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Financial Action Task Force (FATF)

Paper: General Studies 2

Topic: Important International institutions, agencies and fora- their structure, mandate.

Why in the news?

  • Pakistan has been placed on the lowest rung, or “blacklist”, of the Financial Action Task Force’s Asia Pacific Group (APG) for non-compliance and non-enforcement of safeguards against terror financing and money laundering.
  • The APG, one of nine regional affiliates of the FATF, met in Canberra from August 18 to 23 to discuss a five-year review of the Mutual Evaluation Report (MER) for Pakistan, and decided to place it among countries requiring “enhanced, expedited follow-up”. 

What is the FATF?

  • The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions.  The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.  The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
  • The FATF has developed a series of Recommendations that are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction.  They form the basis for a co-ordinated response to these threats to the integrity of the financial system and help ensure a level playing field. 
  • The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.  In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

 

Measures to Boost the Economy

Paper: General Studies 3

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Why in the news?

The Finance Minister presented measures to boost the economy.

What are these measures?

Facilitating Wealth Creators

CSR Violations 

Not to be treated as criminal offence and would instead be civil liability. Ministry of Corporate Affairs to review the sections under Companies Act. Government has provided companies through revised orders, time for completing ongoing projects towards fulfil their CSR obligations. 

Issue of IT orders, notices, summon letters etc through a centralized system

In order to address complaints of harassment on account of issue of notices, summons, orders etc. by certain income-tax authorities:

  • On or after 1st October, 2019 all notices, summons, orders etc. by the income-tax authorities shall be issued through a centralized computer system and will contain a computer generated unique Document Identification Number.
  • Any communication issued without computer-generated unique Document Identification Number shall be non est in law.
  • All old notices to be decided by 1st October 2019 or uploaded again through the system 
  • From 1st October, 2019 all notices to be disposed off within three months from the date of reply.

 

Taxation Measures

Relief from Enhanced surcharge on Long Term/ short term capital gains

In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No. 2) Act, 2019 on long/ short term capital gains arising from transfer of equity shares/units referred in section 111A and 112 A respectively. 

Withdrawal of Angel tax Provisions for Start ups and their investors

  • To mitigate genuine difficulties of startups and their investors, it has been decided that section 56(2)(viib) of the Income-tax Act shall not be applicable to a startup registered with DPIIT. 
  • It has also been decided to set up a dedicated cell under Member of CBDT for addressing the problems of startups. A startup having any income-tax issue can approach the cell for quick resolution of the same. 

 

Banks/NBFCs/MSMEs

Additional Credit expansion through PSBs

Upfront release of Rs. 70,000 Cr., additional lending and liquidity to the tune of ~ Rs 5 Lakh crore by providing upfront Capital to PSBs • This will benefit Corporates, Retail borrowers, MSMEs, small traders, etc

Banks to effect timely rate cuts

Banks have decided to pass on rate cuts through MCLR reduction to benefit all borrowers 

Banks to launch Repo Rate/ External benchmark linked loan products

Reduced EMI for housing loans, vehicle and other retail loans by directly linking Repo rate to interest rates. Working capital loans for industry will also become cheaper

Customer Ease

  • To reduce harassment and bring in greater efficiency, PSBs to ensure mandated return of loan documents within 15 days of loan closure. 
  • Benefit: Borrowers who have mortgaged assets

Customer Ease: Online Tracking of Applications

  • On line tracking of loan applications by customers of Retail, MSME, Housing, Vehicle, working Capital, limit enhancements ,renewals etc. 
  • Would increase transparency, reduce harassment, and improve turn around time for customers. 

Transparent One time settlement Policy

  • Banks to issue improved transparent OTS policy to benefit MSME and retail borrowers in settling their overdues.
  • Policy to be based on check box approach
  • Benefit: Increased transparency 

Protecting Honest Decision Making

  • To support decision making and to prevent harassment for genuine commercial decisions by bankers, CVC has issued directions that Internal Advisory Committee (IAC) in banks to classify cases as vigilance and non-vigilance.
  • Decision of the IAC and bank CVO/ DA to be treated as final.

Support to NBFCs/HFCs

More credit support for purchase of houses, vehicles, consumption goods, 

  • Additional liquidity support to HFCs Rs. 20,000 Cr by NHB thereby increasing it to Rs. 30,000 Cr. 
  • Partial Credit Guarantee scheme for purchase of pooled assets of NBFCs/ HFCs upto Rs 1 lakh Cr – to be monitored at highest level in each bank 
  • Prepayment notices issued to NBFCs to be monitored by Banks 

Use of Bank KYCs by NBFCs

  • NBFCs to be permitted to use the Aadhaar authenticated bank KYC to avoid repeated processes.
  • Necessary changes shall be made in PMLA rules and Aadhaar Regulations 
  • Easier, fast tracked onboarding of customers

Co-origination of loans by PSBs jointly with NBFCs

To take advantage of liquidity with PSBs and last mile customer connect of NBFCs, PSBs to fast track collaboration for loans to MSMEs, small traders Self Help Groups, MFI clients borrowers in coorigination mode with NBFCs

GST Refund to MSMEs within 30 days

All pending GST refund due to MSMEs shall be paid within 30 days. In future all GST refunds shall be paid within 60 days from the date of application

MSME Bill Discounting

TReDS to use GSTN system in medium term to enhance market for bill discounting for MSMEs

MSME Definition

Amendment to MSME Act to move towards single definition to be considered

UK Sinha Committee Recommendations

Decisions on recommendations such as on ease of credit, marketing, technology, delayed payments etc. within 30 days

 

Increasing Capital flows and Energizing Financial Markets

Deepening of bond markets in India

  • In order to improve access to long term finance, it is proposed to establish an organisation to provide Credit Enhancement for infrastructure and housing projects. This would enhance debt flow towards such projects. 
  • The government would soon take further action on development of Credit Default Swap markets soon, in consultation with RBI and SEBI.
  • In order to improve domestic market in bonds, Ministry of Finance will work with RBI to make it more conducive for investors and bond issuers, as well as facilitate increased trading for price discovery 
  • Government has amended the Companies (Share capital and Debenture rules) 2014 to remove the requirement for creation of a Debenture Redemption Reserve (DRR) of outstanding debentures in respect of listed companies, NBFCs and for HFCs. 

Access of Indian Companies to the Global Market

The Depository Receipt Scheme 2014 is expected to be operationalised soon by SEBI. This will give Indian companies increased access to foreign funds through ADR/GDR. 

Use of Aadhar Based KYCs for domestic retail investors

  • In order to improve market access for the domestic retail investors, Aadhaar-based KYC to be permitted for opening of Demat account and making investment in mutual funds 
  • Necessary notification for amendments in PMLA Rules to be issued

Simplified KYC for Foreign Investors and FPIs

Simplified KYC procedure to improve market access for foreign investors including FPIs

Offshore Rupee Market

To bring offshore Rupee market to domestic stock exchanges and permit trading of USD -INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly.

 

Infrastructure

Delayed Payments

Delayed payments from Government/ CPSEs to be monitored by Department of Expenditure and performance reviewed by Cabinet Secretariat

Decision to pay 75% of the Arbitration Awards

In contractual disputes by Government/ CPSEs to be implemented and monitored by Cabinet Secretariat

Rs 100 lakh crore for developing modern infrastructure over 5 years

  • An inter-ministerial Task force is being formed by Department of Economic Affairs to finalise the pipeline of infrastructure projects.
  • The above initiative is expected to boost growth and creation of jobs. These projects would be monitored actively to accelerate capital expenditure and investments in the economy.

 

Automotive Sector

BS IV vehicles purchase till 31.3.20

To remain operational for entire period of registration

Revision of one time Registration Fees

Being deferred till June 2020

Higher Depreciation for all vehicles

Additional 15% depreciation on all vehicles, to increase it to 30% acquired during the period from now till 31.03.20

Both EVs and ICVs will Continue to be Registered

Government’s focus will be on setting up of infrastructure for development of ancillaries /components including batteries for export

To Boost Demand

  • Government shall lift the ban on purchase of new vehicles for replacing all old vehicles by Departments 
  • Government will consider various measures including scrappage policy.

Ministry of Finance to Continue to Engage

With stakeholders for timely and suitable interventions for different sectors

 

NAFED

Paper: General Studies 3

Topic: storage, transport and marketing of agricultural produce and issues 

Why in the news?

  • The Department of Consumers Affairs today reviewed the prices of Essential Commodities such as Onions, Pulses and Oilseeds with all the stakeholders under the chairmanship of Secretary Consumer Affairs.
  • The committee decided to substantially increase the daily supply of onions from government buffer to Delhi and directed NAFED to release the stock from PSF buffer so as to ensure improved availability at reasonable rates. 
  • The committee took note of the fact that import of onion is free (under Open General License) and currently there is sufficient stock of onions available in the government buffer. Supply of onions can be further enhanced if the need so arises.

About NAFED

  • National Agricultural Cooperative Marketing Federation of India Ltd.(NAFED) was established on the auspicious day of Gandhi Jayanti on 2nd October 1958. Nafed is registered under the Multi State Co-operative Societies Act. Nafed was setup with the object to promote Co-operative marketing of agricultural produce to benefit the farmers. Agricultural farmers are the main members of Nafed, who have the authority to say in the form of members of the General Body in the working of Nafed.
  • The objectives of the NAFED shall be to organize, promote and develop marketing, processing and storage of agricultural, horticultural and forest produce, distribution of agricultural machinery, implements and other inputs, undertake inter-state, import and export trade, wholesale or retail as the case may be and to act and assist for technical advice in agricultural, production for the promotion and the working of its members, partners, associates and cooperative marketing, processing and supply societies in India. 

What is the Price Stabilisation Fund (PSF)?

  • The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW) to help regulate the price volatility of important agri-horticultural commodities like onions, potatoes and pulses were also added subsequently. The PSF scheme was transferred from DAC&FW to the Department of Consumer Affairs (DOCA) w.e.f. 1st April, 2016. 
  • The scheme provides for maintaining a strategic buffer of aforementioned commodities for subsequent calibrated release to moderate price volatility and discourage hoarding and unscrupulous speculation. For building such stock, the scheme promotes direct purchases from farmers/farmers’ association at farm gate/Mandi. 
  • The PSF is utilized for granting interest free advance of working capital to Central Agencies, State/UT Governments/Agencies to undertake market intervention operations. Apart from domestic procurement from farmers/wholesale mandis, import may also be undertaken with support from the Fund. 

 

Composite Water Management Index 2.0

Paper: General Studies 3

Topic: Conservation, environmental pollution and degradation, environmental impact assessment 

Why in the news?

NITI Aayog has prepared the second Round of Composite Water Management Index (CWMI 2.0).The Report was launched today by Shri Gajendra Singh Shekhawat, Minister of Jal Shakti, and Dr. Rajiv Kumar, Vice Chairman, NITI Aayog. 

What are the findings of the Composite Water Management Index 2.0?

  • CWMI 2.0 ranks various states for the reference year 2017-18 as against the base year 2016-17.
  • In the report released today, Gujarat held on to its rank one in the reference year (2017-18), followed byAndhra Pradesh, Madhya Pradesh, Goa, Karnataka and Tamil Nadu.  In North Eastern and Himalayan States, Himachal Pradesh has been adjudged number 1 in 2017-18 followed by Uttarakhand, Tripura and Assam. 
  • The Union Territories have first time submitted their data and Puducherry has been declared as the top ranker. In terms of incremental change in index (over 2016-17 level), Haryana holds number one position in general States and Uttarakhand ranks at first position amongst North Eastern and Himalayan States.On an average, 80% of the states assessed on the Index over the last three years have improved their water management scores, with an average improvement of +5.2 points.

What is the Composite Water Management Index 2.0?

  • The CWMI is an important tool to assess and improve the performance of States/ Union Territories in efficient management of water resources.  This has been done through a first of its kind water data collection exercise in partnership with Ministry of Jal Shakti, Ministry of Rural Development and all the States/ Union Territories.
  • The index would provide useful information for the States and also for the concerned Central Ministries/Departments enabling them to formulate and implement suitable strategies for better management of water resources. 

 

Prelims Specific

  • Ministry of Women and Child Development (WCD)recognized significant contributions of State Governments, District teams, Block level teams and Field Functionaries at the POSHAN Abhiyaan Award Ceremony for 2018-19 held in New Delhi. During the award ceremony, nine States – Andhra Pradesh, Chhattisgarh, Himachal Pradesh, Madhya Pradesh, Maharashtra, Mizoram, Rajasthan, Tamil Nadu and Uttarakhand and three Union Territories – Chandigarh, Daman & Diu, Dadra and Nagar Haveli were given 23 excellence awards for ICDS-CAS implementation and capacity building, convergence, behaviour change and community mobilisation. Moreover, for exemplary services, 237 field functionaries comprising of Anganwadi Workers, Anganwadi Helpers, Lady Supervisors, Accredited Social Health Activist (ASHA) and Auxiliary Nurse and Midwives (ANM) were given awards.