Post #32: The 14th Finance Commission

[Source: The Hindu http://www.thehindu.com/business/Economy/all-you-need-to-know-on-finance-commission/article6928860.ece?ref=relatedNews]

Chairman: Y.V.Reddy

What is a Finance Commission?

It is a body set up under Article 280 of the Constitution. Its primary job is to recommend measures and methods on how revenues need to be distributed between the Centre and states.

What else is its job?

Besides suggesting the mechanism to share tax revenues, the Commission also lays down the principles for giving out grant-in-aid to states and other local bodies. In the case of 14th Commission, these principles will apply for a five-year period beginning April 1, 2015.

What kind of work a Finance Commission has to do?

The commission has to take on itself the job of addressing the imbalances that often arise between the taxation powers and expenditure responsibilities of the centre and the states, respectively. Primarily, it has to ensure a sense of equality in public services across the states.

Who is the head of the latest i.e. 14th Finance Commission?

Former Governor of the Reserve Bank of India, Mr. Y.V. Reddy, is the Chairman.

Who are the other members of the Commission?

The Commission comprise Abhijit Sen, Member, Planning Commission; Sushama Nath, Former Union Finance Secretary; M Govinda Rao, former Director of National Institute of Public Finance and Policy; Sudipto Mundle, former Acting Chairman, National Statistical Commission; and AN Jha, Secretary to the Commission.

Are the recommendations of the 14th Finance Commission unanimous?

It appears there is a dissent. The report is believed to contain a dissent note from Planning Commission member Abhijit Sen.

What is the key recommendation of the 14th Finance Commission?

It has recommended an increase in the share of states in the centre's tax revenue from the current 32 per cent to 42 per cent. This is indeed the single largest increase ever recommended by a Finance Commission.

What does it means to States?

As against a total devolution of Rs. 3.48 lakh crore approximately in 2014-15, the total devolution to the States in 2015-16 will be Rs. 5.26 lakh crore approximately, a year-on-year increase of Rs. 1.78 lakh crore approximately

What will the impact of this recommendation if accepted by the Centre?

"The higher tax devolution will allow States greater autonomy in financing and designing schemes as per their needs and requirements," says the report. Practically, it will give more power to states in determining how they spend this money.

What is the implication of this recommendation?

Well, it comes at a time when the Centre is trying to push GST (goods and services tax). Perhaps, higher devolution will help to reassure the States that they will not be at the wrong end of the stick if GST is introduced.

Post #29:How system of cardless withdrawal from ATMs works?

[Via The Economic Times]

If you are living in a metropolitan city and wish to transfer funds to your family member who does not have a bank account, you can use of this service.

MUMBAI: Several banks have started offering cardless withdrawal facilities to their customers. ICICI Bank is the latest to join this bandwagon. Bank of India had launched a similar facility earlier this year.Other players in this space include Axis Bank and IndusInd Bank. Customers of the banks can use the facility to transfer funds even to those who do not have a bank account.

"The sender needs to have an account with us and he can use either internet banking or walk into a branch to send money to a beneficiary's mobile numbers. The beneficiary need not have a bank account," says Rajiv Anand, group executive and head, retail banking, Axis Bank.

For example, if you are living in a metropolitan city and wish to transfer funds to your family member who does not have a bank account, you can make use of this service.

However, the recipient should have a mobile phone connection to complete the transaction. The entire transaction can be completed online, and the process for initiating transfer and withdrawing the amount is similar across the banks.

How does it Work?

To begin with, you must add the name of the recipient to the list of cash withdrawal beneficiaries and provide the mobile number, name and address to the bank.

Once your request to register this recipient is accepted, you can select the recipient and initiate the transfer. You will get a numerical code on your cell phone, which should be shared with the recipient. The system will send an SMS containing another code (onetime password) to the recipient's mobile, too.

The recipient can visit specified ATMs, enter both the codes, mobile number and withdraw the transferred amount.

Remember, any variance in these sensitive details could lead to termination of the transaction -the funds will be credited back to the sender's account. Also, you should make sure that the recipient withdraws the money before the deadline specified (subsequent midnight to 14 days, depending on the bank).

Banks have set a limit of Rs 5,000-10,000 per transaction for the sender using this facility. The monthly cap for each recipient is Rs 25,000.You, as the sender, will have to pay charges of Rs 25 for every money transfer made.

Money transfer apart, you can make use of this facility for other purposes too, particularly when you are travelling. "The facility can be used by the account holder, both for self withdrawal in case of lost card, or for remittance to any beneficiary who may not be an account holder," says Ritesh Raj Saxena, EVP and head, direct banking and savings, IndusInd Bank. That is, if you add yourself as a beneficiary, you can use your mobile to initiate the transfer and withdraw money from the bank's designated ATM. The assumption here is that your mobile phone, with Internet access, is secure in your pocket. Ascertain the Reach

While the facility seems attractive and comes at very little cost, the only hitch is the limited reach -some banks allow cashless withdrawals at select ATMs, while others have a smaller network of ATMs. You need to enquire whether the facility is enabled only at selected ATMs -if the recipient does not live close to such an ATM, travelling to the location could be a hassle. In contrast, non-banking mobile payment entities have a wider network--of distributors and franchisees--though the charges could be higher depending on the issuer and amount transferred.

"However, mobile-enabled money transfers require bank accounts or wallets at both ends and do not facilitate instant cash out," says Anand. Lastly, you should be careful while sharing the code sent to you. Advise the recipient to carry out the transaction herself.Sharing the code with the security guards or others in the ATM can compromise the transaction.