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Flashcards in Economy Deck (18):

Budget 2018-19 : Doubling farmers income

Budget 2018-19 : Doubling farmers income

What is the issue ?

  • The Budget 2018-19 looked on target to achieving the Prime Minister's vision of 'doubling farmers income by 2022'.

Initiatives undertaken in this regard :

1. Minimum Support Price :

  • Government has decided to keep Minimum Support Price (MSP) for all hitherto unannounced crops of Kharif at least at one and half times of their production cost. 

2. Increase in credit for agriculture :

  • Government announced raising institutional credit for agriculture sector to Rs.11 lakh crore for the year 2018-19 from Rs.10 lakh crore in 2017-18.

3. Operation Greens

  • ‘Operation Greens’ was launched to address price volatility of perishable commodities like potatoes, tomatoes and onions, at an outlay of Rs. 500 crore.
  • ‘Operation Greens’, on the lines of ‘Operation Flood’, shall promote Farmer Producers Organizations (FPOs), agri-logistics, processing facilities and professional management in the sector.

4. Gramin Agricultural Markets (GrAMs) :

  • Development and upgradation of existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs).
  • Rs 2000 crore Agri-Market Infrastructure Fund for developing and upgrading agricultural marketing infrastructure to be setup.
  • These GrAMs would be electronically linked to e-NAM and exempted from regulations of APMCs.
  • This would provide farmers facility to make direct sale to consumers and bulk purchasers.

5. Fisheries and Animal husbandry given a boost

  • To help small and marginal farmers in fisheries and animal husbandry sector to meet their working capital needs, government extended the facility of Kisan Credit Cards (KCC) to the sector.
  • This would give benefit of crop loan and interest subvention, so far available to agriculture sector only under KCC, for rearing of cattle, buffalo, goat, sheep poultry and fisheries.
  • Setting up of a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF) for financing infrastructure requirement of animal husbandry sector. Total Corpus of these two new Funds would be Rs.10,000 crore.

6. National Bamboo Mission to be revamped 

  • Launch of the Rs.1290-crore Re-structured National Bamboo Mission, which is based on a cluster based approach to address the complete bamboo value chain and promote bamboo sector in a holistic manner. 
  • With a focus on linking bamboo growers with consumers; creation of facilities for collection, aggregation, processing, marketing, MSMEs, skill building and brand building, this announcement would contribute in generating additional income for farmers, employment opportunities for skilled and unskilled youth especially in rural areas.


Budget 2018-19 : Highest ever allocation to Railways

Budget 2018-19 : Highest ever allocation to Railways

What is the issue ?

  • A capital expenditure of Rs.1,48,528 crore was allocated for the Railway Ministry for the year 2018­-19. 

Salient points regarding the railway budget :

  • A large part of these funds will be utilised for capacity addition. The government has decided to double 18,000 km of tracks and to work on third and fourth lines on several sectors. 
  • Five thousand kilometres of gauge conversion would augment capacity and transform almost the entire network into broad gauge
  • 4,000 km of the railway network would be commissioned for electrification during 2017­-18. 
  • The Budget also made provision for acquisition of 12,000 wagons, 5,160 coaches and approximately 700 locomotives during 2018­-19.


Budget 2018-19 : MSMEs given a big boost

Budget 2018-19 : MSMEs given a big boost

What is the issue?

  • A provision of Rs. 3794 crore has been provided in the General Budget 2018-19 for the Medium, Small and Micro Enterprises (MSMEs) to provide credit support, capital and interest subsidy and innovations to this sector.

Salient points regarding this development :

  • Government will contribute 12% of the wages of the new employees in the Employee Provident Fund (EPF) for all the sectors for next three years
  • In an effort to reduce tax burden on MSMEs and to create large-scale employment, measures to extend the benefit of reduced rate of 25% to companies who have reported turnover up to Rs.250 crore in the Financial Year 2016-17 were also announced.
  • Amendments have been proposed to reduce women employees' contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers' contribution in the Employees Provident Fund and Miscellaneous Provisions Act, 1952
  • Proposition to onboard Public Sector Banks and corporates on Trade Electronic Receivable Discounting System (TReDS) platform and link it to GSTN. According to the RBI, the objective of the TReDS is to facilitate financing of invoices/bills of MSMEs drawn on corporate buyers by way of discounting by  financiers.


Budget 2018-19 : 'Digital India' is here to stay 

Budget 2018-19 : 'Digital India' is here to stay 

What is the issue ?

  • Expenditure to be doubled by the government on its flagship Digital India programme to  Rs.3,073 crore for the next fiscal against  Rs.1,425.63 crore in 2017­-18.

Salient points about the development :

  • NITI Aayog would initiate a national programme to direct efforts in the area of artificial intelligence, including research and development of its applications
  • Department of Science and Technology will launch a Mission on Cyber Physical Systems to support establishment of centres of excellence that will invest in research, training and skilling in robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things.
  • Rs.14,500 crore allocated to strengthen telecom infrastructure projects, including BharatNet, during the upcoming fiscal.


Budget 2018-19 : Infrastructure given importance

Budget 2018-19 : Infrastructure given importance

What is the issue ?

  • The Government has enhanced allocation for the Infrastructure Sector in the Union Budget 2018-19, recognizing its role as the growth driver of the economy.
  • The budgetary and extra budgetary expenditure for the Sector has been increased from Rs.4.94 lakh crore in 2017-18 to Rs.5.97 lakh crore in 2018-19

Salient points in this regard :

  • In the Urban Infrastructure Sector, the Government proposes to develop ten prominent tourist sites as Iconic Tourism destinations through holistic infrastructure and skill development.
  • In addition, tourist amenities will be upgraded at 100 Adarsh monuments of the Archaeological Survey of India (ASI)
  • India Infrastructure Finance Corporation Limited (IIFCL) to help finance infrastructure projects including investment in education and health infrastructure.
  • In a boost to infrastructure development, the total outlay for the Urban Rejuvenation Mission, which includes projects under AMRUT and Smart Cities Mission, has been increased to Rs.12,169 crore. 
  • The Smart Cities Mission, which received Rs.4,000 crore budgetary allocation in 2017­-2018 and Rs.4,412 crore the previous year, will get Rs.6,169 crore in 2018­-19, including Rs.169 crore towards capacity building for urban development. 
  • Establishment of a dedicated Affordable Housing Fund (AHF) under the National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorised by the Centre. 

Civil Aviation gets a boost:

  • In the Civil Aviation Sector, the Budget 2018-19 announced a new initiative NABH Nirman to expand airport capacity by more than five times to handle a billion trips in a year.
  • The expansion will be funded by leveraging the balance sheet of Airports Authority of India. 


Global Investor's Summit : Northeast in the limelight

Global Investor's Summit : Northeast in the limelight

What is the issue?

  • The Global Investors' Summit,  "Advantage Assam", was held at Guwahati, Assam.

Significance of the event:

  • Aims at bringing Northeast into the world focus and open new gateways of trade and business within the region as well as outside the region, with ASEAN nations and  South-East Asia.
  • The event will not only have great relevance from investment point of view, but it has also brought Assam and the entire Northeast region into the cosmopolitan mainstream of India's economic growth.

Why is Assam key to India's Foreign policy?

  • Assam is ranked first among the north-eastern states in the Ease of Doing Business report and this positive energy if channeled in the right way can deliver results in the global arena.
  • Success of India's 'Act East Policy' which priortises its neighbours in Southeast Asia is dependent on the Northeastern states especially Assam.
  • Improving connectivity and contact in Assam and the Northeast would translate into a huge boost for India's overall growth and further cement India's position as an emerging power in the world.

About ASEAN :

  • The Association of Southeast Asian Nations (ASEAN) is an intergovernmental organisation, was established with the signing of the ASEAN DECLARATION (Bangkok Declaration)
  • Founding Fathers of ASEAN are Indonesia, Malaysia, Philippines, Singapore and Thailand.
  • Brunei Darussalam, Vietnam, Lao PDR, Myanmar and Cambodia subsequently joined, making up what is today the ten Member States of ASEAN


Railways working on phasing out diesel locomotives by 2022:

Railways working on phasing out diesel locomotives by 2022:

What is the issue?

  • The Railway ministry has set 2022 as its target to complete the electrification of tracks and phase out diesel locomotives completely.

What is the significance of the move ?

  • The Railways will save about Rs 11,500 crore annually through such a move
  • Shifting of railways into a fully electric mode will save lots of money spent in importing diesel.

Whats the status as of now?

  • At present, the Railways has a fleet of 19,000 passenger and goods trains. Of these, about 5,000 trains run on diesel by consuming around 2.8 billion litre of diesel a year.

Procuring electricity from the producers:

  • Railways also aims to save Rs 41,000 crore in the next ten years on its electricity spending by procuring power directly from producers under the Open Access Arrangement, in this arrangement instead of Business As Usual (BAU).
  • Through this arrangement they have succeeded in achieving a cumulative saving of Rs 5,636 crore from April 2015 to October 2017.

What is Open Access policy:

  • The Open Access policy under the Electricity Act, 2003, allows consumers with electricity load above 1 MW to procure power directly from generators, electricity exchanges or through bilateral arrangements.

What is 'Business As Usual' :

  • In this system, the power is procured from electricity distribution companies.
  • The cost of power procured from Business As Usual is always higher than that of Open Access arrangements.


Budget 2018-19 : Long Term Capital Gains

Budget 2018-19 : Long Term Capital Gains

What is LTCG? 

  • LTCG or long­term capital gains refer to the gains made on any class of asset held for a particular period of time.
  • In case of equity shares, it refers to the gains made on stocks held for more than one year.
  • In other words, if the shares are bought and held for more than a year before selling, then the gains, if any, on the said sale are referred to as long term capital gains or LTCG. 

Why is LTCG tax in the news?

  • It is in the news as Budget 2018-19 re­introduced LTCG tax on equity shares.
  • Investors have to pay 10% LTCG tax on gains exceeding one lakh on the sale of shares or equity mutual funds held for more than one year.
  • Previously, short­term capital gains (STCG) tax of 15% was levied.
  • The Centre said if the gains exceeded one lakh in a year, then 10% LTCG tax had to be paid without the benet of indexation (adjusting the profit against inflation to compute the real taxable gains).

Was the tax levied on stock market trades earlier?

  • Such a tax existed until October 2004 when it was replaced by the securities transaction tax (STT) which was levied on all trades made on the stock exchanges.
  • The issue of tax evasion through stock exchanges by paying a small STT component instead of LTCG had been raised regularly.
  • Further, a study in 2016 stated that between 2005­-06 and 2011-12, the Centre lost about 3.5 lakh crore by replacing LTCG tax with STT.

Will all investors be subject to LTCG tax?

  • All investors who trade on stock exchanges  would be required to pay LTCG tax.
  • Incidentally, the Centre has brought in LTCG tax while retaining STT as well. So, investors will have to pay both the taxes.
  • However, foreign portfolio investors (FPIs), who invest in India from places like Mauritius and Singapore, would not be subject to LTCG tax, courtesy tax avoidance treaties. 


Indian Advance Pricing Agreement regime moves forward

Indian Advance Pricing Agreement regime moves forward

What is the issue ?

  • The Central Board of Direct Taxes (CBDT) has entered into five Unilateral Advance Pricing Agreements (UAPA) and two Bilateral Advance Pricing Agreements (BAPA) during the month of January, 2018.

Status of Advance Pricing Agreements in India:

  • The total number of APAs entered into by the CBDT has gone up to 196.
  • This includes 178 Unilateral APAs and 18 Bilateral APAs. In the current financial year, a total of 44 APAs (7 Bilateral and 37 Unilateral) have been signed till date.

Advance Pricing Agreements in January :

  • The 7 APAs entered into during January, 2018 pertain to various sectors of the economy like Banking, Insurance, Investment Advisory, Information Technology, Chemicals and Engineering.
  • The international transactions covered in these agreements include provision of IT enabled services, provision of software development services, contract manufacturing, payment of royalty, sale of goods, etc.


Advance Pricing Agreements :

What are Advance Pricing Agreements ?

  • An APA is an agreement between a tax payer and tax authority determining the transfer pricing methodology for pricing the tax payer’s international transactions for future years.
  • The methodology is to be applied for a certain period of time based on the fulfillment of certain terms and conditions (called critical assumptions).

What are the different types of APAs?

An APA can be unilateral, bilateral, or multilateral.

  • Unilateral APA: an APA that involves only the tax payer and the tax authority of the country where the tax payer is located.
  • Bilateral APA: an APA that involves the tax payer, associated enterprise (AE) of the tax payer in the foreign country, tax authority of the country where the tax payer is located, and the foreign tax authority.
  • Multilateral APA: an APA that involves the tax payer, two or more AEs of the tax payer in different foreign countries, tax authority of the country where the tax payer is located, and the tax authorities of AEs.

When were Advance Pricing Agreements introduced in India ?

  • Advance Pricing Agreement (APA) provisions were introduced in the Income-tax Act, 1961 (Act) w.e.f. 1 July 2012. The rules in respect of the APA scheme have been notified by the Central Board of Direct Taxes (CBDT) 

What are the key benefits of APA? 

  • Certainty with respect to tax outcome of the tax payer’s international transactions, by agreeing in advance the arm’s length pricing or pricing methodology (ies) to be applied to the tax payer’s international transactions covered by the APA.
  • Removal of an audit threat (minimize rigours of audit), and deliverance of a particular tax outcome based on the terms of the agreement
  • Substantial reduction of compliance costs over the term of the APA
  • For tax authorities, an APA reduces cost of administration and also frees scarce resources. 


Reserve Bank of India's Monetary Policy Report

Reserve Bank of India's Monetary Policy Report

What is the issue?

  • RBI released its sixth bi-monthly monetary policy report.

Highlights of the report

  • Monetary Policy Committee (MPC) kept the benchmark repo and reverse repo rates unchanged at 6 percent and 5.75 percent, respectively.
  • RBI’s Monetary Policy Committee (MPC) maintained its forecast for economic growth in the fiscal year 2018 in gross value added (GVA) terms at 6.6%.
  • GST stabilising, which augurs well for economic activity
  • Early signs of revival in investment activity
  • RBI seeks pick-up in credit growth due to recapitalisation of PSBs and resolution proceedings under IBC
  • Export growth expected to improve further on account of improving global demand
  • RBI says focus of Union Budget on rural and infrastructure sectors a welcome development

Policy Rates :

  • Repo rate: It is rate at which RBI lends to its clients generally against government securities.
  • Reverse Repo Rate: It is rate at which banks lend funds to RBI. 
  • Marginal Standing Facility (MSF) Rate: It is rate at which scheduled banks can borrow funds from RBI against government securities. 
  • Bank Rate: It is rate charged by central bank for lending funds to commercial banks. It influences lending rates of commercial banks.
  • Cash Reserve Ratio (CRR): It is amount of funds that banks have to keep with RBI. 
  • Statutory Liquidity Ratio (SLR): It is amount that banks have to maintain a stipulated proportion of their net demand and time liabilities (NDTL) in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc


Base rate to be linked with MCLR

Base rate to be linked with MCLR

What is the issue?

  • The Reserve Bank will link the base rate for loans given by banks to the MCLR starting April 1, 2018 i.e. from the new financial year. 

Why this move ?

  • Reserve Bank of India (RBI) expressed concern that a large portion of bank loans remain linked to the base rate despite the introduction of the MCLR in April 2016. 

What does this mean ?

  • Linking of base rate to marginal cost of funds-based lending rate (MCLR) will likely reduce the gap between base rate and MCLR.
  • As of now the base for fixing base rate and MCLR is different. It is likely that the components of calculating the two will be aligned. Also, MCLR is reviewed on a monthly basis and base rate on a quarterly basis. With the harmonization of the two, it is likely that base rate will be reviewed on a monthly basis as well.

Why is MCLR considered to be more sensitive to monetary policy transmission?

  • MCLR is calculated on the basis of incremental cost of funds, making it a more reliable benchmark rate as compared to the base rate, usually calculated by taking into account average cost of funds.
  • The most important difference is the careful calculation of Marginal costs under MCLR. On the other hand under base rate, the cost is calculated on an average basis by simply averaging the interest rate incurred for deposits. The requirement that MCLR should be revised monthly makes the MCLR very dynamic compared to the base rate.

What is base rate?

  • It is the lending rate of banks below which the banks are not allowed to lend.
  • Base rate was used for deciding the interest rate for loans before the introduction of MCLR rate.

About base rate:

  • Considered slow in responding to monetary policy transmission.
  • An increase in repo rate (by RBI) is reflected very slowly in the lending rates and deposit rates fixed by banks whereas an increase in the repo rate is reflected very quickly.
  • Quarterly revision of base rate.

Components of base rate :

  • Cost for the funds (interest rate given for deposits),
  • Operating expenses,
  • Minimum rate of return (profit), and
  • Cost for the CRR (for the four percent CRR, the RBI is not giving any interest to the banks)

What is Marginal cost of funds-based lending rates (MCLR) ?

  • The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI.

Components of MCLR :

  • Marginal cost of funds;
  • Negative carry on account of CRR;
  • Operating costs;
  • Tenor premium.


Future of 'Banks Board Bureau (BBB)' is uncertain

Future of 'Banks Board Bureau (BBB)' is uncertain

What is the issue?

  • With the tenure of its present members coming to an end in the near future what happens to the Banks Board Bureau is still unknown.

About Banks Board Bureau:

  • Setup under the government's Indradhanush programme to reform public sector banks.
  • Started operations in April 2016.
  • BBB was conceived by P.J Nayak committee in order to reform the boards of public sector banks.
  • BBB is a super authority (Autonomous Body) of eminent professionals and officials for public sector banks (PSBs). It replaced the Appointments Board of Government.

Functions performed:

  • Give recommendations for appointment of full-time Directors as well as non-Executive Chairman of PSBs. 
  • Give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and instruments and to deal with issues of stressed assets.
  • Guide banks on mergers and consolidations and also ways to address the bad loans problem among other issues.

Why was BBB setup?

  • For the government to distance itself from the appointment process of top management and board members of PSBs, a function that could be performed by the BBB.
  • However, in practise while the BBB was involved in shortlisting and interviewing candidates, the final appointment was always made by the government.


Bill to regulate deposit plans 

Bill to regulate deposit plans 

What is the issue?

  • Union Cabinet is on the verge of clearing a Bill which seeks to regulate deposit schemes in wake of fraudulent schemes being seen all over the country.

About the Bill:

  • The Banning of Unregulated Deposit Schemes and Protection of Depositors Interest Bill may be cleared by the Cabinet in the near future.
  • Stringent penal provisions, including imprisonment for a minimum of three years, which can be extended to 10 years, for running such deposit schemes.
  • ‘Deposit’ under the new law has been described as money taken by way of advance or loan or any other form and returned in a specified period or otherwise in cash or kind, or in the form of a specified service with or without any benefit — interest, bonus, profit or any other form. All unregulated deposit schemes will come under this law.
  • For default in repayment or return of deposits on maturity, the law proposes jail of up to 7 years or fine of not less than Rs 5 lakh or three times the amount of profits made out of such defaults, whichever is higher, or both.
  • Also proposes setting up an empowered committee for arbitration in case of any dispute over the jurisdiction of regulators over a particular scheme.


New Bill to ban Unregulated Deposit Schemes and Chit Funds

New Bill to ban Unregulated Deposit Schemes and Chit Funds

What is the issue?

In a major policy initiative to protect the savings of the investors, the Union Cabinet chaired by the Prime Minister has given its approval to introduce the following bills in the Parliament :

  • Banning of Unregulated Deposit Schemes Bill, 2018 in parliament 
  • Chit Funds (Amendment) Bill, 2018

What does 'Banning of Unregulated Deposit Schemes Bill 2018' provide for ?

  • Complete prohibition of unregulated deposit taking activity
  • Deterrent punishment for promoting or operating an unregulated deposit taking scheme
  • Stringent punishment for fraudulent default in repayment to depositors
  • Designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment
  • Powers and functions of the competent authority including the power to attach assets of a defaulting establishment
  • Designation of Courts to oversee repayment of depositors and to try offences under the Act
  • Listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand or prune the list.

Provisions of the Bill:

  • The Bill contains a substantive banning clause which bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme.
  • The principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante, rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags.
  • The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.
  • The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
  • The Bill provides for attachment of properties/ assets by the Competent Authority, and subsequent realization of assets for repayment to depositors.
  • Clear-cut time   lines   have   been   provided for attachment of property and restitution to depositors.
  • The Bill enables creation of an online central database, for collection and sharing of information on deposit taking activities in the country.
  • The Bill defines "Deposit Taker" and "Deposit" comprehensively.
  • "Deposit Takers" include all possible entities (including individuals) receiving or soliciting  deposits,   except specific  entities  such  as  those  incorporated   by legislation.
  • "Deposit" is defined in such a manner that deposit takers are restricted from camouflaging public deposits as receipts, and at the same time not to curb or hinder acceptance of money by an establishment in the ordinary course of its business.
  • Being a comprehensive Union law, the Bill adopts best practices from State laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the State Governments.

Chit Funds (Amendment ) Bill 2018

Need for changes to the original law ?

In order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, thereby enabling greater financial access of people to other financial products

  • Use of the words "Fraternity Fund" for chit business under Sections 2(b) and 11(1) of the Chit Funds Act, 1982, to signify its inherent nature, and distinguish its working from "Prize Chits" which are banned under a separate legislation;
  • While retaining the requirement of a minimum of two subscribers for the conduct of the draw of the Chit and for the preparation of the minutes of the proceedings, the Chit Funds (Amendment) Bill, 2018 proposes to allow the two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a Chit may not be forthcoming easily.
  • The foreman shall have the minutes of the proceedings signed by such subscribers within a period of two days following the proceedings;
  • Increasing the ceiling of foreman's commission from a maximum of 5% to 7%, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold;
  • Allowing the foreman a right to lien for the dues from subscribers, so that set-off is allowed by the Chit company for subscribers who have already drawn funds, so as to discourage default by them; and
  • Amending Section 85 (b) of the Chit Funds Act, 1982 to remove the ceiling of one hundred rupees set in 1982 at the time of framing the Chit Funds Act, which has lost its relevance. The State Governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time.


Coal mining now open for the private sector 

Coal mining now open for the private sector 

What is the issue?

  • The Cabinet Committee on Economic Affairs, chaired by Prime Minister has approved the methodology for auction of coal mines / blocks for sale of coal under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957. 
  • The opening up of commercial coal mining for private sector is the most ambitious coal sector reform since the nationalisation of this sector in 1973.

About the move :

  • Commercial coal mining for private sector has been opened for both Indian and Foreign companies
  • Big, medium and small mines would be offered to private companies for mining.
  • Until now, private sector was allowed tomine coal only for captive use only, like steel plants and power projects.
  • No restrictions on the sale and/or utilisaton of coal from the mine.

Advantages of the move :

  • Boost to domestic production and reduce the dependence on imports.
  • End of Coal India Limited's (CIL) monopoly. Instead now CIL will have to compete with private competition.
  • Boost to transparency, ease of doing business and ensures that resources are used for national development.


A Bill to hold economic offenders who flee the country responsible

A Bill to hold economic offenders who flee the country responsible

What is the issue?

  • The Central government is considering enacting the 'Fugitive Economic Offenders Bill'
  • The Bill would provide for confiscating of assets of whose who flee the country and refuse to return after committing frauds in  excess of Rs. 100 crore.

About the Bill :

  • The draft Bill defines a fugitive economic offender as any individual against whom an arrest warrant has been issued and who has either left the country or refuses to comeback to face prosecution.
  • As proposed, the Enforcement Directorate will be empowered under the Prevention of Money Laundering Act (PMLA) to initiate the proceedings.
  • It has a provision enabling repayment of dues to creditors by disposing of confiscated assets, in case the accused offender continues to evade prosecution.
  • As listed in the draft Bill’s schedule, it will be applicable to various financial and allied offences as defined under the Indian Penal Code, the Prevention of Corruption Act, the Securities and Exchange Board of India Act, Customs Act and so on. 


Government lists 'high-risk' NBFCs

Government lists 'high-risk' NBFCs

What is the issue?

  • 9491 Non Banking Finance Companies (NBFCs) have been categorised as 'high risk' due to non-compliance with certain rules of the Prevention of Money Laundering (PML) Act.

Which critieria have these NBFCs not adhered to?

  • Appointment of a principal officer and a designated director who are responsible for checking and reporting suspicious transactions and cash transactions of Rs 10 lakh and above.

Which organisation has published this list?

  • Financial Intelligence Unit (FIU)

About the Financual Intelligence Unit (FIU) :

  • Financial Intelligence Unit – India (FIU-IND) was set up by the Government of India in November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions.
  • FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes.
  • FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

What are NBFCs?

  • An NBFC is a company registered under the Companies Act, 1956, and undertakes activities similar to that of a bank like accepting deposits and lending loans and advances.
  • Borrowers prefer them over banks due to their faster decision-making ability, prompt provision of services and expertise in niche segments like truck finance, consumer durables or gold loans.

However, they cannot do the following:

  • NBFCs cannot accept demand deposits
  • NBFCs cannot issue cheques drawn on itself 
  • NBFC deposits are not insured by Deposit Insurance and Credit Guarantee Corporation.