Centre releases Rs 24500 crore to compensate states post GST
Central Government has released Rs. 24500 crore compensation to states to make up for revenue loss on account of Goods and Services Tax (GST) implementation. This compensation is for the period between July-October 2017. i. Karnataka got maximum compensation (Rs 3271 crore) followed by Gujarat (Rs 2282 crore) and Punjab (Rs 2098 crore). ii. The other states that required huge amount of compensation include Rajasthan (Rs 1911 crore), Bihar (Rs 1746 crore), Uttar Pradesh (Rs 1520 crore), West Bengal (Rs 1008 crore) and Odisha (Rs 1,020 crore). iii. This compensation comes from cess (on top of the highest tax rate of 28 %) on luxury, demerit and sin goods.
♦ Rolled out on – July 1, 2017
♦ Type – Indirect Tax
♦ Tax Slabs – 5%, 12%, 18% 28%
Government Injects Rs 7500 Crore Funds Into 6 Public Banks
Central Government has infused over Rs. 7500 crore equity capital in six stressed public sector banks (PSBs). These six banks are Bank of India, Central Bank of India, Dena Bank, IDBI Bank, Bank of Maharashtra and UCO Bank.
There was a need for capital infusion as some of these PSBs could have breached the minimum regulatory capital requirement, as mandated by the Reserve Bank of India (RBI), at the end of the third quarter i.e. on December 31, 2017.
As per RBI norms, Banks have to maintain minimum 9% capital adequacy ratio (CAR). Capital adequacy ratio (CAR) is a measure of a bank’s capital, expressed as a percentage of a bank’s risk weighted credit exposures. Higher CAR reflects bank’s strength and ability to absorb losses.
As per RBI data, capital adequacy ratio of PSBs as on September 30, 2017 was 12.2%.
It is to be noted that all the above stated PSB are saddled with huge non-performing assets and are facing Prompt Corrective Action (PCA) from RBI.
Banks facing PCA are restricted from carrying out certain banking activities. These include, restrictions on opening branches, recruiting staff and giving increments to employees. In addition to these, Banks facing PCA can offer loans only to selected entities having high investment ratings.
PCA is imposed to prevent banks from undertaking certain riskier activities and focus on conserving capital.
Other than above stated six PSBs, Oriental Bank of Commerce, United Bank of India, Corporation Bank and Indian Overseas Bank are also facing PCA from RBI.
Rs 14500cr generated through BHARAT 22 ETF
On December 29, 2017, Minister of State for Finance, P Radhakrishnan, informed Lok Sabha that Central Government has raised an amount of Rs 14500 crore through its BHARAT 22 Exchange Traded Fund (ETF).
i. An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, just like stocks. An ETF holds assets such as stocks, commodities, or bonds and tracks an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. ii. Bharat 22 ETF was launched in November 2017. It is a unique blend of shares of key Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs) and Government owned shares in blue chip private companies like Larsen & Tubro (L&T), Axis Bank and ITC held under the Specified Undertaking of the Unit Trust of India (SUUTI). iii. It comprises 22 companies that represent 6 important sectors of the economy – Finance, Industry, Energy, Utilities, Fast Moving Consumer Goods (FMCG) and Basic Materials. iv. Owing to positive response from Institutional Investors and to accommodate huge demand from retail investors and retirement funds, Government had increased the issue size of New Fund Offer (NFO) of Bharat 22 Exchange Traded Fund (ETF) to Rs 14500 crore from Rs. 8000 crore earlier.
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