Non-Performing Assets An NPA is a loan or advance for which the principle or interest payment remained overdue for a period of 90 days. Banks are further required to classify NPA into: Key Facts about India’s NPA Problem The financial position of India’s Public Sector Banks has deteriorated sharply since 2011. Gross NPA has risen… Continue reading Problem of Non Performing Assets in India

Banking Sector Reforms First Narasimhan Committee Report – 1991 To promote the healthy development of the financial sector, the Narasimhan committee made recommendations. Recommendations of Narasimhan Committee 1.    Establishment of 4 tier hierarchy for banking structure with 3 to 4 large banks (including SBI) at the top and at bottom rural banks engaged in agricultural activities.… Continue reading Banking Sector Reforms in India: Narasimhan Committee 1&2, Nachiket Mor Committee, P J Nayak Committee

Statutory bodies are established by acts which Parliament and State Legislatures can pass. These bodies are entities shaped by an Act of Parliament or state legislatures and set up by the government to consider the data and make judgments in some area of activity. Basically, a statutory body is an organization of government which is… Continue reading Statutory Bodies: Establishment, Functions, Examples

Lead Bank Scheme After the Nationalisation of the commercial Banks, the government took the initiative for extending banking facilities in rural areas. Prof D. R. Gadgil, chairman of National Credit Study Group, recommended the adaptation of an “area approach” to evolve plans and programs for the development of an adequate  banking and credit structure in… Continue reading Nationalisation of Banks

Development Finance Institutions The Need of DFIs Classification of DFIs All India DFIs Special DFIs Investment Institutions Refinance Institutions State Level DFIs IFCI IDBI SIDBI ICICI ICICI ceased to be a DFI and converted into a Bank on 30 March 2002. IDBI was converted into a Bank on 11 October 2004. EXIM Bank IFCI Venture… Continue reading Development Finance Institutions: IFCI, ICICI, SIDBI, IDBI, UTI, LIC, GIC

The budgetary procedure in India involves four different operations that are Preparation of the budget Enactment of the budget Execution of the budget Parliamentary control over finance Preparation of the budget The exercise of the preparation of the budget by the ministry of finance starts sometimes around in the month of September every year. There… Continue reading Budgetary procedure in India

India embraced an economic model which has the features of both free market capitalism and socialism. The policy makers called this a model of ‘Mixed Economy’. The reason for adopting such a hybrid model was to raise people’s standard of living and reduce income inequality. India embraced an economic model that uniquely combined free market… Continue reading The Role of the Government in the Economy

Balance Budget versus Unbalanced Budget Balanced Budget Unbalanced Budget A balanced budget is a situation, in which estimated revenue of the government during the year is equal to its anticipated expenditure.   The budget in which income & expenditure are not equal to each other is known as Unbalanced Budget.   The government’s estimated Revenue… Continue reading Types of Budgets in India

Revenue Account The revenue account shows the current receipts of the government and the expenditure that can be met from these receipts. Revenue Receipts: RR are receipts of the government incomes which cannot be reclaimed back by the citizens from the government.     Revenue Expenditure The expenditure incurred by thegovernment that neither creates any… Continue reading The Government Budget: Revenue Budget, Capital Budget, Government Deficits

Goods and Services Tax The Goods and Services Tax (GST), the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago, at last, becomes a reality. The Working of GST The Manufacturing Stage: Step 1) Imagine a Producer of Shoe. He buys raw materials like leather, cloth,… Continue reading Goods and Services Tax

The Summary of India’s Tax Reforms Income Tax In 1973-74, there were 11 income tax slabs, ranging from 10 per cent to 85 per cent. With a sur charge of additional 15%, the implication of which is high earning individuals paying an effective tax of 97% of their incomes. The Wealth tax further makes a… Continue reading Tax Reforms in India

Key Concepts Relating to Taxation Tax Incidence The key to imposing the tax is who bears its burden. If the person on whom the tax is imposed have the flexibility to transfer it on to the other person, then we say tax incidence has shifted. The shifting of tax form one person to the other… Continue reading Concept Related to Taxation: Tax Incidence, Tax Evasion, Laffer Curve, CESS and Surcharge

Special Category Status to States Various Chief Ministers across the nation have been demanding special status for their respective states since last few years. This has led to fierce debates amongst the proponents and critiques of the special category status. The proponents argue that granting special status to these states will bring them at par… Continue reading Special Category Status, Role of Finance Commission, Centrally Sponsored Schemes, National Counter Terrorism Centre, GST, Federalism and Foreign policy

The Indian Constitution has elaborate provisions regarding the distribution of revenues between the Union and the States. Article 268 to 293 in Part XII deal with the financial relations. The financial relations between the Union and the States can be studied under the following heads: Taxes and duties levied by the Union, but collected and… Continue reading Financial Relations between Centre and State (Art. 268 to 293)

The framers of Indian Constitution made detailed provisions in the Constitution in regard to administrative relations between the Centre and State to ensure minimization of conflict between the two. They have been elaborated below: a) Directives by the Union to the State governments: Article 256 mentions that the executive power of every state shall be… Continue reading Administrative Relations between Centre and State (Art. 256 to 263)

The Role of the Governor (Discretionary Power and Appointment Issues), Reservation of Bills for Consideration of President Misuse of Article 356 The Maintenance of Law and Order in States Encroachment by the Centre on State List The Financial weakness of the State Taxation Powers Issue of Grants Role of Planning Commission Question of Autonomy Issue

Article 356 is the most contentious article of the Constitution.It offers for State emergency or President’s rule in State if the President, on receipt of It offers for State emergency or President’s rule in State if the President, on receipt of report from the Governor of a State or otherwise, is satisfied that a situation… Continue reading Misuse of Article 356 by Central Government