The 2024 Union Budget and the Economic Survey– Expectations and Significance
The release of the 2024 Economic Survey has provided insights into what the Union Budget has in store for the nation. The Economic Survey provides a comprehensive review of the budget, based on statistical data for various economic sectors. It provides us with insight into the government’s priorities for the upcoming year and a holistic view of what sectors require more fund allocation.
Key Takeaways:
- The Role of Micro, Small and Medium Enterprises (MSMEs): Under the new budget, through the Mudra Scheme, MSMEs will now be able to avail loans of ₹20 lakhs instead of ₹10 lakhs, providing them with the monetary means to facilitate sustained growth, encouraging economic development at a grassroots level.
- Infrastructure in Amravati: Recognizing the need to monetarily support the government of Andhra Pradesh in developing infrastructure in their capital, Amravati, INR 15,000 crores have been allocated to help the endeavour.
- The Purvodaya Initiative: To step up development in the Eastern states of Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh, the government is developing the Purvodaya Initiative, channelling more funds to work on infrastructure.
- Taxes revised: Income taxes were revised from last year’s system, with the ministry stating that salaried income earners will be able to save approximately INR 17,500 in taxes. Capital taxes for foreign companies slashed to 35%.
- Foreign Direct Investment (FDI): The finance minister announced that the government will bring out a working paper with a 5-year vision for the economy that will address a revision of FDI rules to attract more foreign investment.
- Railways: Despite the Economic Survey mentioning a potential emphasis on ESG practices, there was no mention of railways in the budget speech.
Reserve Bank of India (RBI) imposes ₹1.9 lakh penalty on Muthoot Finance for Non- Compliance
The RBI imposed a penalty on Muthoot Finance for non-compliance with the Know Your Client (KYC) Directions, 2016. The central bank investigated the company for violations of the KYC directions after it was found that they had issued multiple Unique Customer Identification Codes (UCIC) to individual customers during a statutory inspection carried out in March 2022.
Key Takeaways:
- Enforcement of RBI Directions: This imposition of this fine exhibits how it is every financial institution’s duty to follow all regulations laid out by the RBI.
- The Importance of the UCIC: Issuing a single UCIC is crucial in India where the population is vast. It foremost helps act as a key identifier for any customer. However, it also serves as security for customers. Every individual customer has their own code, and the matchlessness of this code serves as a method to protect them from frauds, scams and more.
- Legal Basis: This was carried out in accordance with clause (aa) of subsection (5) of section 58B of the Reserve Bank of India Act, 1934, which allows the RBI to impose monetary penalties on financial institutions for non-compliance with its guidelines. Furthermore, the penalty was imposed while keeping in mind the constraints for the same outlined in clause (b) of section 58G.
The Insolvency and Bankruptcy Board of India (IBBI) Recent Discussion Paper Proposes Reforms, Subjected to Heavy Public Scrutiny
In a paper the IBBI proposed amendments to the Insolvency Resolution Process for Corporate Persons, also known as the IBBI Regulations 2016. Third party guarantees as part of a borrower’s resolution plan in cases of bankruptcy and insolvency have been the subject of various litigation, analysis and more. This specific provision was brought about by the central government in 2019, that extended the regulations to personal guarantors. It was challenged on constitutional grounds, however the Supreme Court struck down the challenges in 2021. Thus, the number of applications for insolvency against personal guarantors increased. The IBBI proposals aim to make the processes of the Corporate Insolvency Resolution Process (CIRP) more transparent and efficient.
Key Takeaways:
- The Rights of Creditors: The proposal in the paper enforced the right of creditors to proceed against guarantors even if the company is going through restructuring. Current laws allow resolution to be extinguishing the guarantee, assigning the guarantee or retaining the guarantee.
- Removal of Choice: Considering that there is a type of flexibility under current laws to negotiate the status of the guarantee, the new proposed reforms now take away the choice to negotiate the assignment, retainment or extinguishment of the guarantee.
- More Questions Raised: IBBI’s proposals of mandating the retention of the guarantee and enforcing the same, removing the right of assignment or extinguishing pose more questions and renewed concerns for the rights of the guarantor.
Illegal Investment Advisory Given ₹6 lakh Fine, Owner Barred from Markets
Securities and Exchange Board of India (SEBI) has fined SM Global Research ₹6 lakh (6,00,000) for running an investment advisory illegally. Furthermore, the owner of the firm has been banned from financial markets for 2 years and demanded that he refund ₹1.63 lakh (1,63,000) that has been collected as fees from clients.
Key Takeaways:
- The Chief General Manager (CGM) of SEBI stated that due to owner’s false promised of investment plans and defrauding investors through false information, he is in violation of Regulation 3(b), (c) & (d), 4(1) and 4(2)(o) of the Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market (PFUTP) Regulations, 2003.
- The proof of fraudulent investment advice was found through WhatsApp. Furthermore, there was a company website that has various tabs such as Home, Support, Pricing etc. The website also showed that services such as cash intraday, equity premium services and more were offered by the company.
- The company was not registered with the SEBI, and as such was not authorized to provide investment advisory services or conduct any activity in the securities market.
- The investigation by the SEBI began after a complainant reported being contacted by an employee of SM Global. They reported initially making a small profit, but then losing ₹75,000. They were then asked by Mr. Kumar to transfer ₹1.5 lakh into his account with a promise of five times the profit which did not come to fruition.
