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GS Paper: Mobilization Of Resources

  • Launch of Bima Sugam Portal

    Why in the News?

    Bima Sugam, envisioned as the worldā€™s largest online marketplace for insurance, was officially launched by the Bima Sugam India Federation (BSIF) at the IRDAI headquarters in Hyderabad.

    What is Bima Sugam?

    • Overview: Worldā€™s largest unified digital marketplace for insurance products and services, initiated by the Insurance Regulatory and Development Authority of India (IRDAI).
    • Coverage: Includes life, health, motor, travel, property, agricultural, and commercial insurance.
    • Function: Works like Unified Payments Interface (UPI) for insurance, providing common infrastructure for purchase, renewal, management, and claims.
    • Stakeholders: Brings together insurers, intermediaries, agents, brokers, banks, and customers on a single platform.
    • Governance: Operated by the Bima Sugam India Federation (BSIF) with equity participation from insurance companies.
    • Policy Goal: Forms part of Indiaā€™s Digital Public Infrastructure (DPI), aligned with the vision of Insurance for All by 2047.
    • Working: Ā The simplified way for a user on the platform would be as follows:
      • Registration: A person can register using Aadhaar-based KYC or other valid ID.
      • e-Bima Account Creation: A secure, integrated insurance repository has been created.
      • Policy search and comparison: Products from all registered insurance companies are listed with standardized information for easy comparison.
      • Purchase: Policies can be purchased digitally with instant e-documentation and secure payments.
      • Service: Policyholders can renew, update, port, or cancel policies and receive real-time assistance.
      • Claims: Users can submit claims and track the process; insurance companies and TPAs will use backend access for faster verification and settlement.

    Key Features:

    • Phased Rollout: Begins as an information and guidance hub; full transactions enabled gradually.
    • Low-Cost Model: Minimal user charges, unlike private aggregators that rely on high commissions.
    • Centralised Database: Enables policy comparison, customer query resolution, and faster product adoption.
    • Secure Digital Storage: Provides safe policy storage with robust security and compliance standards.
    • Inclusive Ecosystem: All insurers mandated as members, ensuring transparency and fair access.
    [UPSC 2014] With reference to ā€œAam Admi Bima Yojanaā€. Consider the following statements:

    1. The member insured under the scheme must be the head of the family or earning member of the family in a rural landless household.

    2. The member insured must be in the age group of 30 to 65 years.

    3. There is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.

    Which of the statements given above is/are correct?

    Options: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only* (d) 1, 2 and 3

     

  • Is the new Income Tax law more accessible?Ā 

    Introduction

    In August 2025, Parliament passed the Income Tax Bill, 2025, a shorter and simplified legislation with 23 chapters (down from 47) and 536 sections (down from 819). The Bill aims to reduce discretion with clearer provisions, introduce taxpayer-friendly reforms like longer timelines for return updation, and curb harassment. However, it has also expanded the powers of tax officials, especially over digital information and personal data, raising concerns about privacy and misuse.

    Need for Overhauling the 1961 Income Tax Framework

    1. Obsolete framework: The Income Tax Act, 1961 had become outdated, riddled with amendments, and difficult for laypersons to interpret.
    2. Harassment potential: Excessive discretion allowed officials to harass taxpayers.
    3. Structural reform: New law cuts down chapters from 47 to 23 and sections from 819 to 536, simplifying compliance.
    4. Greater clarity: More tables (57, up from 18) and formulae (46, up from 6), along with examples to aid understanding.

    From Draft Bill to Final Law: The Legislative Journey

    1. Initial draft (Feb 2025): Introduced in Parliament but referred to a Select Committee given the Billā€™s significance.
    2. Committee review: Headed by Baijayant Panda, with MPs across parties; submitted a detailed report in July 2025.
    3. Withdrawal & replacement: Government withdrew the earlier version on August 8, 2025, to incorporate committee recommendations.
    4. Final Bill (Aug 11, 2025): Introduced and passed the same day, avoiding confusion through multiple versions.

    Key Reforms and Structural Simplifications:

    1. No slab changes: Finance Minister clarified tax rates and slabs remain unchanged.
    2. Technical refinements: Clearer provisions for Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT), separated into sub-sections.
    3. Taxpayer-friendly features: Returns can be updated up to 4 years from the end of the relevant assessment year without penalty; Assessment reopening period reduced to 5 years.

    Simplification Gains and Emerging Concerns

    1. Expanded search powers: Tax officers can now demand passwords of electronic devices, emails, and social media accounts.
    2. Override access: Officials may bypass access codes to computer systems if passwords are not shared.
    3. Privacy concerns: Unlike earlier provisions (limited to inspection and lock-breaking), the new law extends to personal digital data, raising red flags.

    Governmentā€™s Rationale for Expanding Digital Powers

    1. Rationale: Much of financial data today is exchanged via messaging apps, emails, or stored digitally.
    2. Committee stance: Though some dissent was recorded, the Select Committee accepted the governmentā€™s view that these provisions are essential for effective investigation.

    Conclusion

    The Income Tax Bill, 2025 is a watershed reform, simplifying one of Indiaā€™s most complex laws. While the codification of taxpayer-friendly provisions marks a progressive step, the enhanced surveillance powers granted to tax authorities highlight the thin line between efficiency and overreach. The challenge ahead lies in ensuring that simplification does not come at the cost of citizensā€™ trust and constitutional rights.

    Value Addition for UPSC
    • Governance angle (GS-II): Balancing simplification of laws with citizen rights and privacy.
    • Economic reforms (GS-III): Tax rationalisation improves compliance and ease of doing business.
    • Ethics (GS-IV): Dilemma of state surveillance vs. individual liberty; Kantian duty-based ethics vs. utilitarian approach.
    • Comparative context: Similar debates exist globallye.g., U.S. IRSā€™s digital access powers vs. EUā€™s stricter GDPR protections.

    PYQ Relevance

    [UPSC 2020] Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017.How has COVID-19 impacted the GST compensation fund and created new federal tensions?

    Linkage: The GST Compensation Act, 2017 aimed to build Centreā€“State trust during the GST transition but COVID-19 strained revenues, sparking federal tensions. Similarly, the Income Tax Bill, 2025 seeks to simplify direct taxes to build citizen trust but raises concerns over state overreach in digital surveillance. Both show that taxation is ultimately about trust and legitimacy in governance.

    Practice Mains Question

    The Income Tax Bill, 2025 seeks to simplify Indiaā€™s tax regime but also introduces stronger surveillance powers for officials. Discuss the balance between efficiency, transparency, and taxpayer rights. (250 words)

    Mapping Microthemes for GS Papers

    1. GS-I: Evolution of economic policies post-Independence.
    2. GS-II: Governance, legislative reforms, fundamental rights (privacy).
    3. GS-III: Fiscal reforms, tax policy, ease of doing business.
    4. GS-IV: Ethics of surveillance, transparency, accountability.

  • IBC Amendment Bill, 2025

    Why in the News?

    The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 was introduced in the Lok Sabha by Finance Minister to streamline insolvency, cut tribunal delays, and add new tools like creditor-led resolution and cross-border insolvency.

    About the Insolvency and Bankruptcy Code (IBC), 2016:

    • IBC is Indiaā€™s bankruptcy law, covering corporate persons, partnership firms, and individuals.
    • Insolvency: Liabilities exceed assets; entity cannot meet obligations.
    • Bankruptcy: Legal declaration of inability to pay debts.
    • Objective: Time-bound, creditor-driven resolution to improve recovery and business confidence.
    • Regulating Authority: Insolvency and Bankruptcy Board of India (IBBI), a statutory body with members from Ministry of Finance, Ministry of Corporate Affairs, and Reserve Bank of India.
    • Adjudicating Authority:
      • National Company Law Tribunal (NCLT) for companies/LLPs.
      • Debt Recovery Tribunal (DRT) for individuals and partnership firms.

    Key Amendments Proposed in IBC (2025):

    • Creditor-Initiated Insolvency Resolution Process (CIIRP): Out-of-court creditor resolutions with NCLT approval; faster timelines and promoter involvement.
    • Group Insolvency: Joint proceedings for related companies to preserve asset value and cut costs (e.g., Videocon Group case).
    • Cross-Border Insolvency: Framework to handle overseas assets and debts, allowing Indian lenders access to foreign assets.
    • Pre-Packaged Insolvency (PPIRP): Faster, affordable restructuring route for Micro, Small, and Medium Enterprises (MSMEs) while operations continue.
    • Other Reforms: Segregated asset sales, more NCLT benches (now 16), extended claim timelines, sector-specific provisions, and debtor audits.

    Achievements of IBC:

    • Debt Resolution: Resolved ā‚¹3.16 lakh crore in 808 cases since 2016 (CRISIL data).
    • Recovery Rate: Average recovery of 32% of admitted claims, 169% of liquidation value.
    • Comparison: Outperformed earlier mechanisms (DRT, SARFAESI Act, Lok Adalat) which achieved only 5ā€“20% recovery.
    • Deterrence: Borrowers pre-settled ā‚¹9 lakh crore debt to avoid IBC proceedings.
    • Large NPAs: Addressed RBIā€™s ā€œDirty Dozenā€ cases like Bhushan Steel, Essar Steel, Jaypee Infratech.

     

    [UPSC 2017] Which of the following statements best describes the term ā€˜Scheme for Sustainable Structuring of Stressed Assets (S4A)ā€™, recently seen in the news?

    Options: (a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government.

    (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

    (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

    (d) It is an important provision in ā€˜The Insolvency and Bankruptcy Codeā€™ recently implemented by the Government. *

     

  • India rolls over $50M Treasury Bill to help Maldives

    Why in the News?

    India extended critical financial assistance to the Maldives by rolling over a $50 million Treasury Bill, continuing its support under a government-to-government arrangement since 2019.

    About Treasury Bill:

    • A T-Bill is a short-term debt instrument issued by the GoI through the Reserve Bank of India (RBI).
    • They are part of Government Securities (G-Secs) and are used to raise short-term funds.
    • They are zero-coupon securities, meaning they do not carry periodic interest payments.
    • Instead, they are issued at a discount and redeemed at face value upon maturity.
    • They were first introduced in India in 1917.
    • They are ideal for investors seeking safety and liquidity over short periods.

    Features of the T-Bills:

    • Tenures Available: 91-day, 182-day, and 364-day maturity periods.
    • Issued at a Discount: T-Bills are sold at a lower price than their face value. The return (yield) is the difference between purchase price and face value.
    • Minimum Investment: Starts at ā‚¹25,000, and in multiples of ā‚¹25,000 thereafter.
    • Zero-Coupon Nature: No interest payments during the tenure. Investors earn via the discounted purchase price.
    • Risk-Free Investment: Backed by the Government of India, making it virtually risk-free.
    • High Liquidity: Due to short tenure, T-Bills can be easily converted to cash.
    • Auction Mechanism: Sold through competitive and non-competitive bidding at RBI auctions.
    • Taxable Gains: Returns are treated as short-term capital gains and are taxable.
    • Sensitive to Inflation: Fixed returns can be impacted by rising inflation, reducing real returns.
    [UPSC 2018] Consider the following statements:

    1.The Reserve Bank of India manages and services GoI Securities but not any State Government Securities.

    2.Treasury bills are issued by the GoI and there are no treasury bills issued by the State Governments.

    3.Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    Options: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only * (d) 1, 2 and 3

     

  • [pib] 10 years of the Pradhan Mantri MUDRA Yojana (PMMY)

    Why in the News?

    April 8, 2025, marks the 10th anniversary of Pradhan Mantri MUDRA Yojana (PMMY), launched to fund micro and small enterprises.

    About the Pradhan Mantri MUDRA Yojana (PMMY)

    • The PMMY, launched in 2015 is a Central Sector Scheme designed to provide financial support to non-corporate, non-farm small and micro-entrepreneurs previously excluded from the formal financial system.
    • MUDRA stands for Micro Units Development & Refinance Agency Ltd., a financial institution established to support the development and refinancing of micro-enterprises
    • It aims to foster grassroots entrepreneurship and remove barriers to accessing loans, especially for businesses that lack collateral.

    Loan Categories:

      1. Shishu: Loans up to ā‚¹50,000 for new or small businesses.
      2. Kishore: Loans ranging from ā‚¹50,000 to ā‚¹5 lakh for growing enterprises.
      3. Tarun: Loans from ā‚¹5 lakh to ā‚¹10 lakh for more established businesses with greater capital needs.
      4. TarunPlus: Loan limit up to ā‚¹20 lakh for more established and larger businesses (since July 2024).

    Key Features:

    • Collateral-Free Loans: PMMY loans do not require any collateral, making them accessible to those without assets.
    • Member Lending Institutions (MLIs): These include Public Sector Banks, Private Sector Banks, Regional Rural Banks, Micro Finance Institutions (MFIs), Non-Banking Financial Companies (NBFCs), and Small Finance Banks (SFBs).
    • Credit Guarantee: Loans are backed by the Credit Guarantee Fund for Micro Units (CGFMU), which was established in 2015 to provide security to financial institutions offering loans under PMMY.
    • MUDRA Card: A MUDRA card is issued to manage the working capital portion of the loan, providing convenience to the borrower.

    MUDRA 2.0:

    • MUDRA 2.0 (launched in Union Budget 2024) is an upgraded version of the original PMMY, designed to extend its outreach, particularly in rural and semi-urban areas.
    • This version introduces additional services such as financial literacy programs, business mentorship, and comprehensive business support, aiming to improve the overall impact of the scheme.
    • Enhanced Credit Guarantee Scheme (ECGS) is a new feature introduced to encourage more lending to small and microenterprises by reducing the risk for financial institutions.

    Successes of PMMY:

    • Massive Loan Disbursement: Over ā‚¹32.61 lakh crore disbursed through 52 crore loans, benefitting millions.
    • Inclusivity: 69% of loans are held by women, 51% by SC/ST and OBC entrepreneurs.
    • Job Creation: Promoted self-employment and business growth in rural and semi-urban areas.
    • MSME Credit Growth: Lending increased from ā‚¹8.51 lakh crore in FY14 to ā‚¹27.25 lakh crore in FY24.
    • International Recognition: Praised by IMF for expanding financial access, especially for women-led businesses.

    Challenges:

    • Increase in NPAs: Rising defaults due to lack of collateral.
    • Disbursement Delays: Some banks face challenges in meeting loan targets.
    • Fraud Risk: Collateral-free loans are susceptible to misuse and fraud.
    • Larger Loan Limits: Higher limits under TarunPlus raise default risks for banks.
    • Default Risk: Some borrowers exploit the system through ā€œevergreeningā€ tactics.
    [UPSC 2016] Pradhan Mantri MUDRA Yojana is aimed at

    (a) bringing small entrepreneurs into the formal financial system.

    (b) providing loans to poor farmers for cultivating particular crops.

    (c) providing pensions to old and destitute persons.

    (d) funding the voluntary organizations involved in the promotion of skill development and employment generation.

     

  • RBI revises Priority Sector Lending (PSL) guidelines

    Why in the News?

    The RBI has issued revised guidelines for Priority Sector Lending (PSL), effective from April 1, 2025, to improve the targeting of bank credit to key sectors of the economy.

    About Priority Sector Lending (PSL)

    What is it?
    • PSL refers to the portion of bank lending that must be directed to specific sectors identified as priorities for national development.
    • The RBI mandates that banks must allocate a specified portion of their credit to these sectors to ensure inclusive growth.

    Origin of PSL:

    • PSL was introduced in India in the late 1960s.
    • The term “priority sector” was first used in 1967 by Morarji Desai, then Deputy Prime Minister, and it led to legislative measures for social control over banks.
    • In 1972, the RBI formally defined priority sectors, focusing initially on agriculture and small-scale industries.
    Which Banks are Covered Under PSL? 1. Domestic Scheduled Commercial Banks, Cooperative Banks, and Foreign Banks: 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBSE), whichever is higher.

    2. Small Finance Banks and Regional Rural Banks (RRBs): 75% of ANBC or CEOBSE, whichever is higher.

    3. Payment Banks: NOT subject to PSL targets.
    Priority Sector Categories ā€¢ Agriculture ā€¢ Micro, Small, and Medium Enterprises (MSMEs) ā€¢ Export Credit ā€¢ Education ā€¢ Housing ā€¢ Social Infrastructure ā€¢ Renewable Energy

    ā€¢ Others, including Scheduled Castes, Scheduled Tribes, and Persons with Disabilities.

    ā€¢ Micro Finance Institutions (MFIs) offering loans to individuals and Self-Help Groups (SHGs) are also eligible for PSL classification.
    Consequences of Failing to Meet PSL Norms 1. Investment in Rural Infrastructure Development Fund (RIDF): Banks falling short of PSL targets may be required to invest in the Rural Infrastructure Development Fund (RIDF), managed by NABARD, or other designated funds like those managed by SIDBI and NHB.

    2. Purchase of PSL Certificates: Banks can purchase Priority Sector Lending Certificates (PSLCs) to meet their PSL targets.
    Priority Sector Lending Certificates (PSLCs)
    • Tradable certificates issued against priority sector loans by banks.
    • Banks can purchase PSLCs to meet PSL targets if they fall short, while incentivizing surplus banks to lend more to these sectors.

    Revised PSL Guidelines for 2025:

    • Revised PSL guidelines for 2025 will enhance the targeting of bank credit to priority sectors.
    • Loan limits for housing have been increased, with differentiated limits based on population size: ā‚¹50 lakh (population ā‰„ 50 lakh), ā‚¹45 lakh (population 10-50 lakh), and ā‚¹35 lakh (population < 10 lakh).
    • Renewable energy loans: Up to ā‚¹35 crore for power generators and public utilities, and ā‚¹10 lakh for individual households.
    • Urban Cooperative Banks (UCBs) have a revised PSL target of 60% of Adjusted Net Bank Credit (ANBC).
    • Weaker Section borrowers expanded and the cap on loans to individual women beneficiaries has been removed.
    [UPSC 2012] The basic aim of Lead Bank Scheme is that the –

    (a) big banks should try to open offices in each district

    (b) there should be stiff competition among the various nationalized banks

    (c) individual banks should adopt particular districts for intensive development

    (d) all the banks should make intensive efforts to mobilize deposits

     

  • RBIā€™s Financial Stability Report (FSR) 2024 and Rising Household Debt

    Why in the News?

    The Reserve Bank of India (RBI) Financial Stability Report (FSR), 2024 has highlighted an increasing household debt burden and a concerning rise in consumption-based borrowing.

    About Financial Stability Report (FSR):

    • The FSR is published biannually (June & December) by the RBI.
    • It reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC ā€“ headed by the Governor of RBI) on risks to financial stability and the resilience of the financial system.
    • The Report also discusses issues relating to the development and regulation of the financial sector.

    RBIā€™s Financial Stability Report (FSR) 2024 and Rising Household Debt

    Key Highlights of the Financial Stability Report (FSR) 2024:

    • Rising Household Debt-to-GDP Ratio:
      • Household debt-to-GDP ratio: 36.6% (June 2021) ā†’ 42.9% (June 2024).
      • Household assets declined: 110.4% (June 2021) ā†’ 108.3% (March 2024), indicating more borrowing for consumption.
    • Credit Growth Trends:
      • Total credit growth (March 2024): 15.4% YoY.
      • Prime & Super-Prime borrowers: 66% of total loans, reducing risky lending.
      • Super-prime borrowers mainly borrow for asset creation, while sub-prime borrowers rely on loans for consumption.
    • Rising Unsecured Loans & Financial Stress:
      • 50% of sub-prime loans are for consumption; 64% of super-prime loans are for asset creation.
      • Credit card delinquencies: 1.8% (Sept 2023) ā†’ 2.4% (Sept 2024).
      • Personal loan defaults: 3.2% (Sept 2023) ā†’ 3.9% (Sept 2024).
      • Low-income households rely more on credit cards & personal loans than secured loans.
    • RBIā€™s Measures to Curb Consumer Borrowing:
      • September 2023: RBI raised risk weights on unsecured loans, slowing credit expansion.
      • Auto loan growth fell: 18.2% (March 2023) ā†’ 14.5% (March 2024) due to tighter lending norms.
    • Consumption Loans & Economic Impact:
      • More borrowing for consumption, less for housing, education, or business investment.
      • Rising debt repayment reduces spending, weakening GDP growth.
    • NPA Risks from Consumer Credit:
      • Unsecured loans growing faster, raising default risks.
      • Half of borrowers with credit card/personal loans also have home/auto loansā€”defaulting on one triggers loan classification as NPA.
    • Fintechā€™s Role in Rising Debt:
      • Digital lending & BNPL schemes enable easy credit but increase financial vulnerability.
      • Regulatory oversight needed to prevent excessive debt accumulation.

    PYQ:

    [2022] In India, which one of the following is responsible for maintaining price stability by controlling inflation?

    (a) Department of Economic Affairs, Ministry of Finance

    (b) Financial Stability and Development Council (FSDC)

    (c) NITI Aayog

    (d) Reserve Bank of India

     

  • India approves Mutual Credit Guarantee Scheme for MSME manufacturers

    Why in the News?

    The government approved a Mutual Credit Guarantee SchemeĀ  (MCGS) Ā for micro, small, and medium enterprises (MSMEs).

    What is MCGS-MSME?

    • The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) is a government initiative aimed at enhancing financial accessibility for micro, small, and medium enterprises in India.

    What are the Provisions and Salient Features of MCGS-MSME?

    • Eligibility and Loan Coverage: The MCGS-MSME is available to MSMEs with a valid Udyam Registration Number, providing loan guarantees of up to Rs 100 crore for purchasing equipment and machinery.
    • Guarantee Coverage: The scheme offers 60% guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) for loans sanctioned to Member Lending Institutions (MLIs).
    • Project Cost Requirements: While the guaranteed loan amount is capped at Rs 100 crore, the total project cost can exceed this amount, provided that at least 75% of the project cost is allocated for equipment or machinery.
    • Repayment Terms: Loans up to Rs 50 crore have a repayment period of up to 8 years, including a moratorium of up to 2 years on principal repayments. For loans above Rs 50 crore, longer repayment schedules may be considered.
    • Scheme Duration and Fees: The MCGS-MSME will be in effect for four years from the issuance of operational guidelines or until cumulative guarantees of Rs 7 lakh crore are issued. The initial guarantee fee is waived for the first year, followed by a fee of 1.5% per annum for the next three years, and then reduced to 1% per annum thereafter.

    What are the other steps taken to ease access to Credit for MSMEs?

    In addition to the MCGS-MSME, several other measures have been implemented to facilitate easier access to credit for MSMEs:

    • Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): This scheme provides collateral-free loans up to Rs 2 crore, offering up to 85% guarantee coverage, thereby reducing lender risk.
    • Raising and Accelerating MSME Performance (RAMP) Program: This initiative involves an investment of Rs 6,000 crore over five years, aimed at enhancing MSME growth and performance.
    • Trade Receivables Discounting System (TReDS): An online platform that enables MSMEs to receive faster payments from larger companies, improving cash flow and liquidity.
    • Emergency Credit Line Guarantee Scheme (ECLGS): Introduced during COVID-19, this scheme provided a Rs 3 lakh crore relief package, offering a 100% government-backed guarantee for loans.
    • Priority Sector Lending (PSL) Norms: These regulations require banks to allocate a portion of their loans specifically for MSMEs, ensuring that they receive necessary financial support.

    What are the challenges faced by MSMEs in accessing finance?

    • Access to Finance: One of the most significant challenges faced by MSMEs is obtaining timely and affordable financing. For example, The Bank of Baroda reported that over 50% of MSMEs in India could not access formal credit.
    • Lack of Financial Knowledge: Many MSMEs lack awareness of available financial schemes and products, which restricts their ability to access funding. For example, Many business owners remain unaware of the Shishu, Kishor, and Tarun loan schemes.

    Way forward:Ā 

    • Enhanced Financial Literacy and Awareness Campaigns: There is a need for targeted outreach programs to educate MSMEs about available financial schemes, including loan products and government initiatives like Shishu, Kishor, and Tarun schemes, to ensure they are aware and can leverage them effectively.
    • Streamlined Loan Processes and Collateral-Free Options: Simplifying the loan application process and expanding collateral-free loan schemes like CGTMSE, along with improving credit rating systems, will ensure quicker and easier access to funds, especially for smaller MSMEs.

    Mains PYQ:

    Q Ā Can the strategy of regional-resource-based manufacturing help in promoting employment in India? (UPSC IAS/2019)

  • [pib] Yuva Sahakar Scheme

    Why in the News?

    The Ministry of Cooperation, in written reply to a question in the Lok Sabha has informed about the progress of the Yuva Sahakar Scheme.

    Current Financial Details:

    • As of 30th November 2024, the following financial assistance details have been recorded:
      • Sanctioned Amount: ā‚¹4734.97 lakh to cooperatives with 18,915 beneficiary members.
      • Disbursed Amount: ā‚¹294.44 lakh.
      • Sanctioned for 2024: ā‚¹230.61 lakh, with ā‚¹89.88 lakh disbursed.

    About the Yuva Sahakar Scheme:

    Details
    Overview and Objectives
    • Launched in 2018 under the Ministry of Agriculture and Farmers Welfare.
    • Implemented by NCDC (National Cooperative Development Corporation), which operates under the Ministry of Cooperation
    • Goal: To promote the formation of new cooperative societies and encourage innovative ideas from young entrepreneurs.
    • Targets cooperatives that have been operational for at least 3 months.
    NOTE: NCDC was established in 1963 as a statutory Corporation under Ministry of Agriculture & Farmers Welfare.
    Features and Provisions
    • Loan Tenure: Up to 5 years.
    • Interest Subvention: 2% subvention on the applicable interest rate for term loans related to project activities.
    • Subsidy Integration: Loans can be combined with subsidies available under other Government of India schemes.
    • Eligibility: All cooperatives in operation for at least 1 year are eligible for funding based on proposed projects.
    Significance
    • Encourages cooperatives to explore new and innovative areas.
    • Dedicated fund by NCDC for youth cooperatives.
      • Linked to the ā‚¹1000 crore Cooperative Start-up and Innovation Fund (CSIF).
    • Increased funding for cooperatives from North Eastern regions, Aspirational Districts, and those with women, SC/ST, or PwD members.

  • NABARD Unveils Climate Strategy 2030 for Green Financing

    Why in the news?

    The National Bank for Agriculture and Rural Development (NABARD) revealed its ā€˜Climate Strategy 2030ā€™ document, aiming to address India’s need for enhanced green financing.

    Key Pillars of Climate Strategy 2030:

    • The strategy focuses on four key pillars:Ā 
      1. Accelerating green lending across sectors,Ā 
      2. Playing a broader market-making role,Ā 
      3. Internal green transformation, andĀ 
      4. Strategic resource mobilization.
    Green Financing Scenario in India

    • Despite India’s requirement of $170 billion annually for achieving sustainable development goals by 2030, the current green finance inflows remain critically insufficient.
    • As of 2019-20, India secured only about $49 billion in green financing, with a significant portion allocated to mitigation efforts, leaving minimal funds for adaptation and resilience.

     

    About NABARD:

    • It was established on July 12, 1982, based on the recommendation of the Sivaraman Committee to promote sustainable rural development and agricultural growth in India.
    • Aim: Ā To facilitate credit flow for the promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts, and other rural crafts.
    • It operates as a statutory body under the Reserve Bank of India (RBI) Act, 1934, with its headquarters located in Mumbai.
    • It is governed by a Board of Directors appointed by the GoI:
      • Representatives from the RBI;
      • Central and state governments;Ā 
      • Experts from various fields related to Rural Development and Finance.

    Ā Functions of NABARD:

    • Refinance Support: NABARD provides refinance facilities to banks and financial institutions for agricultural and rural development activities, including crop loans and rural infrastructure projects.
    • Financial Inclusion: It promotes financial inclusion by expanding banking services in rural areas, supporting SHGs, FPOs, and MFIs, and facilitating access to credit for rural communities.
    • Priority Sector Lending: NABARD plays a crucial role in channelling credit to priority sectors such as agriculture, small-scale industries, and rural infrastructure, in alignment with the Reserve Bank of Indiaā€™s priority sector lending guidelines.
    • Direct Lending: It extends direct loans to institutions for specific rural development projects, such as agricultural production, rural infrastructure development, and agri-processing units.
    • Scheme Implementation: The organization administers government schemes and funds like Rural Infrastructure Development Fund (RIDF), Watershed Development Fund (WDF) to finance rural infrastructure projects and watershed development activities.
    • Credit Planning: NABARD collaborates with central and state governments, RBI, and other stakeholders to formulate credit policies and plans for agriculture and rural sectors.
    • Research and Training: NABARD promotes research and development in agriculture, supports capacity building and training programs for rural stakeholders, and facilitates technology transfer initiatives.

     

    PYQ:

    [2013] Which of the following grants/grants direct credit assistance to rural households?Ā 

    1. Regional Rural Banks
    2. National Bank for Agriculture and Rural Development
    3. Land Development Banks

    Select the correct answer using the codes given below:

    (a) 1 and 2 onlyĀ 

    (b) 2 onlyĀ 

    (c) 1 and 3 only

    (d) 1, 2 and 3