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Monday,27-September-2021

Business

Reform-linked grant released for local bodies

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Ministry-of-Finance

The Finance Ministry has released an amount of Rs 4,608 crore to the states for providing grant-in-aid to the local bodies. The grants are both for the Rural Local Bodies (RLBs) and Urban Local Bodies (ULBs).

Out of this, RLBs will get Rs 2,660 crore and ULBs will receive Rs 1,948 crore.

The grants have been released as per the recommendations of the 15th Finance Commission.

In the financial year 2020-21, the Ministry has released a total amount of Rs 87,460 crore to 28 states as local body grants.

Of this, Rs 60,750 crore have been released for RLBs, while Rs 26,710 crore have been released for ULBs.

The RLB grants are meant for all the tiers in the panchayat – village, block and district as well as for 5th and 6th Schedule areas in the states.

RLB grants are partly basic/untied and partly tied in nature.

The basic grants can be used by RLBs for location-specific felt needs. On the other hand, tied grants can only be used for the basic services of sanitation and maintenance of the open-defecation free (ODF) status and for supply of drinking water, rain water harvesting and water recycling.

In the year 2020-21, basic RLB grant of Rs 32,742.50 crore and tied RLB grant of Rs 28,007.50 crore was released by the Ministry.

ULB grants have been provided in two categories grants for Million Plus cities and grants for Non-Million Plus cities.

While Million Plus cities have been provided grant of Rs 8,357 crore, Non-Million Plus cities received Rs 18,354 crore from the Ministry in 2020-21.

In case of Million-Plus cities, an amount of Rs 1,824 crore has been released. Entire grant to Million Plus cities is tied in nature.

To receive these grants, the Million Plus cities are required to develop city -wise and areas-wise targets on ambient air quality based on annual average concentrations of PM 10 and PM 2.5. The Ministry of Environment, Forest and Climate Change (MOEF&CC) will monitor and evaluate the improvement and recommend disbursal of grants to such cities.

MOEF&CC will also take up establishment of ambient air quality monitoring network, source apportionment studies and update the air-quality data of these cities.

Bedsides ambient air quality improvement, grants to Million Plus cities have also been linked for improving conservation, supply and management of water and efficient solid waste management, which are critical for planned urbanisation. For this component, Ministry of Housing and Urban Affairs is the nodal Ministry and is entrusted with development of city-wise and year-wise targets and recommend disbursals of grants to these cities.

Water supply and solid waste management related component of the grant is to be spent exclusively for improving water and solid waste management and achieving star ratings by ULBs.

The states need to draw up a detailed project report for capacity development and address the infrastructural issues for meeting the service level benchmarks.

In case of non Million-Plus cities, an amount of Rs 18,354 crore has been released as grant-in-aid in the year 2020-21.

Fifty per cent of this is basic grant while the rest 50 per cent is tied to drinking water (including rainwater harvesting and recycling) and solid waste management.

This amount is in addition to the funds provided under various Centrally Sponsored Schemes like Swachh Bharat Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) etc.

The states are required to transfer the grants to the local bodies within 10 working days.

Any delay beyond this period makes the State Government liable to release the grants with interest to the local bodies.

Business

IFIN to sell 62 NPA accounts worth Rs 4.3K cr

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ITNL

 IL&FS Financial Services (IFIN) has put its non performing asset (NPA) portfolio of approx Rs 4,300 crore up for sale as part of plan to bring down overall group level debt.

The sale of NPA would be done under Swiss Challenge with the new board already having received a binding bid.

Under this method of bidding, the seller who have already received a bid, publishes the bid and invite third parties to match or better it. The process also allows the entity which submitted the first bid then to match or better the best bid which comes out of the Swiss challenge process.

IFIN’s sale of NPA book includes 62 accounts aggregating to total outstanding principal of Rs 4,297 crore. Bids have been invited from eligible applicants for purchasing the entire sale asset book comprising all of the 62 accounts.

The public process of inviting bids was launched on Monday and the sale would be concluded on cash consideration basis. The last date for submission of bids is October 19, 2021.

IFIN has an asset under management of around Rs 18,000 crore involving external and internal loans and investments.

The sale of external corporate loans is part of the resolution process of the overall debt.

IFIN is a 100 per cent subsidiary of IL&FS and is registered with the Reserve Bank of India as a systemically important non-deposit accepting non-banking finance company.

IL&FS group had total outstanding debt over Rs 90,000 crore. The new team is resolving some these through a strategy of asset sale and combing resources of other entities.

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Business

Service given by corporate offices to their branches taxable

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gst

In what may pose challenge to companies having wider spread of employees and branches all across the country, an authority for advance ruling (AAR) had said that managerial and leadership services by a corporate office to its group companies and other construction sites registered in different states is considered as supply of service and would be taxable under GST.

This would mean companies having separate GST registration for its head offices and branches would need to pay GST on the services that a head offices gives to its branches and receive payment for it.

The order on the issue came from Maharashtra AAR or MAAR on application filed by Pune-based B.G. Shirke Construction Technology Private Limited.

The company supplied managerial and leadership services to its branch office and group companies, and received fixed monthly charges from each of them. It asked MAAR whether it is liable to pay tax on such service which gave its order on affirmative going by a similar order given Karnataka AAR on a separate application. This application is now pending before the Karnataka High Court.

Though AAR orders are valid only for the applicants, tax officials use it for other matters as well. These timings also form the basis for amendment to rules of taxation

According to the tax experts, the present ruling with respect to head offices and their branch operations would create a lot of confusion over the issue of valuation of services rendered and valuation taxes.

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Business

India needs 4-5 more SBI sized banks: FM

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 India needs a lot more banks and a lot more large sized ones to meet the growing needs of the country needs in the path of making a smart recovery post pandemic disruptions, Finance Minister Nirmala Sitharaman said on Sunday.

Speaking at 74th Annual General Meeting of Indian Banks’ Association at Mumbai, Sitharaman said there was an urgent need to scale up banking to meet the growing needs of the industry and also to ensure that all economic centres of the country are covered with at least one physical or digital banking presence.

“We need to scale up banking. The need is for at least four-five more SBI sized banks,” she said, while reminding that the amalgamation exercise among public sector banks have helped in moving ahead with creation of large banks.

Having done two rounds of bank consolidation earlier, the Central government in 2019 decided to merge six disparate and weak PSBs into four in one stroke.

Accordingly, Punjab National Bank (PNB) took over Oriental Bank of Commerce and United Bank of India; Allahabad Bank became part of Indian Bank; Canara Bank subsumed Syndicate Bank; and Andhra Bank and Corporation Bank merged with Union Bank of India. Earlier, State Bank of India (SBI) with five of its associate banks while Vijaya Bank and Dena Bank were merged with Bank of Baroda.

Sitharaman lauded the efforts of the PSBs to see through that the amalgamation of banks during the pandemic period was completed without any inconvenience to customers.

She said that that in the post pandemic world, hanks would need to change their mindset and the way they conduct their businesses.

Digitisation, the Finance Minister said has changed a lot of how businesses are done and banks will now need to think futuristically and keep pace with evolving technology.

Sitharaman also asked the IBA to conduct a digitised mapping of each district of the country with regard to presence of bank branch operation and their location. This, she said, would help to plug areas of gaps with no banking presence effectively.

“Not necessary to have physical banking presence everywhere. The country’s optic fibre network has covered two-third of about 7.5 lakh panchayats. This could be used to deliver banking services in unconnected areas as well,” the Finance Minister said.

She also asked banks to develop models and better understanding of businesses focused on exports as country has set a $2 trillion export target by 2030.

With regard funding for the infra sector, she said that a government sector development financial institution (DFI) is coming up soon.

Sitharaman said that Indian economy is at a critical stage of a reset and banks would form the backbone for it by providing best of the financial services.

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