. It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.<br />
<br />
The '''non-conviction-based asset confiscation''' for corruption-related cases is enabled under provisions of [https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf United Nations Convention against Corruption] (ratified by India in 2011). Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. The Fugitive Economic Offenders Bill, 2018 adopts this principle.<br />
<br />
In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.<br />
<br />
<br />
'''Objectives of the Fugitive Economic Offenders Bill'''<br />
<br />
The Bill is expected to re-establish the rule of [https://www.americanbar.org/content/dam/aba/migrated/publiced/features/Part1DialogueROL.authcheckdam.pdf law with] respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences (meaning list of economic offences appearing in the schedule to the Fugitive Economic Offenders Act). This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.<br />
<br />
It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. “Confiscation” mean the permanent deprivation of property by order of a court or other competent authority;</span><br />
<br />
<br />
==References==<br />
* Source: [http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920 Press release]dated 1 March 2018<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rose Mary K Abraham (IES 2006)]<br />
* Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|FugitiveEconomicOffender]]<br />
[[Category:Contributed|A]]</div>Rosemary.ahttp://arthapedia.in/index.php/BackwardnessBackwardness2018-02-01T09:52:25Z<p>Rosemary.a: </p>
<hr />
<div>As a consequence of amalgamation of regions at varying levels of socio- economic development & different political and administrative structures, the modern state has inherited regional imbalances that still persist. The backwardness of states is measured to understand the extent of these regional imbalances. Some of the attempts to define or measure backwardness in India are mentioned below. However, it is pertinent to note that no state has been categorized as a "backward state" in India:<br />
<br />
'''Measuring backwardness of taluks in the state of Karnataka - 2000'''<br />
<br />
Considering the resentment in North Karnataka over growing disparities, the state government of Karnataka had appointed a High Powered Committee for Redressal of Regional Imbalances (HPCRRI) in October 2000. Committee studied the disparities & presented its report in June 2002 wherein all the taluks in the State were categorized in the order of backwardness. The study followed a two-fold approach<br />
*overall level of backwardness of taluk was determined by evolving Comprehensive Composite Development Index (CCDI) using 35 indicators <br />
*taluks were classified as Most Backward, More Backward and Backward Taluks<br />
<br />
The 35 indicators considered by this study pertained to 5 main sectors: <br />
*Agriculture - % of Total cropped area to net area sown, % Area under food grains, % of Area under Horticultural crops to total Cropped Area, % Area under Commercial crops to total Cropped Area, % net area irrigated to net area sown, Fertilizer(NPK) Consumption in Kg per Hec, No. of Tractors per 000 hectares, Live Stock Units per lakh rural population, Bank Credit to Agriculture<br />
*Industry, Trade & Finance - No. of Industrial units per lakh population, % Industrial Workers to Total Main Workers, Bank Advances per lakh population, No. of Bank Branches per lakh population, No. of Enterprises engaged in trade, hotels & transport<br />
*Economic Infrastructure - No. of Post Offices per lakh population, No. of Telephones per lakh population, Road length, No. of Villages having access to all weather Roads, Railway line length, No. of Motor Vehicles per lakh population, No. of Co-operative credit Societies per lakh population, Proportion of electrified villages including Hamlets, Regulated Markets & Sub Markets per lakh population<br />
*Social Infrastructure - No. of Doctors per 10000 population, No. of Beds per 10000 population, Literacy Rate, Pupil-Teacher Rate (I to X std), Children Out of School in the 6-14 age group, No. of Students enrolled in Aided & Degree Colleges, No. of Habitations having drinking water facility of 40 or more LPCD. <br />
*Population Characteristics - Sex Ratio, Urban Population to total Population, SC & ST Population, No. of Non Agricultural Workers, Agricultural labourers to Total Main Workers<br />
<br />
<br />
The Committee had also calculated the resource allocation among the four divisions of the state i.e., Gulbarga, Belgaum, Bangalore and Mysore Division, based on the Cumulative Deprivation Index (1-CCDI).<br />
<br />
<br />
'''Measuring backwardness of Districts at the national level - 2003-04'''<br />
<br />
Concept of Backwardness also came up in the context of a scheme for backward districts, called Backward Districts Initiative – [http://planningcommission.nic.in/plans/stateplan/guid_rsvy.pdf Rashtriya Sam Vikas Yojana] (RSVY) – (A Tenth Plan Initiative). The Rashtriya Sam Vikas Yojana (RSVY) was being implemented in 147 districts since 2003-04. The list of districts covered under the RSVY may be seen [http://pib.nic.in/newsite/erelease.aspx?relid=51327 here]. The Scheme was aimed at focused development programmes for backward areas which would help reduce imbalances and speed up development. The identification of backward districts within a State was made on the basis of an index of backwardness comprising three parameters with equal weights to each: <br />
*value of output per agricultural worker;<br />
*agriculture wage rate; and<br />
*percentage of SC/ST population of the districts.<br />
<br />
This Scheme later (2006-07) got subsumed in the [http://pib.nic.in/newsite/efeatures.aspx?relid=79312 Backward Regions Grant Fund program], the guidelines of which may be seen [http://www.nird.org.in/brgf/doc/BRGFFINALGUIDELINES.pdf here]. BRGF consists of two components - (a) Districts Component covering 270 districts, and (b) State Component-which covers special plan for West Bengal, Bihar and the KalahandiBolangir-Koraput (KBK) Region of Odisha and Bundelkhand packages for UP & MP. The implementing Ministry for the BRGF districts component is the Ministry of Panchayati Raj. This Scheme was also proposed for closure from December 2009 as most of the districts have claimed their total allocation of Rs.45 crore each. As such there is no proposal under consideration of the Government to extend RSVY to other districts of the country. However, a special development package of Rs. 850.00 crore has been provided to the state of Andhra Pradesh from BRGF (State component) during 2014-15.Pursuant to the recommendations of 14th Finance Commission for higher untied tax devolution to states, the scheme followed a natural death since 2015-16. Hence, the ongoing projects under BRGF for addressing Intra-State inequality may be supported by the States out of their own funds, including received under the recommendations of 14th Finance Commission. <br />
<br />
However, the [http://164.100.47.134/lsscommittee/Finance/16_Finance_10.pdf Parliamentary Standing Committee on Finance in its report in April 2015] (on the [http://arthapedia.in/index.php?title=Demand_for_Grants Demand for Grants] of Ministry of Finance) had disagreed with this view in their report and were of the view that such subsuming of specific schemes designed with a special purpose / focus to uplift living standards in backward and under-developed areas / regions with chronic poverty is not desirable. According to the Committee, Central budgetary support and an element of hand-holding by way of [http://arthapedia.in/index.php?title=Central_Plan_Assistance special central assistance] is therefore still required to bring about social and economic development in such areas, which are lagging far behind in socioeconomic indices and which also face extraordinary challenges.In this regard the Committee desired that the recommendations of Raghuram Rajan's Report on backwardness of States (Committee for Evolving a Composite Development Index of States) may be considered and appropriately implemented.<br />
<br />
'''Measuring backwardness of states - 2013'''<br />
<br />
Government in May 2013, decided to constitute an Expert Committee under the chairmanship of Dr. Raghuram Rajan to measure backwardness of the Indian States by evolving a Composite Development Index of States for guiding devolution of funds from central government to such backward states. The committee submitted its [http://dea.gov.in/sites/default/files/Report_CompDevState_press.pdf report] in September 2013. <br />
<br />
The Committee proposed a general method for allocating funds from the Centre to the states based both on a state’s development needs as well as its development performance. Towards this, committee created a multi-dimensional index based on certain measures which correspond to the multi dimensional approach to defining poverty outlined in the Twelfth Plan. Need is based on a simple index of (under) development computed as an average of the following ten sub-components: <br />
*monthly per capita consumption expenditure<br />
*education<br />
*health<br />
*household amenities<br />
*poverty rate<br />
*female literacy<br />
*percent of SC-ST population<br />
*urbanization rate <br />
*financial inclusion<br />
*connectivity<br />
<br />
Improvements to a state’s development index over time (that is, a fall in underdevelopment) is taken as the measure of performance. Less developed states rank higher on the index, and would get larger allocations based on the need criteria, with allocations increasing more than linearly to the most underdeveloped states.<br />
<br />
The Committee recommended that States that score 0.6 and above on the Index may be classified as “''Least Developed''”; States that score below 0.6 and above 0.4 may be classified as “''Less Developed''”; and States that score below 0.4 may be classified as “Relatively Developed”. The “Least Developed” states effectively subsume what is now [http://arthapedia.in/index.php?title=Special_Category_States “special category” state].<br />
<br />
Committee recommended that each State may get a fixed basic allocation of 0.3 percent of overall funds, to which will be added its share stemming from need and performance to get its overall share. Of the funds remaining after the allocation of 0.3%, around 3/4th will be allocated based on need and 1/4th based on performance. <br />
<br />
Using the index, the Committee has identified the “Least Developed” states as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar Pradesh. Government as on date has not taken any decision on the recommendations of the Committee.<br />
<br />
==Further References==<br />
[http://planningcommission.nic.in/reports/publications/pb80_NCDBAgn.pdf Report on General Issues Relating to Backward Areas Development], National Committee on the Development of Backward Areas (1981)<br />
<br />
[http://planning.kar.nic.in/node/56/ Methodology to identify Backward taluks in Karnataka] (About 137 taluks)<br />
<br />
[http://www.nird.org.in/brgf/doc/BRGFFINALGUIDELINES.pdf Backward Regions Grant Fund, Programme Guidelines], Ministry of Panchyati Raj<br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=155 Ms. Bidisha Chaudhuri (IES 1992)]<br />
*Email- [mailto:b.chaudhuri@nic.in b.chaudhuri@nic.in]<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=349 Mr. Praveen Kumar (IES 2007)]<br />
*Email- [mailto:praveenkumar.ies@gmail.com praveenkumar.ies@gmail.com]<br />
<br />
[[Category:concepts|Backwardness]]</div>Rosemary.ahttp://arthapedia.in/index.php/BackwardnessBackwardness2018-02-01T09:51:46Z<p>Rosemary.a: </p>
<hr />
<div>As a consequence of amalgamation of regions at varying levels of socio- economic development & different political and administrative structures, the modern state has inherited regional imbalances that still persist. The backwardness of states is measured to understand the extent of these regional imbalances. Some of the attempts to define or measure backwardness in India are mentioned below. However, it is pertinent to note that no state has been categorized as a "backward state" in India:<br />
<br />
'''Measuring backwardness of taluks in the state of Karnataka - 2000'''<br />
<br />
Considering the resentment in North Karnataka over growing disparities, the state government of Karnataka had appointed a High Powered Committee for Redressal of Regional Imbalances (HPCRRI) in October 2000. Committee studied the disparities & presented its report in June 2002 wherein all the taluks in the State were categorized in the order of backwardness. The study followed a two-fold approach<br />
*overall level of backwardness of taluk was determined by evolving Comprehensive Composite Development Index (CCDI) using 35 indicators <br />
*taluks were classified as Most Backward, More Backward and Backward Taluks<br />
<br />
The 35 indicators considered by this study pertained to 5 main sectors: <br />
*Agriculture - % of Total cropped area to net area sown, % Area under food grains, % of Area under Horticultural crops to total Cropped Area, % Area under Commercial crops to total Cropped Area, % net area irrigated to net area sown, Fertilizer(NPK) Consumption in Kg per Hec, No. of Tractors per 000 hectares, Live Stock Units per lakh rural population, Bank Credit to Agriculture<br />
*Industry, Trade & Finance - No. of Industrial units per lakh population, % Industrial Workers to Total Main Workers, Bank Advances per lakh population, No. of Bank Branches per lakh population, No. of Enterprises engaged in trade, hotels & transport<br />
*Economic Infrastructure - No. of Post Offices per lakh population, No. of Telephones per lakh population, Road length, No. of Villages having access to all weather Roads, Railway line length, No. of Motor Vehicles per lakh population, No. of Co-operative credit Societies per lakh population, Proportion of electrified villages including Hamlets, Regulated Markets & Sub Markets per lakh population<br />
*Social Infrastructure - No. of Doctors per 10000 population, No. of Beds per 10000 population, Literacy Rate, Pupil-Teacher Rate (I to X std), Children Out of School in the 6-14 age group, No. of Students enrolled in Aided & Degree Colleges, No. of Habitations having drinking water facility of 40 or more LPCD. <br />
*Population Characteristics - Sex Ratio, Urban Population to total Population, SC & ST Population, No. of Non Agricultural Workers, Agricultural labourers to Total Main Workers<br />
<br />
<br />
The Committee had also calculated the resource allocation among the four divisions of the state i.e., Gulbarga, Belgaum, Bangalore and Mysore Division, based on the Cumulative Deprivation Index (1-CCDI).<br />
<br />
<br />
'''Measuring backwardness of Districts at the national level - 2003-04'''<br />
<br />
Concept of Backwardness also came up in the context of a scheme for backward districts, called Backward Districts Initiative – [http://planningcommission.nic.in/plans/stateplan/guid_rsvy.pdf Rashtriya Sam Vikas Yojana] (RSVY) – (A Tenth Plan Initiative). The Rashtriya Sam Vikas Yojana (RSVY) was being implemented in 147 districts since 2003-04. The list of districts covered under the RSVY may be seen [http://pib.nic.in/newsite/erelease.aspx?relid=51327 here]. The Scheme was aimed at focused development programmes for backward areas which would help reduce imbalances and speed up development. The identification of backward districts within a State was made on the basis of an index of backwardness comprising three parameters with equal weights to each: <br />
*value of output per agricultural worker;<br />
*agriculture wage rate; and<br />
*percentage of SC/ST population of the districts.<br />
<br />
This Scheme later (2006-07) got subsumed in the [http://pib.nic.in/newsite/efeatures.aspx?relid=79312 Backward Regions Grant Fund program], the guidelines of which may be seen [http://www.nird.org.in/brgf/doc/BRGFFINALGUIDELINES.pdf here]. BRGF consists of two components - (a) Districts Component covering 270 districts, and (b) State Component-which covers special plan for West Bengal, Bihar and the KalahandiBolangir-Koraput (KBK) Region of Odisha and Bundelkhand packages for UP & MP. The implementing Ministry for the BRGF districts component is the Ministry of Panchayati Raj. This Scheme was also proposed for closure from December 2009 as most of the districts have claimed their total allocation of Rs.45 crore each. As such there is no proposal under consideration of the Government to extend RSVY to other districts of the country. However, a special development package of Rs. 850.00 crore has been provided to the state of Andhra Pradesh from BRGF (State component) during 2014-15.Pursuant to the recommendations of 14th Finance Commission for higher untied tax devolution to states, the scheme followed a natural death since 2015-16. Hence, the ongoing projects under BRGF for addressing Intra-State inequality may be supported by the States out of their own funds, including received under the recommendations of 14th Finance Commission. <br />
<br />
However, the [http://164.100.47.134/lsscommittee/Finance/16_Finance_10.pdf Parliamentary Standing Committee on Finance in its report in April 2015] (on the [http://arthapedia.in/index.php?title=Demand_for_Grants Demand for Grants] of Ministry of Finance) had disagreed with this view in their report and were of the view that such subsuming of specific schemes designed with a special purpose / focus to uplift living standards in backward and under-developed areas / regions with chronic poverty is not desirable. According to the Committee, Central budgetary support and an element of hand-holding by way of [http://arthapedia.in/index.php?title=Central_Plan_Assistance special central assistance] is therefore still required to bring about social and economic development in such areas, which are lagging far behind in socioeconomic indices and which also face extraordinary challenges.In this regard the Committee desired that the recommendations of Raghuram Rajan's Report on backwardness of States (Committee for Evolving a Composite Development Index of States) may be considered and appropriately implemented.<br />
<br />
'''Measuring backwardness of states - 2013'''<br />
<br />
Government in May 2013, decided to constitute an Expert Committee under the chairmanship of Dr. Raghuram Rajan to measure backwardness of the Indian States by evolving a Composite Development Index of States for guiding devolution of funds from central government to such backward states. The committee submitted its [http://dea.gov.in/sites/default/files/Report_CompDevState_press.pdf] in September 2013. <br />
<br />
The Committee proposed a general method for allocating funds from the Centre to the states based both on a state’s development needs as well as its development performance. Towards this, committee created a multi-dimensional index based on certain measures which correspond to the multi dimensional approach to defining poverty outlined in the Twelfth Plan. Need is based on a simple index of (under) development computed as an average of the following ten sub-components: <br />
*monthly per capita consumption expenditure<br />
*education<br />
*health<br />
*household amenities<br />
*poverty rate<br />
*female literacy<br />
*percent of SC-ST population<br />
*urbanization rate <br />
*financial inclusion<br />
*connectivity<br />
<br />
Improvements to a state’s development index over time (that is, a fall in underdevelopment) is taken as the measure of performance. Less developed states rank higher on the index, and would get larger allocations based on the need criteria, with allocations increasing more than linearly to the most underdeveloped states.<br />
<br />
The Committee recommended that States that score 0.6 and above on the Index may be classified as “''Least Developed''”; States that score below 0.6 and above 0.4 may be classified as “''Less Developed''”; and States that score below 0.4 may be classified as “Relatively Developed”. The “Least Developed” states effectively subsume what is now [http://arthapedia.in/index.php?title=Special_Category_States “special category” state].<br />
<br />
Committee recommended that each State may get a fixed basic allocation of 0.3 percent of overall funds, to which will be added its share stemming from need and performance to get its overall share. Of the funds remaining after the allocation of 0.3%, around 3/4th will be allocated based on need and 1/4th based on performance. <br />
<br />
Using the index, the Committee has identified the “Least Developed” states as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar Pradesh. Government as on date has not taken any decision on the recommendations of the Committee.<br />
<br />
==Further References==<br />
[http://planningcommission.nic.in/reports/publications/pb80_NCDBAgn.pdf Report on General Issues Relating to Backward Areas Development], National Committee on the Development of Backward Areas (1981)<br />
<br />
[http://planning.kar.nic.in/node/56/ Methodology to identify Backward taluks in Karnataka] (About 137 taluks)<br />
<br />
[http://www.nird.org.in/brgf/doc/BRGFFINALGUIDELINES.pdf Backward Regions Grant Fund, Programme Guidelines], Ministry of Panchyati Raj<br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=155 Ms. Bidisha Chaudhuri (IES 1992)]<br />
*Email- [mailto:b.chaudhuri@nic.in b.chaudhuri@nic.in]<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Ms. Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=349 Mr. Praveen Kumar (IES 2007)]<br />
*Email- [mailto:praveenkumar.ies@gmail.com praveenkumar.ies@gmail.com]<br />
<br />
[[Category:concepts|Backwardness]]</div>Rosemary.ahttp://arthapedia.in/index.php/Electoral_BondElectoral Bond2018-01-24T04:44:59Z<p>Rosemary.a: </p>
<hr />
<div>Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.<br />
<br />
Electoral bond was announced in the [http://indiabudget.gov.in/ub2017-18/bs/bs.pdf Union Budget 2017-18]. Required amendments to the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf Reserve Bank of India Act, 1934] (Section 31(3)) and the [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf Representation of People Act, 1951] were made through Section 133 to 136 of [http://indiabudget.gov.in/ub2017-18/fb/bill.pdf Finance Bill, 2017].<br />
<br />
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. <br />
<br />
Government [http://www.incometaxindia.gov.in/communications/notification/notificationso29_2018.pdf notified] the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;<br />
<br />
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day. <br />
<br />
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.<br />
<br />
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. <br />
<br />
As per Section 29C(1) of [http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf The Representation of People Act, 1951], the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond. <br />
<br />
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.<br />
<br />
<br />
'''Also See''' <br />
<br />
[http://www.arthapedia.in/index.php?title=Electoral_Trust Electoral Trust] <br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Electoral Bond]]</div>Rosemary.ahttp://arthapedia.in/index.php/National_Investment_and_Infrastructure_Fund_(NIIF)National Investment and Infrastructure Fund (NIIF)2018-01-24T04:28:13Z<p>Rosemary.a: </p>
<hr />
<div>National Investment and Infrastructure Fund (NIIF) is a fund created by the Government of India for enhancing infrastructure financing in the country. <br />
<br />
This is different from the [http://arthapedia.in/index.php?title=National_Investment_Fund_(NIF) National Investment Fund]. <br />
<br />
NIIF was proposed to be set up as a Trust, to raise debt to invest in the equity of infrastructure finance companies such as [http://irfc.nic.in/showfile.asp?lid=479 Indian Rail Finance Corporation (IRFC)] and [http://www.nhb.org.in/ National Housing Bank (NHB)]. The idea is that these infrastructure finance companies can then leverage this extra equity, manifold. In that sense, NIIF is a banker of the banker of the banker. <br />
<br />
NIIF is envisaged as a fund of funds with the ability to make direct investments as required. As a fund of fund it may invest in other SEBI registered funds.<br />
<br />
Its creation was announced in the [http://indiabudget.nic.in/bspeecha.asp Union Budget 2015-16]. The operational framework was approved on [http://finmin.nic.in/the_ministry/dept_eco_affairs/investment_division/NIIF24082015.pdf 20 August 2015].NIIF got registered with SEBI as Category II Alternative Investment Fund (AIF) on December 28, 2015. A website was created on [http://pib.nic.in/newsite/erelease.aspx?relid=146057 8 June 2016].Mr. Sujoy Bose, Director and Global Co-Head, Infrastructure and Natural Resources, International Finance Corporation(IFC), Washington DC, was appointed as the first Chief Executive Officer (CEO) of NIIF Ltd on [http://pib.nic.in/newsite/erelease.aspx?relid=146560 27 June 2016]. Its first investment was made in January 2018. <br />
<br />
Financial Times (London) had adjudged NIIF as the Most Innovative structure in Asia Pacific under Finance category.<br />
<br />
<br />
'''Objective'''<br />
<br />
The objective of NIIF would be to maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects, for example, in manufacturing, if commercially viable.<br />
<br />
<br />
'''Functions of NIIF'''<br />
<br />
The functions of NIIF are as follows: <br />
# Fund raising through suitable instruments including off-shore credit enhanced bonds, and attracting anchor investors to participate as partners in NIIF; <br />
# Servicing of the investors of NIIF.<br />
# Considering and approving candidate companies/institutions/ projects (including state entities) for investments and periodic monitoring of investments.<br />
# Investing in the corpus created by Asset Management Companies (AMCs) for investing in private equity.<br />
# Preparing a shelf of infrastructure projects and providing advisory services. <br />
<br />
<br />
NIIF <br />
# provides equity / quasi-equity support to those Non Banking Financial Companies (NBFCs)/Financial Institutions (FIs) that are engaged mainly in infrastructure financing. These institutions will be able to leverage this equity support and provide debt to the projects selected.<br />
# Invest in funds engaged mainly in infrastructure sectors and managed by Asset Management Companies (AMCs) for equity / quasi-equity funding of listed / unlisted companies.<br />
# provides Equity/ quasi-equity support / debt to projects, to commercially viable projects, both greenfield and brownfield, including stalled projects.<br />
<br />
<br />
'''Operational Aspects''' <br />
<br />
As per the operational framework approved on [http://finmin.nic.in/the_ministry/dept_eco_affairs/investment_division/NIIF24082015.pdf 20 August 2015] NIIF is not a single entity. There can be more than one fund. The NIIF will be established as one or more [http://arthapedia.in/index.php?title=Alternative_Investment_Funds_(AIFs) Alternate Investment Funds (AIF)] under the SEBI Regulations. Of the various forms an AIF can take, NIIF was proposed to be set up as a Trust though other legal forms could also be considered from the perspective of flexibility and taxation. If set up as Category I and II AIFs, then NIIF will be eligible for a pass through status under the Income Tax Act. A 'pass-through' status means that the income generated by the fund would be taxed in the hands of the ultimate investor, and the fund itself would not have to pay tax on the same. In the case of category III AIF, where pass through status is not available, all income received by NIIF will be taxable at its level and any distribution made to the unit holders (investors) would be tax exempt. <br />
<br />
The proposed corpus of NIIF is Rs. 40,000 Crores (around USD 6 Billion). The initial authorized corpus of NIIF would be Rs. 20,000 crore, which may be raised from time to time, as decided by Ministry of Finance. Government can provide upto 20000 crore per annum into these funds. Government's contribution/share in the corpus will be 49% in each entity set up as an alternate Investment Fund (AIF) and will neither be increased beyond, nor allowed to fall below, 49%. The whole of 49% would be contributed by Government directly. Rest is open for contribution from others. The contribution of Government of India to NIIF would enable it to be seen virtually as a sovereign fund and is expected to attract overseas sovereign/ quasi-sovereign/multilateral/bilateral investors to co-invest in it. Cash-rich Central Public Sector Enterprises (PSUs) could contribute to the Fund, which would be over and above the Government's 49%. Similarly, domestic pension and provident funds and National Small Savings Fund may also provide funds to the NIIF. NIIF may utilize the proceeds of monetized land and other assets of PSUs for infrastructure development. The NIIF will work out these details in consultation with the Ministry of Finance, to match different investors’ preferences.<br />
<br />
Finally, NIIF was formed as a category II AIF, as a Trust, under Indian Trust Act on 28 December 2015 alongwith the formation of National Investment and Infrastructure Fund Trustee Ltd. and National Investment and Infrastructure Fund Ltd. India Infrastructure Finance Company Ltd (IIFCL) was appointed as Investment Advisor to NIIF Ltd and IDBI Capital Market Services Ltd as Advisor to NIIF Trustee Ltd initially for 6 months and 1 year respectively. <br />
<br />
Pursuant to discussions with investors the structure of NIIF was further refined. The NIIF can have various sector-specific or investor-specific close ended Schemes (“funds”) and each fund may issue various classes of units. Government along with other investor(s) would subscribe to the units of various funds. The units, investment strategy and accounts of each fund shall be distinct from and independent of the other funds. <br />
<br />
National Investment and Infrastructure Fund (NIIF) Ltd. signed a Memorandum of Understanding (MoU) with RUSNANO of Russia on 2 February 2016 to set up the RUSSIA-INDIA HIGH TECHNOLOGY PRIVATE EQUITY FUND for joint implementation of investments into projects in India. RUSNANO is a Russian development institute with interest to invest in projects in the field of high technologies and defense including the projects aimed at establishment of manufacturing industrial enterprises in India. <br />
<br />
<br />
'''Governance'''<br />
<br />
There will be a Governing Council of the NIIF which will have Government representatives and experts in international finance, eminent economists and infrastructure professionals. It could include representatives from other non-Government shareholders. The terms and period of appointment of the Governing Council of the NIIF will be as decided by the Government. The Governing Council will oversee the activities of the Trust and will be constituted as a separate legal entity, if necessary. <br />
<br />
NIIF would be supported by one or more Chief Executive Officers (depending upon the number of funds created) and a small investment team consisting of limited number of expert staff, at arm's length from the Government. Their salaries would be market-linked. It would be possible for the NIIF Governing Council to appoint one or several Fund Managers.<br />
<br />
NIIF would have full autonomy for project selection. NIIF would formulate guidelines and would follow due processes for selection criteria for AMCs and Non-Banking Financial Companies (NBFCs) / Financial Institutions (FIs). Appropriate rules of bidding including potential conflicts of interest will be worked out. <br />
<br />
[[File:Structure_and_composition_of_NIIF.PNG]]<br />
<br />
<br />
'''Investment Policy''' <br />
<br />
*NIIF aims to maximize risk-adjusted returns on the investments over a long term by making investments in infrastructure sector on a commercial basis. NIIF will invest primarily as a financial investor and may have an option to seek control, if necessary, of the entities in its portfolio. It will have the flexibility to take concentrated positions with a long or short time horizon, and invest, divest or remain liquid when it is commercially viable. <br />
*NIIF would invest in projects where the revenue streams are clearly identified in an agreement between the project entity and approved government entity. It shall be the endeavor of NIIF to be treated on par with the most favored contributor of its class. <br />
*As a long term-term investor it will not be subject to market trends and have benefits of long term investments. It will endeavour to manage the risks through portfolio diversification and exercise proper flexibility to actively seize investment opportunities as they materialize. <br />
*Investment Manager would have an Investment Committee that shall comprise of professionals from the industry and may have representatives of the contributors. <br />
*Investments may be exited through private negotiated enterprise level divestments, asset sales, re-capitalizations or through the public market routes, redemptions from cash flows of underlying investments, disposition of underlying investments / assets and any other mechanism as may be available. <br />
*NIIF would at all times remain focused on its economic and financial objectives. It shall invest in:<br />
<br />
# units of funds engaged mainly in infrastructure sectors and provide equity/quasi-equity or debt funding to listed/unlisted companies;<br />
# equity/quasi-equity in NBFCs and Financial Institutions that are engaged mainly in infrastructure financing; and<br />
# Equity/ quasi-equity or debt to commercially viable projects, both greenfield and brownfield.<br />
<br />
*Co-investment would allow NIIF to deploy more capital at attractive returns while preserving the multiplier effect. NIIF would invest with co-investors such that their (co-investor) share of investment in portfolio entities is either equal to or more than NIIF’s share. NIIF would not co-invest with someone who has conflicting interest in the project. In state projects, NIIF would invest only when there are third party (non-government) professional investors<br />
investing in the project. Co-investment by NIIF along with other co-investors would be on a no fees basis.<br />
*NIIF would endeavour to ensure maximum returns and tax efficiency for NIIF and its contributors.<br />
<br />
NIIF made its first investment in January 2018 partnering with DP World to create an investment platform for ports, terminals, transportation and logistics businesses in India. The platform will invest in opportunities in the ports sector, and beyond sea ports into areas such as river ports and transportation, freight corridors, port-led special economic zones, inland container terminals, and logistics infrastructure including cold storage. An India-UK Green Growth Equity Fund (GGEF) is also being set up under the fund of funds vertical of NIIF, and shall have anchor commitments of GBP 120 million each from Government of India (through NIIF) and Government of UK.<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary K. Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|NationalInvestmentandInfrastructureFund(NIIF)]]</div>Rosemary.ahttp://arthapedia.in/index.php/Systemically_Important_Financial_Institutions_(SIFIs)Systemically Important Financial Institutions (SIFIs)2017-11-18T20:36:59Z<p>Rosemary.a: </p>
<hr />
<div>[http://www.fsb.org/what-we-do/policy-development/systematically-important-financial-institutions-sifis/ Financial Stability Board] (FSB) refers Systemically Important Financial Institutions (SIFIs) as institutions “whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity”. World financial history is abound with events of such institutions going into troubles, posing threat to the system and eventually rescued by the state. Identification and regulation of SIFIs are, therefore, crucial in systemic risk management. As a matter of fact, SIFIs reflect how risks are distributed across the financial system at any particular point of time (i.e. cross-section aspect of systemic risk). At global level, based on the suggestion of G-20 Leaders in Pittsburgh summit in 2009, FSB spearheads the efforts of formulating a framework for assessing and regulating SIFIs.<br />
<br />
<br />
'''SIFIs as 'Too Big to Fail' Institutions'''<br />
<br />
Systemically Important Financial Institutions (SIFIs) are perceived as institutions that are Too Big to Fail (TBTF)<sup class="reference">[[#ref1|[1]]]</sup>. Indeed they are TBTF, but a SIFI status tells more than a TBTF status. Insofar as the systemic significance of a financial institution is reflected, one term can justifiably be used as synonym for the other. Because TBTF status is quiet about the regulatory mechanisms needed to rectify the adverse outcomes associated with conferring that status to a financial institution, the notion of TBTF is limited in scope.<br />
<br />
To consider a financial institution as TBTF implies that the institution enjoys an implicit sovereign guarantee against its failure. But it cannot be done without inviting some perverse outcomes. Moral hazard<sup class="reference">[[#ref2|[2]]]</sup> is the oft repeated problem associated with TBTF. Creditors to a financial institution, say a bank, may be least interested in monitoring its activities and thus permitting the bank to tread a risky path, when they knew beforehand that the bank is considered to be too big to fail by the government and regulator. These are uninsured large creditors, including holders of debt and equity, who do not enjoy insurance cover under usual deposit insurance mechanism (Mishkin, 2004). The conception of TBTF, as Stern and Feldman (2004) put, gives rise to “a policy environment in which uninsured creditors expect the government to protect them from prospective losses from the failure of a big bank”. However, to extend government protection to an insolvent institution is not a cakewalk. On both moral and economic grounds, the action invites criticisms (Moosa, 2010). Even on the premise of ‘public interest’, morally, it is hard to square with the idea that the rest of the society is paying for the losses of a sinking institution, which is spared from confronting the consequences of its own reckless actions. Advocates of [https://www.britannica.com/topic/laissez-faire laissez faire] would indict the government for weakening market discipline and rewarding inefficiency. For them, failure of any firm must be allowed as it is the very outcome of a free market economy and part of ‘creative destruction’, an essential aspect of capitalism (Moosa, 2010). If the government finances the bail-out using borrowed money, there is a concern that future generations shall bear the tax burden. If it is done through printing money, the worry is over the resultant hyperinflation (Moosa, 2010). <br />
<br />
By laying out identification criteria and regulatory approach with respect to institutions of systemic import, the concept of SIFI is much more refined than TBTF idea. TBTF considerations, employed in case of many financial institutions, did not arise out of a globally accepted framework and were amateur and ambiguous. Usually, in TBTF idea, the aspect of size of an institution is overemphasised to the neglect of other aspects in assessing the systemic significance of an institution (Moosa, 2010). Thomson (2009) says that '''concentration, contagion, correlation and conditions are as important as size in deciding an institution’s systemic importance. The other distinctive aspect of SIFI concept is the inclusion of a regulatory approach.''' As and when an institution is identified as SIFI, necessarily, it becomes an obligation for it to maintain an addition Tier 1 capital to act as a bulwark against many ills associated with a ‘too big to fail’ institution. Persuad (2014) rightly says that the purport of a SIFI framework is “to internalise the adverse, wider consequence of a bank [institution] being too big to fail...”<br />
<br />
<br />
'''Global Framework for SIFIs'''<br />
<br />
The document brought out by Financial Stability Board (FSB) in 2010, titled [http://www.fsb.org/wp-content/uploads/r_101111a.pdf?page_moved=1 ''Reducing the moral hazard posed by systemically important financial institutions: FSB recommendations and time lines''], has arguably been the most important global effort to fix the dilemma caused by TBTF institutions. Its aim was to address “the systemic and moral hazard risks associated with SIFIs whose disorderly failure,...would cause significant disruption to the wider financial system and economic activity”. In Seoul summit of 2010, [https://www.g20.org/Webs/G20/EN/G20/FAQs/faq_node.html G-20] (Group of 19 countries +European Union) endorsed this document. The document recommended, inter alia, that the FSB and national authorities shall decide those institutions, based on the methodology developed by international standard setting bodies ([https://www.bis.org/bcbs/ BCBS], [https://www.iaisweb.org/home IAIS], [https://www.iosco.org/ IOSCO], [https://www.bis.org/cgfs/ CGFS] and [http://www.bis.org/press/p140901.htm CPSS] /[https://www.bis.org/cpmi/ CPMI]), to which FSB Global SIFI (G-SIFI) recommendations can be applied. Based on this recommendation, Basel Committee of Banking Supervision (BCBS) had come up with [http://www.bis.org/publ/bcbs201.pdf ''Global systemically important banks: assessment methodology and the additional loss absorbency requirement''] in 2011; International Association of Insurance Supervisors (IAIS) published [https://www.iaisweb.org/page/supervisory-material/financial-stability-and-macroprudential-policy-and-surveillance ''Globally systemically important insurers: assessment methodology''] in 2013; FSB and International Organisation of Securities Commissions (IOSCO) brought out a consultative document on [https://www.iosco.org/library/pubdocs/pdf/IOSCOPD479.pdf ''Assessment methodologies for identifying non-bank, non-insurer global systemically important financial institutions''] (NBNI G-SIFIs) in 2014. Broad aims of these efforts are (a) to reduce the likelihood of failure of an institution by increasing its loss-absorbency capacity and (b) to mitigate the impact of failure of the institution, if it happens, through its orderly resolution.<br />
<br />
Based on the BCBS methodology, FSB publishes the list of Global Systemically Important Banks (G-SIBs) annually. Similarly the FSB, in consultation with the IAIS and national authorities, identifies Global Systemically Important Insurers (G-SIIs) as part of its annual identification process of global SIFIs.<br />
<br />
Given below is a brief exposition on BCBS efforts to identify, assess and regulate global systemically important banks (G-SIBs). To assess the systemic importance of banks, an indicator-based approach, as against a model-based approach, is used; qualitative information is also considered to supplement the approach. The approach is based on a large sample of banks. Indicators are selected to reflect five aspects of G-SIBs: (i) size, (ii) interconnectedness, (iii) substitutability, (iv) cross-jurisdictional activity and (v) complexity '''(Refer Table 1)'''.<br />
<br />
<br />
'''Table 1: Indicator-based Measurement Approach'''<br />
<br />
<table border="0" cellspacing="0" cellpadding="0" width="60%" class="table_formatting"><br />
<tr><br />
<td width="50%"><p align="center"><strong>Category (Weighting)</strong></p></td><br />
<td width="50%" valign="top"><p align="center"><strong>Indicators (Weights)</strong></p></td><br />
</tr><br />
<tr><br />
<td rowspan="2"><p>Cross-jurisdictional activity (20%)</p></td><br />
<td valign="top"><p>Cross-jurisdictional claim (10%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Cross-jurisdictional liabilities (10%)</p></td><br />
</tr><br />
<tr><br />
<td><p>Size (20%)</p></td><br />
<td valign="top"><p>Total exposure as defined for use in the Basel III leverage ratio (20%)</p></td><br />
</tr><br />
<tr><br />
<td rowspan="3"><p>Interconnectedness (20%)</p></td><br />
<td valign="top"><p>Intra-financial system assets (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Intra-financial system liabilities (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Securities outstanding (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td rowspan="3"><p>Substitutability/ financial market institution infrastructure (20%)</p></td><br />
<td valign="top"><p>Assets under custody (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Payments activity (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Underwritten transactions in debt and equity markets (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td rowspan="3"><p>Complexity (20%)</p></td><br />
<td valign="top"><p>Notional amount of over-the-counter (OTC) derivatives (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Level 3 assets (6.67%)</p></td><br />
</tr><br />
<tr><br />
<td valign="top"><p>Trading and available-for-sale securities (6.67%)</p></td><br />
</tr><br />
</table><br />
<br />
'''Source:''' ''Basel Committee of Banking Supervision (2013), Global systemically important banks: assessment methodology and the additional loss absorbency requirement''<br />
<br />
<br />
Each bank gets a score in each of the five aspects that are given equal weights and an overall score for each bank is arrived at by taking a simple average of all the five scores. Those banks whose overall scores of systemic importance exceed a cut-off level, fixed by BCBS, are classified as G-SIBs. Based on their overall scores, then, these banks are categorised in five equally-sized buckets. G-SIBs in bucket 5 are systemically more important than those in the lower bucket. G-SIBs thus categorised in each of the buckets are required to hold additional capital as ‘higher loss absorbency’; [http://www.bis.org/publ/bcbs198.pdf Common Equity Tier 1 (CET1) capital], as defined by [http://www.bis.org/bcbs/basel3.htm Basel III]<sup class="reference">[[#ref3|[3]]]</sup> , is used for this purpose. G-SIBs placed in top buckets need to maintain more such additional capital than those placed in bottom buckets. For instance, G-SIBs in bucket 5 need to hold 3.5 per cent additional capital (i.e. CET1 capital as a percentage of risk-weighted assets), while those in bucket 4, 3, 2 and 1 are required to hold 2.5%, 2%, 1.5% and 1% respectively. This has at least two benefits. First, expansion of any bank, identified as G-SIBs, would put them in higher buckets where they have to hold more capital and it is costly to do so. Hence it is a disincentive for banks, designated as G-SIBs, to expand further. Second, by holding more capital the resilience of the institution rises. The resolution aspect of these institutions, however, lies beyond the scope of this framework. Rather the purpose of this framework is to reduce moral hazard problem linked to TBTF principle, to lessen the probability of the institution’s failure by “increasing its going-concern loss absorbency” and eventually to render a level playing field between G-SIBs and non-G-SIBs in the sense of neutralising the competitive advantage received by G-SIBs in funding markets (BIS, 2013).<br />
<br />
<br />
'''SIFIs in India'''<br />
<br />
Even before developing an exclusive framework for SIFIs, Reserve Bank of India (RBI) has been regulating systemically important institutions among non-banking financial companies (NBFCs) since April 2007. Systemically Important Non-Deposit Taking NBFC (NBFC-NDSI) is defined as a non-banking financial company not accepting / holding public deposits and having total assets of Rs. 500 crore and above<sup class="reference">[[#ref4|[4]]]</sup>. They are subject to stringent prudential regulation which includes maintenance of capital adequacy ratio of 15%, exposure norms, asset liability management discipline, Income Recognition and Asset Classification (IRAC) norms, corporate governance standards and disclosure norms. Nevertheless, this regulation has not been in the spirit of FSB recommendation of assessing SIFIs.<br />
<br />
As a bank-dominated financial system, India began with the assessment of SIFIs in the banking system calling them Domestic Systemically Important Banks (D-SIBs). In July 2015, RBI released a [https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=31680 Framework for dealing with domestic systemically important banks], based on which D-SIBs are recognised in India. RBI has followed, more or less, the methodology of BCBS with some modifications to suit domestic conditions. The sample for the assessment consisted of those banks having a size over and above 2 per cent of GDP. Unlike BCBS methodology, only four aspects are considered for assessing D-SIBs. Size, interconnectedness, substitutability and complexity are those four aspects with size receiving 40% weight and other receiving 20% weight each; this is because size is considered to be a more important aspect than others. The Framework also requires that D-SIBs may be placed in five buckets depending upon their Systemic Importance Scores (SISs). The additional CET1 capital requirement in these five buckets are 1%, 0.80%, 0.60%, 0.40% and 0.20% respectively. The names of the banks classified as D-SIBs are disclosed in the month of August every year, starting from 2015. In [https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=34862 August 2015], RBI announced, for the first time, State Bank of India (SBI) and ICICI as D-SIBs; and the list is revised annually. Latest addition was HDFC Bank.<br />
<br />
For assessing SIFIs in other areas of financial system such as securities market, insurance and pension sectors, a similar framework needs to be developed.<br />
<br />
In the proposed [http://dea.gov.in/sites/default/files/FRDI Bill-27092016_1.pdf Financial Resolution and Deposit Insurance Bill, 2017] which provides for a comprehensive resolution framework to deal with bankruptcy situation in banks, insurance companies and financial sector entities, it is specified that the Central Government, in consultation with the appropriate sectoral regulator may designate certain categories of financial institutions as SIFIs (under Section 25 of the draft bill).<br />
<br />
The Bill outlines the criteria for designation of a financial service provider as a Systemically Important Financial Institution. The following features of a financial service provider: (a) size; (b) complexity; (c) nature and volume of transactions with other financial service providers; (d) interconnectedness with other financial service providers; and such other related matter as may be prescribed - shall be taken into consideration, while specifying an entity as SIFI.<br />
<br />
Given their importance for the economy, the Bill envisages some additional powers in respect of these SIFIs when it comes to their resolution or bankruptcy. All SIFIs are expected to provide such information in such frequency and such manner as may be specified by the Resolution Corporation, to monitor the safety, soundness and solvency of such SIFIs. Resolution Corporation can also do inspection of SIFIs in addition to sectoral regulators. It is specified in the Bill that the Central Government, may by an order to be published in the official gazette, appoint a body constituted by it to discharge its powers and functions in respect of SIFIs. However, this assignment can happen only once the Bill is passed. <br />
<br />
<br />
'''Systemically important Financial Market Infrastructures (S-FMI)'''<br />
<br />
A concept closer to SIFI is systemically important Financial Market Infrastructures<sup class="reference">[[#ref5|[5]]]</sup>. In April 2012, the then Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) published the standards report [http://www.bis.org/cpmi/publ/d101a.pdf ''Principles for financial market infrastructures''] (PFMIs). The new standards replaced the three existing sets of international standards set out in the [http://www.bis.org/publ/cpss43.htm ''Core principles for systemically important payment systems''] (CPSS, (2001)); the [http://www.bis.org/publ/cpss46.htm ''Recommendations for securities settlement systms''] (CPSS-IOSCO, (2001)); and the [http://www.bis.org/publ/cpss64.htm ''Recommendations for central counterparties''] (CPSS-IOSCO, (2004)). The new standards (called principles) are designed to ensure that the essential infrastructure supporting global financial markets is even more robust and thus even better placed to withstand financial shocks than at present. Principles for financial market infrastructures contain a single, comprehensive set of 24 principles designed to apply to all systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories (collectively called financial market infrastructures or FMIs). These FMIs collectively record, clear and settle transactions in financial markets. Financial Market Infrastructures (FMIs) that are determined by national authorities to be systemically important are expected to observe these principles.<br />
<br />
As against SIFIs, the concept of S-FMIs focuses on infrastructure service providers like stock exchanges, depositories or clearing corporations, whereas SIFIs would refer to individual mutual funds or banks or some such individual service providers.<br />
<br />
<br />
'''S-FMIs in India'''<br />
<br />
Though the expression “Financial Market Infrastructure” is not specifically defined in the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86706.pdf Payment and Settlement Systems (PSS) Act], the definition of payment systems in the PSS Act includes all categories of FMIs as indicated in the PFMI report except for the Trade Repository.<br />
<br />
An authorized payment system would be categorised as an FMI as and when it reaches systemic importance which could be based on various parameters such as (i) volume and value of transactions; (ii) share in the overall payment systems; (iii) markets in which it is operating; (iv) degree of interconnectedness and interdependencies; (v) criticality in terms of concentration of payment activities etc. The Reserve Bank maintains a separate list of authorized payment systems which are declared as FMIs and are made public. As in June 2017, its list includes, Real Time Gross Settlement System (RTGS), Securities Settlement Systems (SSS), Clearing Corporation of India Ltd (CCIL) and Negotiated Dealing System- Order Matching (NDS-OM). More details may be seen [https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2706 here].<br />
<br />
SEBI vide its circular dated [http://www.sebi.gov.in/sebi_data/attachdocs/1378293615856.pdf September 04, 2013] clarified that SEBI as a member of IOSCO is committed to the adoption and implementation of the new CPSS-IOSCO standards of PFMIs in its regulatory functions of oversight, supervision and governance of the key financial market infrastructures under its purview. SEBI clarified that the following Depositories and Clearing Corporations regulated by SEBI are FMIs and would be required to comply with the PFMIs specified by CPSS-IOSCO as applicable to them.<br />
<br />
<br />
'''Clearing Corporations'''<br />
<br />
a) Indian Clearing Corporation Ltd. (ICCL)<br />
<br />
b) MCX-SX Clearing Corporation Ltd. (MCX-SXCCL)<br />
<br />
c) National Securities Clearing Corporation Ltd. (NSCCL)<br />
<br />
(In India, stock / securities exchanges have separated out the clearing function to independent entities called clearing corporations)<br />
<br />
<br />
'''Depositories'''<br />
<br />
d) a. Central Depository Services Ltd. (CDSL)<br />
<br />
e) b. National Securities Depository Ltd (NSDL)<br />
<br />
On [http://www.sebi.gov.in/sebi_data/attachdocs/1481885596226.pdf 16 December 2016] SEBI declared the two prominent national commodity exchanges - National Commodity & Derivatives Exchange Limited ([https://www.ncdex.com/home.htm NCDEX]) and Multi Commodity Exchange of India Limited ([https://www.mcxindia.com/ MCX]), as systemically important Financial Market Infrastructure (FMIs). They are in the process of complying with the Principles for FMIs (PFMIs) specified by CPSS-IOSCO. Commodity derivatives exchanges carry out clearing and settlement processes in-house. Hence, commodity exchanges are identified as S-FMIs while stock exchanges are not. However, SEBI has advised them to separate out clearing operations to a separate legal entity over a period of time. <br />
<br />
<br />
'''Data on SIFIs'''<br />
<br />
Data on G-SIBs and G-SIIs (global systemically important insurers) may be seen [http://www.fsb.org/what-we-do/policy-development/systematically-important-financial-institutions-sifis/ here].<br />
<br />
<br />
<span class="small_footernote" id="ref1">1. It was during 1980s that TBTF principle caught the popular imagination, when Continental Illinois National Bank, the then seventh largest bank in US with $40 billion assets, faced distress and was bailed-out thereafter in 1984 (Stern and Feldman, 2004).</span><br />
<br />
<span class="small_footernote" id="ref2">2. Moral hazard is a concept which focuses on rational behaviour, usually with respect to information asymmetry. It is opportunistic behaviour, i.e., behaviour which takes advantage of an opportunity for personal benefit even if it is at the expense of others. Eg. Concept of moral hazard in the field of insurance refers to the possibility that insurance would encourage the insured party to take on additional risk in a way which could not effectively be monitored.</span><br />
<br />
<span class="small_footernote" id="ref3">3. Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:<br />
<br />
*Improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source.<br />
*Improve risk management and governance.<br />
*strengthen banks' transparency and disclosures.<br />
</span><br />
<br />
<br />
<span class="small_footernote" id="ref4">4. As of March 2017, there were 11,517 non-banking financial companies (NBFCs) registered with the Reserve Bank, of which 179 are deposit-accepting (NBFCs-D). There were 220 Systemically Important Non-Deposit accepting NBFCs (NBFCs-ND-SI). NBFCs-ND-SIs are NBFCs-ND with assets of Rs.5 billion and above.</span><br />
<br />
<span class="small_footernote" id="ref5">5. Financial Market Infrastructure (FMI) are critically important institutions responsible for providing clearing, settlement and recording of monetary and other financial transactions. The different categories of FMIs, as identified under Principles for financial market infrastructures [PFMIs], are -<br />
<br />
''Payment Systems (PSS)''<br />
<br />
A payment system is a set of instruments, procedures, and rules for the transfer of funds between or among participants. The system includes the participants and the entity operating the arrangement. Payment systems are typically based on an agreement between or among participants and the operator of the arrangement, and the transfer of funds is effected using an agreed-upon operational infrastructure.<br />
<br />
''Central Securities Depositories (CSD)''<br />
<br />
Central securities depository provides securities accounts, central safekeeping services, and asset services, which may include the administration of corporate actions and redemptions, and plays an important role in helping to ensure the integrity of securities issues (that is, ensure that securities are not accidentally, or fraudulently created or destroyed or their details changed). A CSD can hold securities either in physical form (but immobilised) or in dematerialised form (that is, they exist only as electronic records). A CSD may maintain the definitive record of legal ownership for a security; in some cases, however, a separate securities registrar will serve this notary function.<br />
<br />
''Securities Settlement Systems (SSS)''<br />
<br />
A securities settlement system enables securities to be transferred and settled by book entry according to a set of predetermined multilateral rules. Such systems allow transfers of securities either free of payment or against payment. When transfer is against payment, many systems provide delivery versus payment (DvP), where delivery of the security occurs if and only if payment occurs. An SSS may be organised to provide additional securities clearing and settlement functions, such as the confirmation of trade and settlement instructions.<br />
<br />
''Central Counterparties (CCP)''<br />
<br />
A central counterparty interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts. A CCP becomes counterparty to trades with market participants through novation, an open-offer system, or through an analogous legally binding arrangement. CCPs have the potential to significantly reduce risks to participants through the multilateral netting of trades and by imposing more effective risk controls on all participants. For example, CCPs typically require participants to provide collateral (in the form of initial margin and other financial resources) to cover current and potential future exposures. CCPs may also mutualise certain risks through devices such as default funds. As a result of their potential to reduce risks to participants, CCPs also can reduce systemic risk in the markets they serve.<br />
<br />
''Trade Repositories (TR)''<br />
<br />
A trade repository is an entity that maintains a centralised electronic record (database) of transaction data. TRs have emerged as a new type of FMI and have recently grown in importance, particularly in the OTC derivatives market. By centralising the collection, storage, and dissemination of data, a well-designed TR that operates with effective risk controls can serve an important role in enhancing the transparency of transaction information to relevant authorities and the public, promoting financial stability, and supporting the detection and prevention of market abuse. An important function of a TR is to provide information that supports risk reduction, operational efficiency and effectiveness, and cost savings for both individual entities and the market as a whole. Such entities may include the principals to a trade, their agents, CCPs, and other service providers offering complementary services, including central settlement of payment obligations, electronic novation and affirmation, portfolio compression and reconciliation, and collateral.<br />
</span><br />
<br />
<br />
==Also See==<br />
*[http://arthapedia.in/index.php?title=Financial_Market_Infrastructure_(FMI) Financial Market Infrastructure (FMI)]<br />
<br />
<br />
==Contributed by==<br />
*[http://ies.gov.in/myaccount-profile-view.php?memid=559 Mr. Arun C. Adatte (IES 2014)]<br />
*Email:[mailto:ac.adatte@nic.in ac.adatte@nic.in]<br />
<br />
<br />
==Reference==<br />
<br />
Bank of International Settlements (BIS) (2013) Basel Committee of Banking Supervision (BCBS) on ''Global Systemically Important Banks: Assessment Methodology and the Additional Loss Absorbency Requirement'' accessed from [https://www.bis.org/publ/bcbs255.pdf https://www.bis.org/publ/bcbs255.pdf] on May 25, 2017<br />
<br />
Financial Stability Board (FSB) (2010) ''Reducing the Moral Hazard Posed by Systemically Important Financial Institutions'': FSB Recommendations and Time Lines accessed from [http://www.fsb.org/wp-content/uploads/r_101111a.pdf?page_moved=1 http://www.fsb.org/wp-content/uploads/r_101111a.pdf?page_moved=1] on May 25, 2017<br />
<br />
Mishkin, F (2004) The Economics of Money, Banking and Financial Markets, Pearson Addison-Wesley, Boston<br />
<br />
Moosa, I.A (2010) The Myth of Too Big To Fail, Palgrave Macmillan, Hampshire, UK<br />
<br />
Persuad, A (2015) Reinventing Financial Regulation: A Blueprint for Overcoming Systemic Risk, Apress<br />
<br />
Reserve Bank of India (2015) F''ramework for dealing with domestic systemically important banks'' accessed from [https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2861 https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2861] on May 25, 2017<br />
<br />
Stern, G.H. and Feldman, R.J (2004) Too Big To Fail: The Hazards of Bank Bailouts, Brooking Institution Press, Washington<br />
<br />
Thomson, J. (2009) ''On Systematically Important Financial Institutions and Progressive Systemic Mitigation'', Federal Reserve Bank of Cleveland, Policy Discussion Papers, No 27, August.<br />
<br />
[[Category:concepts|SystemicallyImportantFinancialInstitutions(SIFIs)]]</div>Rosemary.ahttp://arthapedia.in/index.php/SecuritiesSecurities2017-11-18T13:53:02Z<p>Rosemary.a: </p>
<hr />
<div><p> Financial instruments which are tradable or that can be bought and sold are generally referred to as securities. eg. shares, bonds etc. </p><br />
<p>Securities can represent either an ownership or debt position or both, or it can mean rights or entitlements. The key aspect is that it should be transferable. For instance, Fixed Deposit with banks is not considered as a security since it cannot be transferred to another person. </p><br />
<p>In India, the word &quot;securities&quot; is defined in clause (<em>h</em>) of section 2 of the [http://www.sebi.gov.in/sebiweb/home/list/1/1/0/0/Acts Securities Contracts (Regulation) Act, 1956] (SCRA). The term securities includes the following in India: </p><br />
<ul><br />
<li>shares, scrips, stocks, bonds, debentures, debenture stock or other <em>marketable securities of a like nature</em> in or of any incorporated company or other [http://arthapedia.in/index.php?title=Body_Corporate body corporate]</li><br />
<li>derivatives which includes </li><br />
<ul><br />
<li>a contract which derives its value from the prices, or index of prices, of underlying securities; </li><br />
<li>a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; </li><br />
<li>Repos and Reverse Repos (being incorporated through the Finance Act, 2015)</li><br />
<li>Commodity Derivatives (being incorporated through the Finance Act, 2015)</li><br />
<li>any instrument which is notified as a derivative by Central Government (being incorporated through the Finance Act, 2015)</li><br />
</ul><br />
<li>Government security - a security created and issued by the Central Government or a State Government</li><br />
<li>units or any other instrument issued by any [http://arthapedia.in/index.php?title=Collective_Investment_Scheme_(CIS) collective investment scheme] to the investors in such schemes</li><br />
<li>units or any other such instrument issued to the investors under any mutual fund scheme but does not include any unit linked insurance policy which is a hybrid instrument providing for life risk cover and investments</li><br />
<li>security receipts issued under [http://www.indiacode.nic.in/rspaging.asp?tfnm=200254 SARFAESI Act]</li><br />
<li>Securitized debt instruments (collateralized debt obligations etc.)</li><br />
<li>such other instruments as may be declared by the Central Government to be securities; and </li><br />
<li>Rights or interest in securities </li><br />
</ul><br />
<p>The market for securities is regulated by [http://www.sebi.gov.in/sebiweb/ Securities and Exchange Board of India] (SEBI). </p><br />
<p> From the definition it can be seen that &quot;securities&quot; can belong to both capital market and money market. The key aspect is their marketability. However, certain instruments like mutual fund policies are non-transferable, notwithstanding the fact that some of them can be bought and sold on the exchange platform (a category known as exchange traded funds). The definition of securities is expansive and includes such instruments also. </p><br />
<p> What is a &ldquo;marketable security of a like nature&rdquo; and hence eligible to be included in the definition of Securities under Section 2(h) of the SCRA, is at times clarified through judicial interpretations. <br /><br />
For instance, in the context of determining the scope of the term &lsquo;marketable&rsquo; in definition of securities under the SCRA, the Hon&rsquo;ble Supreme Court in July 2013, in the matter of<em> Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Company Ltd. and Anr</em> had stated as follows-</p><br />
<p><em>&ldquo;19. As is evident from the dictionary meaning set out above, the expression &quot;marketable&quot; has been equated with the word saleable. In other words, whatever is capable of being bought and sold in a market is marketable. The size of the market is of no consequence. In other words, the number of persons willing to purchase such shares would not be decisive. One cannot lose sight of the fact that there may not be any purchaser even for the listed shares. In such a case can it be said that even listed shares are not marketable? <strong><u>In our opinion what is required is free transferability</u></strong>. Subject to certain limited statutory restrictions, the shareholders possess the right to transfer their shares, when and to whom they desire. It is this right which satisfies the requirement of free transferability. <strong><u>However, when the statute prohibits or limits transfer of shares to a specified category of people with onerous conditions or restrictions, right of shareholders to transfer or the free transferability is jeopardized and in that case those share with these limitations cannot be said to be marketable</u></strong>&rdquo;(emphasis supplied)</em></p><br />
<p> This means that the same instrument say a &quot;share&quot; can be treated as a security or not depending on various other factors. For instance, shares issued by private companies would not be treated as &quot;securities&quot; in India. This is because a statute - Companies Act, 2013 - provides that private companies can restricts the right to transfer its shares. </p><br />
<p> Further, Hon&rsquo;ble Supreme Court (SC) in its judgment dated 31 August 2012 in the matter of Sahara Vs SEBI (Civil appeal No. 9813 and 9833 of 2011) held that </p><br />
<ul><br />
<li>A combination of debt instrument and equity instrument and therefore a hybrid security would also qualify as &ldquo;security&rdquo; if it is marketable and even if it is not specifically mentioned in the list of instruments as &quot;securities&quot; in SCRA</li><br />
<li>SEBI has the power to regulate unlisted companies if they are issuing securities</li><br />
<li>Any entity which issues instruments which are marketable securities, would become a &ldquo;person associated with the securities market&rdquo; and hence amenable to SEBI jurisdiction. </li><br />
</ul><br />
<br />
<br />
<br />
==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
<br />
[[Category:concepts|Securities]]</div>Rosemary.ahttp://arthapedia.in/index.php/Small_Finance_BankSmall Finance Bank2017-10-21T19:56:17Z<p>Rosemary.a: </p>
<hr />
<div>The Small Finance Bank (SFB) is a private financial institution intended to further the objective of [http://www.arthapedia.in/index.php?title=Financial_Inclusion financial inclusion] by primarily undertaking basic banking activities of acceptance of deposits and lending to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities, but without any restriction in the area of operations, unlike [http://www.arthapedia.in/index.php?title=Regional_Rural_Banks Regional Rural Banks] or [http://www.arthapedia.in/index.php?title=Local_Area_Banks Local Area Banks]. <br />
<br />
Small Finance Banks were created pursuant to the announcement in [http://indiabudget.nic.in/ub2014-15/bs/bs.pdf Union Budget 2014-2015], presented on July 10, 2014. [http://www.rbi.org.in/home.aspx RBI] issued the Guidelines on [http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=32614 27 November 2014] for licensing and regulation of SFBs. On [https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=35010 16 September 2015], RBI decided to grant “in-principle” approval to 10 applicants to set up small finance banks under the Guidelines issued on November 27, 2014.<br />
<br />
The concept of small finance banks was also one of the recommendations in the 2009 Report - [http://planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf A Hundred Small Steps] - of the Committee on Financial Sector Reforms headed by Dr. Raghu Ram Rajan. <br />
<br />
Resident individuals/professionals with 10 years of experience in banking and finance and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), [http://www.arthapedia.in/index.php?title=Micro-finance Micro Finance Institutions (MFIs)], and [http://www.arthapedia.in/index.php?title=Local_Area_Banks Local Area Banks] (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.<br />
<br />
The minimum capital for SFBs is prescribed at Rs. 100 crore with an initial contribution of 40% coming from the promoters, which over a period of 12 years, have to be reduced to 26%. Foreign Investment is permitted as in the case of other private sector commercial banks. After the small finance bank reaches the net worth of Rs.500 crore, listing of its shares on a stock exchange will be mandatory within three years of reaching that net worth. <br />
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SFBs are full fledged banks in contrast to [http://www.arthapedia.in/index.php?title=Payment_Banks payments banks] created around the same time. Hence, they are subject to all prudential norms and regulations of RBI as applicable to existing commercial banks like maintenance of [http://www.arthapedia.in/index.php?title=Cash_Reserve_Ratio_(CRR) Cash Reserve Ratio] (CRR) and [http://www.arthapedia.in/index.php?title=Statutory_Liquidity_Ratio Statutory Liquidity Ratio] (SLR). <br />
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The target group of SFBs are similar to that of Local Area Banks. They are required to extend 75 per cent of its [http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7460&Mode=0 Adjusted Net Bank Credit] (ANBC) to the sectors eligible for classification as [http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7460&Mode=0 priority sector lending] (PSL) by the Reserve Bank. At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh. <br />
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However, SFBs can also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products. The small finance bank can also become a Category II Authorized Dealer in foreign exchange business for its clients’ requirements. However it cannot set up subsidiaries to undertake non-banking financial services activities.<br />
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There will not be any restriction in the area of operations of small finance banks; however, preference will be given to those applicants who in the initial phase set up the bank in a cluster of under-banked States / districts. it is stipulated that at least 25 per cent of its branches shall be in unbanked rural centers.<br />
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Equitas Small Finance Bank Ltd and Ujjivan Small Finance Bank Ltd are listed entities.Mumbai-based Suryoday Small Finance Bank Ltd, Varanasi based Utkarsh Small Finance Bank and Kerala based ESAF Small Finance Bank Ltd have all started operations by first half of 2016. North East Small Finance Bank Limited has commenced operations as a small finance bank with effect from October 17, 2017. <br />
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==Contributed by==<br />
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]<br />
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]<br />
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[[Category:concepts|SmallFinanceBank]]</div>Rosemary.a