CURRENT BULLETIN - FEBRAURY 2020
ECONOMY
Deposit insurance hiked to Five lakhs
Context:
 In Union Budget 2020, finance minister
Nirmala Sitharaman has permitted to
increase the limit of insurance cover in case
of bank failure on deposits to ?5 lakhs from
current ?1 lakh.
What is Deposit insurance?
 Deposit insurance is providing insurance
protection to the depositor's money by
receiving a premium.
 The government has set up Deposit
Insurance and Credit Guarantee Corporation
(DICGC) under RBI to protect depositors if a
bank fails to repay their customers. Institutions covered under deposit insurance:
 The agency does not directly charge any
premium from bank depositors, but, every
insured bank pays premium amounting to
0.001% of its deposits to DICGC every year.
What happens when a Bank is liquidated?
 When a bank goes into liquidation then in
such a case the DICGC was liable to pay to
each depositor through a liquidator
appointed by RBI, the amount of his deposit
up to Rs 1 lakh within two months from the
date of claim list from the liquidator.
 If a bank is reconstructed or amalgamated
or merged with another bank, then in such
a case the DICGC pays to the bank concerned.
 In case of multiple bank accounts with the
same bank, an account will get maximum of
up to Rs.1 lakh only.
 This insured amount of 1 lakh earlier has
been increased to Five lakhs now.
 This deposit guarantee can be released only
if the bank gets closed. It cannot be released
if the bank is a going concern.
About Deposit Insurance and Credit
Guarantee Corporation (DICGC):
 DICGC is a wholly owned subsidiary of
Reserve Bank of India.
 It was established in 1978 under the Deposit
Insurance and Credit Guarantee Corporation
Act, 1961 for the purpose of providing
insurance of deposits and guaranteeing of
credit facilities.
 The deposit insurance scheme is mandatory
for all banks and no bank can voluntarily
withdraw from it. However, DICGC has the
power to cancel the registration of an
insured bank if it fails to pay the premium
for three consecutive half-year periods.
 This scheme insures all types of bank
deposits including savings, fixed, current
and recurring with an insured bank.
 DICGC covers all commercial banks,
including Local Area Banks (LABs) and
Regional Rural Banks (RRBs) in all the States
and Union Territories (UTs).
 All Co-operative Banks across the country
except three UTs of Lakshadweep,
Chandigarh, and Dadra and Nagar Haveli are
also covered by deposit insurance.
 Primary cooperative societies are not
insured by the DICGC.
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Deposits are not insured by the DICGC?
 Deposits of Foreign governments
 Deposits of Central/state governments
 Inter-bank deposits
 Deposits made in Non-Banking Financial
Corporations (NBFCs)
 Deposits of the state land development
banks with the state co-operative bank
 Any amount due on account of any deposit
received outside India
 Any amount specifically exempted by the
DICGC with previous approval of RBI.
Dividend Distribution Tax on companies
waved off
Context:
 Finance Minister NirmalaSitharaman under
Union Budget 2020-21 has proposed to
remove dividend distribution tax on
companies, and henceforth the tax will be
shifted to recipients at the applicable rate.
What is Dividend Distribution Tax?
 The Dividend Distribution Tax (DDT) is a tax
levied on dividends that a company pays to
its shareholders out of its profits.
 Till now, DDT was taxable at source, and is
deducted at the time of the company
distributing dividends.
 The dividend is the part of profits that the
company shares with its shareholders.
Present laws for DDT:
 The present law provides for the Dividend
Distribution Tax to be levied at the hands of
the company, and not at the hands of the
receiving shareholder.
 The companies are required to pay dividend
distribution tax (DDT) on the dividend paid
to its shareholders at the rate of 15% plus
applicable surcharge and cess, in addition
52
to the tax payable by the company on its
profits.
 However, an additional tax was imposed on
the shareholder, who received over Rs. 10
lakhs in dividend income in a financial year.
When is the Dividend Distribution Tax paid?
 The tax has to be paid to the government
within 14 days of the dividend declaration,
distribution or payment whichever is
earliest.
 If DDT is not paid within the given time
period, interest at a rate of 1 % per month or
part thereof starts getting accumulated till
the amount is paid. The tax is paid
separately, over and above the company's
income tax liability.
What changed now?
 DDT has been removed and the classical
system of dividend taxation is adopted
under which the companies would not be
required to pay DDT.
 The dividend shall be taxed only in the
hands of the recipients at their applicable
rate.
 The ministry has also proposed deduction
for the dividend received by holding
company from its subsidiary, to remove the
cascading effects.
Problems with earlier provisions:
 The system of levying DDT, results in
increased tax burden for investors and
especially those who are liable to pay tax
less than the rate of DDT, if the dividend is
included in their income.
 Further, non-availability of credit of DDT to
 CURRENT BULLETIN - FEBRAURY 2020
most of the foreign investors in their home
country results in reduction of rate of return
on equity capital for them.
 Market participants, especially brokers,
have been calling for long to scrap the DDT.
The tax makes markets unattractive as it
leads to significant taxation of corporate
earnings.
Significance:
 It is expected to make India more attractive
market for investment and to provide relief
to a large class of investors.
 However, it would result in a revenue loss
of Rs 25,000 crore per annum to the Central
government.
Co-operative banks under RBI's ambit
Context:
 The Union Cabinet has recently approved an
amendment to the Banking Regulation Act,
1949 to bring multi-state co-operative banks
under the watch of the central bank and
prevent a repeat of Punjab and Maharashtra
Cooperative Bank (PMC) like crisis.
Co-operative banks:
 Co-operative banks are financial entities
established on a co-operative basis and
belonging to theirmembers. This means that
the customers of a co-operative bank are
also its owners.
 They are regulated by the Reserve Bank of
India under the Banking Regulation Act, 1949
and Banking Laws (Application to
Cooperative Societies) Act, 1965 or theyare
under dual control of Registrar of
Cooperative Societies and RBI.
 While the role of registrar of cooperative
societies includes incorporation,
registration, management, audit, superse-
ssion of board and liquidation, RBI is
responsible for regulatory functions such
maintaining cash reserve and capital
adequacy, among others.
Concern:
 There are 1,540 cooperative banks in India
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with a depositor base of 8.60 crore having
total savings of about Rs 5 lakh crore.
 Urban cooperative banks reported nearly
1,000 cases of fraud worth more than ?220
crores in past five fiscal years. Hence, the
responsibility of the government increases
to safeguard the rights of the depositors.
Proposed recommendation:
 The proposed law seeks to enforce banking
regulation guidelines of the RBI in
cooperative banks, while administrative
issues will still be guided by Registrar of
Cooperatives.
 The cooperative banks would be audited
according to RBI rules.
 The appointment of CEOs would require
prior approval from the central bank.
 RBI can supersede management in case of
liquidation or failure of any cooperative
bank.
 These measures would be implemented in
a phased manner.
 The amendments will apply to all urban co-
operative banks and multi-state
cooperative banks.
 The rationale is to increase professionalism
and improve corporate governance, keeping
in mind the recent PMC crisis and need for
structural reforms in banks.
India betters score in GIPC's IP Index
Context:
 India stands at 40th place out of 53
economies in global IP (intellectual
property) Index 2020, as against 36th place
out of 50 economies in the 2019 Index.
International IP Index 2020:
 It is released by Global Innovation Policy
Center (GIPC) of the US Chamber of
Commerce.
 The index ranked 53 global economies,
representing over 90% of global GDP.
 The US tops the scorecard followed by the
UK, France, Germany, Sweden and Japan
respectively.
 CURRENT BULLETIN - FEBRAURY 2020
 The 2020 index includes three new
countries: Dominican Republic, Greece, and
Kuwait.
Key highlights of index:
 India's overall score has increased to 38.46%
in the International IP Index 2020.
 It has found that India has embraced a series
of reforms and issued court rules that
strengthen IP enforcement, address
administrative inefficiencies and increase
penalties for IP infringement.
 Implementation of the policy has resulted
in improving rates of patent and trademark
pendency, greater awareness of IP rights
among Indian innovators.
 However, index points out serious hurdles
particularly in terms of patent eligibility and
Reserve Bank of India offers CRR
enforcement. Compulsory licensing in
exemption to Banks
pharma companies, patent opposition and
regulatory data protection are the main
challenges faced by the India.
 The index has reported that India's key areas
of strength in IP domain include continued
strong efforts to combat copyright piracy
through 2019 by:
 Issuing of dynamic injunction orders,
 Precedent-setting case law on online
trademark infringement and damages,
 New pilot patent prosecution highway
(PPH) programme,
 Generous R&D along with IP-based
incentives.
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Indicators:
 The indicators span 8 categories of IP
protection:
1. Patents
2. Copyrights
3. Trademarks
4. Trade Secrets
5. Commercialization of IP Assets
6. Enforcement
7. Systemic Efficiency
8. Membership and Ratification of
International Treaties
What is Intellectual Property?
 Intellectual property (IP) refers to creations
of the mind, such as inventions; literary and
artistic works; designs; and symbols, names
and images used in commerce.
 IP is protected in law by, for example,
patents, copyright and trademarks, which
enable people to earn recognition or
financial benefit from what they invent or
create.
 By striking the right balance between the
interests of innovators and the wider public
interest, the IPsystem aims to foster an
environment in which creativity and
innovation can flourish.
Context:
 In a bid to spur credit growth and boost
demand, the Reserve Bank of India (RBI) has
offered banks Cash Reserve Ratio (CRR) for
five years for incremental credit disbursed
to automobiles, residential housing, and
micro, small and medium enterprises
(MSMEs) between 31 Jan-31 July, 2020.
According to RBI statement:
 The banks are allowed to deduct the
equivalent amount of incremental credit
disbursed by them as retail loans to
automobiles, residential housing, and loans
to micro, small and medium enterprises
 CURRENT BULLETIN - FEBRAURY 2020
(MSMEs), over and above the outstanding
level of credit to these segments as at the
end of the fortnight ended January 31, 2020
from their net demand and time liabilities
(NDTL) for maintenance of CRR.
 The central bank said banks can claim first
such deduction from NDTL of 14 February,
2020 for CRR exemption.
 As per RBI, an amount equivalent to the
incremental credit outstanding from the
fortnight beginning January 31, 2020 and up
to the fortnight ending July 31, 2020 will be
eligible for deduction from NDTL for the
purpose of computing the CRR for a period
of five years from the date of origination of
the loan or the tenure of the loan,
whichever is earlier.
 RBI said the bank must maintain proper
fortnightly records of net incremental credit
extended to the select sectors/NDTL
exemption claimed, duly certified by the
Chief Financial Officer (CFO) or an
equivalent level officer, for supervisory
review.
What is CRR or cash reserve ratio?
 Cash Reserve Ratio is a certain minimum
amount of deposit that the commercial
banks have to hold as reserves with the
central bank.
 CRR is set according to the guidelines of the
central bank of a country.
Cash reserve ratio is:
 It is also referred to as the amount of funds
which the banks have to keep with the
Reserve Bank of India (RBI)
 It's a vice-versa process
 If a central bank increases CRR then the
available amount with the banks decreases
or comes down
 The CRR is used by RBI to wipe out excessive
money from the system
 Commercial banks are required to maintain
an average cash balance with the RBI, the
amount of which shall not be less than 3 per
cent of the total Net Demand and Time
Liability (NDTL).
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Example:
 When someone deposits Rs 100 with a bank,
it increases the deposits of the bank by Rs
100. If the CRR is 9 per cent, then the bank
will have to hold additional Rs 9 with the
central bank. This means that the
commercial bank will be able to use only Rs
91 for investments and/or lending or credit
purpose.
How does Cash Reserve Ratio help in times
of high inflation?
 At the time of high inflation, the
government needs to ensure that excess
money is not available in the economy.
 To that extent, RBI increases the Cash
Reserve Ratio, and the amount of money
that is available with the banks reduces. This
curbs excess flow of money in the economy.
 When the government needs to pump funds
into the system, it lowers the CRR rate, which
in turn, helps the banks provide loans to a
large number of businesses and industries
for investment purposes. Lower CRR also
boosts the growth rate of the economy.
DRT under Vivaad se Vishwas scheme
Context:
 The Direct Tax Vivaad se Vishwas Bill, 2020
will now cover pending litigation in debt
recovery tribunals (DRTs) as well besides
those in various courts and tribunals.
Vivaad se Vishwas Bill 2020
 The Direct Tax Vivaad se Vishwas Bill, 2020
was introduced in LokSabha by the Minister
of Finance, Ms. NirmalaSitharaman.
What is the scheme?
 Under this scheme, taxpayers whose tax
demands are locked in dispute in multiple
forums, can pay due to taxes by March 31,
2020, and get a complete waiver of interest
and penalty.
 If a taxpayer is not able to pay within the
deadline, he gets a further time till June 30,
 CURRENT BULLETIN - FEBRAURY 2020
but in that case, he would have to pay 10%
more on the tax.
 The Vivaad se Vishwas scheme is similar to
the 'Indirect Tax, SabkaV ishwas' scheme,
which was introduced by Finance Minister
during her maiden budget presentation in
July 2019.
 The "SabkaV ishwas" legacy dispute
resolution scheme was aimed at reducing
disputes related to excise and service tax
payments.
Aim of the scheme:
 The V ivaad se V ishwas Scheme aims to
resolve 483,000 direct tax-related disputes
pending in various appellate forums.
 Currently, there are 4.83 lakh direct tax cases
pending in various appellate forums -
Commissioner (Appeals), Income Tax
Appellate Tribunal (ITAT), High Court and
Supreme Court.
Key Points:
 The Bill provides a mechanism for resolution
of pending tax disputes related to income
tax and corporation tax.
 The bill aimed at reducing litigations related
to direct taxes.
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 It covers disputes pending at the level of
commissioner (appeals), Income Tax
Appellate Tribunals (ITAT), high courts, the
Supreme Court and those in international
arbitration.
 Now, the ambit of the scheme will include
disputes pending in Debt recovery tribunals
(DRTs) also.
 Disputes of search and seizure where the
recovery is below Rs 5 crore can be taken in
this scheme.
 It is hoped that people will take advantage
of the scheme to settle the tax disputes
before March 31, 2020 as 10 % more will be
charged for settlement of disputes after the
end of the current financial year.
Debt recovery tribunals (DRTs):
 DRTs were established to facilitate the debt
recovery involving banks and other financial
institutionswith their customers.
 DRTs were set up after the passing of
Recovery of Debts due to Banks and Financial
Institutions Act (RDBBFI), 1993.
 The DRTs enforces the provisions of the
RDDBFI Act, 1993 and also Securitization and
Reconstruction of Financial Assets and
Enforcement of Security Interests
(SARFAESI) Act, 2002.
 DRTs can take cases from banks for disputed
loans above Rs 10 Lakhs.
 Appeals against orders passed by DRTs lie
before Debts Recovery Appellate Tribunal
(DRAT).
Aim:
 The fundamental purpose of the 1993 Act
was to remove claims of banks and financial
institutions from the ordinary form to
specialised tribunals.
 The avowed purpose of the statute was to
ensure the speedy disposal of claims of
banks and financial institutions intended to
be governed by it.
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Arth-Ganga project
Context:
 Arth-Ganga project is a sustainable
development model with a focus on
economic activities related to River Ganga.
When was the project envisaged?
 During the first meeting of the National
Ganga Council in Uttar Pradesh, in December
2019, Prime Minister urged for a holistic
thinking process where 'NamamiGange'
evolves to 'Arth Ganga' or a sustainable
development model with a focus on
economic activities related to Ganga.
Vision:
 With implementing the mantra of PM
NarendraModi, 'Reform, Perform and
Transform' Cargo volume on Ganga will be
increased by 4 times with special focus on
developing inland waterways Arth-Ganga
project will boost economic development
and inclusive growth for farmers, small
traders and villagers.
 As part of this process, farmers should be
encouraged to engage in sustainable
agriculture practices, including zero budget
farming, planting of fruit trees and building
plant nurseries on the banks of Ganga.
 Priority could be given to women Self Help
Groups and ex-servicemen organizations for
these programs.
 Such practices, along with creation of
infrastructure for water sports and
development of camp sites, cycling and
walking tracks etc., which would help to tap
the 'hybrid' tourism potential of the river
basin area- for purposes of religious as well
as adventure tourism.
 The income generated from encouraging
eco-tourism and Ganga wildlife
conservation and cruise tourism etc. would
help to generate sustainable income
streams for cleaning of Ganga.
Initiatives taken till date:
 Ministry of Shipping has taken several
initiatives in last few years which has
57
resulted into substantial growth in-terms of
increasing Inland Cruises from 3 to 9, Cargo
from 30,00,000 MT to 70,00,000 MT, and
Vessels in-flow from 300 to 700.
 A lot of activities like developing of small
jetties have been carried out for the
beneficial for small community especially
for farmers, traders and general public in the
1400 km stretch of National Waterway-1
from Banaras to Haldia.
 The Ministry is developing Varanasi (UP)
Freight Village and Sahibganj (Jharkhand)
Industrial Cluster-cum-Logistics Park with an
objective of creating synergy with Inland
Waterways at the cost of Rs. 200 crores and
create enormous direct and indirect
employment, giving an economical boost in
this particular area.
Treaty for Transit of Cargo between India and
Nepal:
 National Waterway-1 will act as a main
conduit of connection with Nepal in a
trilateral manner, i.e. from Varanasi to
Nautanwa (280km), KaughattoRaxaul (204km)
and Sahibganj to Biratnagar (233km).
 Earlier Nepal was connected by Kolkata and
Visakhapatnam Ports for transporting cargo.
Now, Inland Waterways, particularly NW-1
will be allowed under Treaty for Transit of
Cargo between Government of India and
Government of Nepal.
 It will save logistic cost and decongest
Kolkata Port as well.
 CURRENT BULLETIN - FEBRAURY 2020
Significance:
 Almost half of the Indian population lives
around Ganges River belt in which about 1/
5th of all India's freight originates and 1/3rd
terminates in the states around Ganges Belt.
 Inland Waterways is one of the most
important pillars of "Arth-Ganga" project,
which will result into inclusive growth and
play a key role in generation of enormous
employment opportunities in the National
Waterways stretch.
 The Farmers will get a better return for their
produce as the transportation of goods Objective:
would become easier and cost effective by  To fund infrastructure projects in India, fuel
this. It will improve 'Ease of Living' and 'Ease internal growth via borrowings and
of Doing Business.' internationalize the Indian currency.
Why Masala Bond?
ADB lists masala bonds on India INX  IFC named them 'masala' bonds to reflect
the Indian flavour. The term masala bonds
Context: have been used ever since.
 Asian Development Bank (ADB) has listed  Before masala bonds, corporates raised
its 10-year masala bonds worth Rs 850 crore finance from international market through
on the global debt listing platform of India external commercial borrowings called ECBs.
INX. The proceeds would be used to support
local currency lending and investment in
India.
Details:
 India INX is the country's first international
stock exchange, located at International
Financial Services Centre in Gift city, Gujarat.
 ADB's masala bonds are listed on both
Luxembourg exchange and India INX.
Masala Bonds:
 The term "Masala Bonds" is used to refer to
rupee-denominated borrowings by Indian
entities in overseas markets.
Eligibility:
 Through masala bonds, Indian entities can
 Investors from outside of India who would
raise money from overseas markets in the
like to invest in Indian assets can invest in
rupee, not foreign currency. Masala bonds. It can also be subscribed by
 It helps the Indian companies to diversify multilateral and regional financial
their bond portfolio as previously they one institutions where India is a member
issued corporate bonds. Masala bonds are country.
an addition to their bond portfolio. Features:
 The bonds are directly pegged to the Indian
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currency. So, investors will directly take the
currency risk or exchange rate risks. If the
value of Indian currency falls, the foreign
investor will have to bear the losses, not the
issuer which is an Indian entity or a
corporate.
 Currently, these bonds are listed on the
London Stock Exchange.
 For bonds up to USD 50 million per financial
year, the maturity period is 3 years and for
bonds raising over USD 50 million per
financial year, it is 5 years.
 It will give a higher interest rate compared
to the standard interest rate prevailing in
the markets.
 On average these bonds have an interest
rate of 2-3% higher compared to the standard
LIBOR (London Interbank Offer Rate).
 Masala bonds cannot be used for real estate
activities other than for the development
of integrated township affordable housing
projects.
 It also can't be used for investing in capital
markets, purchase of land and on-lending
to other entities for such activities as stated
above.
Background:
 In 2014, International Finance Corporation
(IFC), the investment arm of the World Bank,
issued the first masala bond of Rs. 1,000
crores to fund infrastructure projects in
India. IFC then named them Masala bonds
to give a local flavour by calling to Indian
culture and cuisine.
59
CENTRAL CONSUMER PROTECTION
AUTHORITY
Context:
 Union Minister of Consumer Affairs, Food
and Public Distribution announced that a
Central Consumer Protection Authority
(CCPA) will be established by the first week
of April.
Details:
 The authority is being constituted under
Section 10(1) of The Consumer Protection
Act, 2019.
 The Act replaced The Consumer Protection
Act, 1986, and seeks to widen its scope in
addressing consumer concerns.
 The new Act recognises offences such as
providing false information regarding the
quality or quantity of a good or service, and
misleading advertisement.
 It also specifies action to be taken if goods
and services are found "dangerous,
hazardous or unsafe".
CCPA:
 The CCPA, introduced in the new Act, aims
to protect the rights of the consumer by
cracking down on unfair trade practices, and
false and misleading advertisements that
are detrimental to the interests of the public
and consumers.
 The CCPA will have the powers to inquire or
investigate into matters relating to
violations of consumer rights or unfair trade
practices suomotu, or on a complaint
received, or on a direction from the central
government.
 Ministry of Consumer Affairs, Food and
Public Distribution is in the process of
finalising the rules relating to the
composition and functioning of the CCPA,
and these are expected to be notified by
April.
 An investigative wing will be formed under
the aegis of the authority and it will carry
out inquiries in matters related to unfair
trade practices and misleading
advertisements.
 CURRENT BULLETIN - FEBRAURY 2020
Provisions:  CCPA may ban the endorser of a false or
 Under Section 20 of The Consumer misleading advertisement from making
Protection Act, the proposed authority will endorsement of any products or services in
have powers to recall goods or withdrawal the future, for a period that may extend to
of services that are "dangerous, hazardous one year. The ban may extend up to three
or unsafe; pass an order for refund the prices years in every subsequent violation of the
of goods or services so recalled to Act.
purchasers of such goods or services; and What other powers will the CCPA have?
discontinuation of practices which are unfair  While conducting an investigation after
and prejudicial to consumer's interest". preliminary inquiry, officers of the CCPA's
 For manufacture, selling, storage, Investigation Wing will have the powers to
distribution, or import of adulterated enter any premise and search for any
products, the penalties are: document or article, and to seize these. For
 If injury is not caused to a consumer, search and seizure, the CCPA will have
fine up to Rs 1 lakh with imprisonment similar powers given under the provisions
up to six months; of The Code of Criminal Procedure, 1973.
 If injury is caused, fine up to Rs 3 lakh  The CCPA can file complaints of violation of
with imprisonment up to one year; consumer rights or unfair trade practices
 If grievous hurt is caused, fine up to Rs before the District Consumer Disputes
5 lakh with imprisonment up to 7 years; Redressal Commission, State Consumer
 In case of death, fine of Rs 10 lakh or Disputes Redressal Commission, and the
more with a minimum imprisonment of National Consumer Disputes Redressal
7 years, extendable to imprisonment Commission. It will issue safety notices to
for life. alert consumers against dangerous or
 Section 21 of the new Act defines the powers hazardous or unsafe goods or services.
given to the CCPA to crack down on false or
misleading advertisements.
 According to these provisions, if the CCPA is
satisfied after investigation that any
advertisement is false or misleading and is
harmful to the interest of any consumer, or
is in contravention of consumer rights, the
CCPA may issue directions to the trader,
manufacturer, endorser, advertiser, or
publisher to discontinue such an
advertisement, or modify it in a manner
specified by the authority, within a given
time.
 The authority may also impose a penalty up
to Rs 10 lakh, with imprisonment up to two
years, on the manufacturer or endorser of
false and misleading advertisements.
 The penalty may go up to Rs 50 lakh, with
imprisonment up to five years, for every
subsequent offence committed by the same
manufacturer or endorser.

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