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N K Singh panel submits report on changes in FRBM Act  

The Fiscal Responsibility and Budget Management (FRBM) Committee has submitted its 4 volume report on changes in FRBM Act, 2013 to the Union Finance Minister Arun Jaitley.

The 5 member committee was headed by N.K. Singh, former Revenue and Expenditure Secretary and former MP. Its member included RBI Governor Urjit Patel, Chief Economic Advisor Arvind Subramanian, former Finance Secretary Sumit Bose, and National Institute of Public Finance and Policy Director Rathin Roy.

Key Facts
  • The committee was constituted in May 2016 following Finance Minister Budget 2016-17 announcement. It was assigned task to review the working of the FRBM Act over last 12 years to suggest the way forward.
  • It was also tasked to examine the need and feasibility of having a ‘fiscal deficit range’ as the target in place of the existing fixed numbers (percentage of GDP) as fiscal deficit target.
  • The committee has kept in view the broad objective of fiscal consolidation and prudence and has suggested changes required in the context of the uncertainty and volatility in the global economy.
  • The first volume of the report addresses the issue of the fiscal roadmap, fiscal policy, international experience and recommendations therein.
  • The second volume refers to international experience especially from a lot of international organisations particularly OECD, the World Bank, ILO.
  • The third volume deals with Centre-State issues. The fourth volume deals with views of domain experts both from national and international appropriate for fiscal policy

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Union Cabinet approves advancement of the Budget presentation

The Union Cabinet has given in principle approval for advancement of the date of Budget presentation from the last day of February to a suitable date.

Besides in another reform relating to budgetary process, Union Cabinet has approved merger of Plan and Non Plan classification in Budget and Accounts.

Advancement of the date of Budget presentation

Benefits

  • Pave way for early completion of Budget cycle and enable Central Ministries and Departments to ensure better planning and execution of schemes from beginning of financial year.
  • It will also enable Central Ministries and Departments to ensure better utilize the full working seasons including the first quarter of the year.
  • It will preclude the need of appropriation through ‘Vote on Account’. It will enable implementation of legislative changes in tax and laws for new taxation measures from the beginning of financial year.

Merger of Plan and Non Plan classification in Budget and Accounts

The Union Cabinet also approved proposal of Union Finance Ministry to do away with the Plan and Non-Plan expenditure classification from 2017-18and replace with ‘capital and receipt’.

The relevance of plan and non-plan expenditure was lost after the abolition of the Planning Commission.

However Budget will continue earmarking funds for Scheduled Castes Sub-Plan/Tribal Sub-Plan and similarly, the allocations for North Eastern States.

Plan/Non-Plan will help in resolving the following issues

  • This distinction of expenditure had led to a fragmented view of resource allocation to various schemes.
  • It had made it difficult to ascertain cost of delivering a service and also to link outlays to outcomes.
  • It had led to bias in favour of Plan expenditure by Centre as well as the State Governments and had neglected essential expenditures on maintenance of assets and other establishment related expenditures to provide essential social services.
  • The merger is expected to provide appropriate budgetary framework that will have focus on the capital and revenue expenditure.

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RBI suspended licence of seven non-banking finance companies (NBFCs)

On 17 August the Reserve Bank of India (RBI) suspends licence of seven non-banking finance companies (NBFCs).

The seven NBFCs whose licences were suspended are – Religare Finance, Artisans Micro Finance, Eden Trade & Commerce, RCS Parivar Finance, Nott Investments, Dewra Stocks & Securities, Swetasree Finance.

Being a dormant entity, Religare Finance licence was suspended by RBI as it did not conducted lending operation for long period of time.

RBI role in issuing licence to NBFCs:

  • A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956, whose principal business is lending, investments and receiving deposits. At present there are around 12,000 NBFCs in India.
  • NBFC does not include any institution whose principal business is agricultural activity, trading activity, industrial activity or sale/purchase/construction of immovable property.
  • RBI has power under RBI Act 1934 to register, regulate, lay down policy, inspect, issue directions, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.
  • Any NBFCs that does not carry out its principal business according to the directions or orders issued by RBI under RBI Act is eligible for penal action that can also result in cancelling the Certificate of Registration issued to the NBFC.

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