Panel to evaluate applications for Universal Banks, Small Finance Banks
The Reserve Bank of India (RBI) has announced the creation of a Standing External Advisory Committee under the chairmanship of Shyamala Gopinath for evaluating applications for Universal Banks and Small Finance Banks.
This is part of the central bank’s earlier announced plan to give banking permits on a continuous basis to candidates, a process that is is commonly known as ‘on-tap’ licensing.
What is On tap licensing?
It means the RBI window for granting banking licences will be open throughout the year.
What is Universal banking?
It is a system of banking where banks undertake a blanket of financial services like investment banking, commercial banking, development banking, insurance and other financial services including functions of merchant banking, mutual funds, factoring, housing finance, insurance etc.
RBIs universal bank licensing guidelines:
Individuals/professionals who are ‘residents’ and have minimum 10 years of experience in banking and finance at a senior level.
The initial minimum paid-up voting equity capital for a bank shall be five billion. Thereafter, the bank shall have a minimum net worth of five billion at all times.
The requirement of Non-Operative Financial Holding Company (NOFHC) is not mandatory for individual promoters or standalone promoting/converting entities who/which do not have other group entities.
Not less than 51% of the total paid-up equity capital of the NOFHC shall be owned by the Promoter/Promoter Group. No shareholder, other than the promoters/promoter group, shall have significant influence and control in the NOFHC.
The bank shall get its shares listed on the stock exchanges within six years of the commencement of business by the bank.
The bank is precluded from having any exposure to its promoters, major shareholders who have shareholding of 10 per cent or more of paid-up equity shares in the bank, the relatives of the promoters as also the entities in which they have significant influence or control.
The bank has to open at least 25 per cent of its branches in unbanked rural centres.
The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic scheduled commercial banks.
The board of the bank should have a majority of independent directors.
The validity of the in-principle approval issued by the Reserve Bank will be 18 months from the date of granting in-principle approval and would thereafter lapse automatically.
Sixth Schedule areas
The Union Ministry of Home Affairs (MHA) has informed the Lok Sabha that “presently, there is no proposal to implement panchayat system in Sixth Schedule areas of Assam”.
Efforts in this regard- Constitution (125th Amendment) Bill, 2019:
Introduced in the Rajya Sabha on February 6, 2019, the Bill provides for elected village municipal councils.
The Bill that is still active proposes that the State Election Commissions would hold elections to the autonomous councils, village and municipal councils.
About the Sixth Schedule:
It protects tribal populations and provides autonomy to the communities through creation of autonomous development councils that can frame laws on land, public health, agriculture and others.
As of now, 10 autonomous councils exist in Assam, Meghalaya, Tripura and Mizoram.
This special provision is provided under Article 244(2) and Article 275(1) of the Constitution.
The governor is empowered to organise and re-organise the autonomous districts.
If there are different tribes in an autonomous district, the governor can divide the district into several autonomous regions.
Composition: Each autonomous district has a district council consisting of 30 members, of whom four are nominated by the governor and the remaining 26 are elected on the basis of adult franchise.
Term: The elected members hold office for a term of five years (unless the council is dissolved earlier) and nominated members hold office during the pleasure of the governor.
Each autonomous region also has a separate regional council.
Powers of councils: The district and regional councils administer the areas under their jurisdiction. They can make laws on certain specified matters like land, forests, canal water, shifting cultivation, village administration, inheritance of property, marriage and divorce, social customs and so on. But all such laws require the assent of the governor.
Village councils: The district and regional councils within their territorial jurisdictions can constitute village councils or courts for trial of suits and cases between the tribes. They hear appeals from them. The jurisdiction of high court over these suits and cases is specified by the governor.
The Centre will release ₹30,000 crore as GST compensation to States this month, from the compensation cess collections during the year.
The pending compensation dues to States for 2020-21 are expected to be more than ₹77,000 crore.
Why should the Centre pay states for GST loss?
The GST Compensation Act, 2017 guaranteed States that they would be compensated for any loss of revenue in the first five years of GST implementation, until 2022, using a cess levied on sin and luxury goods.
However, the economic slowdown has pushed both GST and cess collections down over the last year, resulting in a 40% gap last year between the compensation paid and cess collected.
States are likely to face a GST revenue gap of ₹3 lakh crore this year, as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman termed an unforeseen “act of God”.
What is compensation cess?
The modalities of the compensation cess were specified by the GST (Compensation to States) Act, 2017.
This Act assumed that the GST revenue of each State would grow at 14% every year, from the amount collected in 2015-16, through all taxes subsumed by the GST.
A State that had collected tax less than this amount in any year would be compensated for the shortfall. The amount would be paid every two months based on provisional accounts, and adjusted every year after the State’s accounts were audited by the Comptroller and Auditor General.
This scheme is valid for five years, i.e., till June 2022.
Compensation cess fund:
A compensation cess fund was created from which States would be paid for any shortfall. An additional cess would be imposed on certain items and this cess would be used to pay compensation.
The items are pan masala, cigarettes and tobacco products, aerated water, caffeinated beverages, coal and certain passenger motor vehicles.
The GST Act states that the cess collected and “such other amounts as may be recommended by the [GST] Council” would be credited to the fund.