INDIAN ECONOMY: PUBLIC FINANCE IN INDIA

INDIAN ECONOMY: PUBLIC FINANCE IN INDIA


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Overview

• Public finance in India comes under the purview of the Ministry of Finance
• The Ministry of Finance has four departments
  • Department of Economic Affairs
  • Department of Expenditure
  • Department of Revenue
  • Department of Company Affairs
• The Ministry of Finance prepares the budget for the following governments
  • Union Government
  • Union Territories
  • Various states, when under President’s rule

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Repositories of public finance

1. Consolidated Fund of India
   1. Consists of all revenue received, loans raised and money received in repayment of loans by the Union Government
   2. All expenditure incurred by Government is incurred from the Consolidate Fund
   3. No money can be withdrawn from this fund except under the authority of Parliament
2. Public Account India
   1. Consists of all other receipts such as deposits , service funds and remittances
   2. Usually consists of funds that don’t belong to the government, and need to be paid back
   3. Disbursements from the Public Account do not need authorization of Parliament
3. Contingency Fund of India
   1. Contains funds for meeting unforeseen needs including supplementary Demand for Grants
   2. The Contingency Fund is placed at the disposal of the President to enable Government to meet urgent unforeseen expenditure
   3. Funds released from the Contingency Fund are released pending authorization from Parliament

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Sources of Revenue

• Main sources of revenue are customs duties, excise duties, service tax, corporate and income taxes
• Non-tax revenues consist of interest receipts (including interest paid by Railways), dividend and profits
• For states, revenue is mainly from taxes and duties levied by the state governments, share of taxes levied by Union, and grants received from the Union
• For local body finance, the primary sources are property taxes, octroi and terminal taxes

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Sources of expenditure

1. Non-plan expenditure
   1. Revenue expenditure: it consists of interest payments, defence revenue expenditure, subsidies, debt relief to farmers etc, and grants to states and Union Territories
   2. Capital expenditure: include defence capital expenditure, loans to public sector enterprises, loans to state governments and UTs, and loans to foreign governments
2. Plan expenditure
   1. Includes agriculture, rural development, irrigation and flood control, energy, industry, minerals, transport, communications etc

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Union Budget

• The Union Budget is a statement of financial position of the Union Government
• The objectives of the Budget include
  • Coordination of resources
  • Economic stability
  • Management of public enterprises
  • Definition of economic policy
• The first Budget was presented in 1860
• The Railway Budget was separated from the General Budget in 1921. However, the Railway Budget is a part of the General Budget, just prepared and presented separately
• The first Union Budget of independent India was presented by R K Shanmukham Chetty in Nov 1947
• The Budget is presented on the last working day of February, and must be passed by Parliament before it can come into effect on April 1 (the start of the financial year)

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Kelkar Commission

• The 13^th Finance Commission, with Vijay Kelkar as Chairman was constituted in Nov 2007
• The Finance Commission is ordained by Article 280 of the Constitution
• The main recommendations of the Kelkar Commission include
  • Senior citizens and widows to have exception limit on income tax of Rs 150,000
  • Three types of income tax slabs: up to Rs 1 lakh (no tax), Rs 1-4 lakh (20% tax), Above Rs 4 lakh (30% tax)
  • Abolition of dividend tax and long term capital gain
  • Income tax on agriculture to be withdrawn
  • Higher duty of 150% for specific agro products and demerit goods
  • Complete exemption of custom duty for life saving drugs, equipment, and defence related goods

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Taxes

• Direct taxes are those taxes in which the burden of tax cannot be shifted from the person on whom it has been levied. Eg: income tax, property tax
• Indirect taxes are those taxes in which the burden of tax can be shifted. Eg: sales tax, excise duty, entertainment tax
  
• Indirect taxes are the larger source of revenue for the government
  
• The ratio of revenue from direct to indirect taxes is usually around 40:60
  
• The largest revenue of the government comes from excise duty

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Value Added Tax

• By definition, VAT is a tax levied on the value added at each stage of production and distribution process. It is an ideal form of consumption taxation since the value added by a firm represents the difference between its receipts and cost of purchased inputs
• Value Added Tax (VAT) is a general tax on commodities to replace sales tax, surcharge and other entry level taxes levied by the states and Union Territories
• VAT is levied on sale of all taxable goods. VAT is not levied if sales of goods are not made in the course of furtherance of business
• VAT is collected in stages: tax paid on purchases (input tax) is rebated against tax payable on sales (output tax). The concept of second sale or resale tax is done away with
• VAT can be computed using one of three techniques
  • Subtraction method: tax rate is applied to the difference between the value of the output and the cost of the input
  • Addition method: the value added is computed by adding all payments that is payable to the factors of products (wages, interest payments etc)
  • Tax credit method: this entails the set off of the tax paid on inputs from tax collected on sales
• India uses the tax credit method for VAT computation
• Advantages of VAT include
• Tax evasion becomes difficult. Businesses compelled to keep proper record of purchases and sales, and keep a trail of invoices
• Avoids problem of undervaluing
• Increase in revenue as tax net widens
• Uniformity in tax regime avoids confusion
• Permits easy and effective targeting of tax rates, as a result of which exports can be zero-rated
• Parity with tax structures in other countries

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INDIAN ECONOMY: HOUSING IN INDIA

INDIAN ECONOMY: HOUSING IN INDIA


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Overview

• Majority of Indian have per capita housing space less than 10 x 10 square feet. Average rural per capita space is 103 sq ft and urban per capita space is 117 sq ft
• Dharavi (in Mumbai) is the largest slum in India. It comprises around 600,000-1 million people in a 0.67 sq mile area. Dharavi is one of the most densely populated areas of the world
• Housing is a state subject. However, the Union Government is responsible for formulation of policies and programmes
  
• Central-level policies are implemented by the Ministry of Housing and Urban Poverty Alleviation
  

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Urbanization in India

• Urban settlements in India are those settlements
  • That have a minimum population of 5000 and
  • Have 75% of the male population engaged in non-agricultural activities and
  • Have a population density of at least 400 persons per sq km
• Further, all towns having a Municipal Corporation, Municipal Council or Cantonment Board are classified as urban
• As per Census 2001, India’s urban population was 286 million (28% of total population)
  
• The number of cities with population more than 1 million is 35
  
• With 49.76% of population living in urban areas, Goa is the most urbanized state in India. Himachal Pradesh is the least urbanized (9.30%)
  

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POLICIES AND PROGRAMMES

All policies/programmes under the purview of the Ministry of Housing and Urban Poverty Alleviation unless otherwise noted

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National Urban Housing and Habitat Policy 2007

• The main aim of the policy is Affordable Housing for All
• Objectives of the Policy include
  • Urban planning including urban local bodies, rural-urban balance and Mass Rapid Transit Systems (MRTS)
  • Affordable housing including development of housing infrastructure, technological modernization and subsidies for economically weaker sections
  • Increased flow of funds from government and private financial sources
  • Spatial incentives including relaxation of Floor Area Ratio and more efficient use of space by construction of high-rise buildings
  • Special provisions for minorities and women

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Jawaharlal Nehru National Urban Renewal Mission (JNNURM)

• Launched in 2005
• It is a massive city modernization programme
• Applies to 63 cities in India
• Provides City Development Plans (CDP) for addressing infrastructure gaps relating to water, sanitation, housing and roads
• Includes the following sub-missions
  • Basic Services for the Urban Poor (BSUP): provides seven services to low income settlements i.e. security of tenure, affordable housing, water, sanitation, health, education, social security
  • Integrated Housing and Slum Development Programme (IHSDP): provides the seven services to cities other Mission cities

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Interest Subsidy Scheme for Housing the Urban Poor (ISSHUP)

• Launched in 2009
• Applies to Economically Weaker Sections (EWS) and Low Income Group (LIG)
• The scheme aims to encourage the poor to avail loan facilities through commercial banks/HUDCO for construction of housing
• Provides a 5% subsidy in interest payment
• Envisages construction of 310,000 dwelling units in the country

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Swarna Jayanti Shahari Rozgar Yojana (SJSRY)

• Launched in 1991
• Aims to provide gainful employment to urban unemployed
• Promotes setting up self-employment ventures and wage employment prospects
• Sponsored jointly by Central and state governments (75:25 ratio)

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Integrated Low Cost Sanitation Scheme (ILCS)

• Launched in 1980, revised in 2003
• ILCS scheme launched to eliminate dry latrines in India, which involve carrying of sewage on the heads of scavengers
• The Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act 1993 seeks to remove this unsanitary and restore human dignity of scavengers
• Aims include
  • Construct/convert low-cost sanitation units through sanitary two-pit pour flush latrines
  • Construct news latrines for EWS households having no latrines
• The scheme covers all towns, but only EWS households
• Funded by the Centre (75%), state (15%) and beneficiary (10%)
• The main target of the scheme is to convert 600,000 dry latrines by March 2010

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GOVERNMENTAL BODIES AND OFFICES

All bodies/offices under the purview of the Ministry of Housing and Urban Poverty Alleviation unless otherwise noted

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National Buildings Organization (NBO)

• Established in 1954
• Headquarters in New Delhi
• The NBO is primarily tasked with collection, collation, analysis and dissemination of statistics relating to housing and construction
• Data collected by the NBO includes construction activity, building permits/completion certificates, prices of building materials and wages etc
• The NBO also conducts training courses for personnel engaged in housing statistics at the state level

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Building Materials and Technology Promotion Council (BMTPC)

• Established in 1990
• Headquarters in New Delhi
• The Council provides proven innovative technologies for entrepreneurs interested in setting up manufacturing units in construction materials
• Objectives include
  • develop and operationalise a comprehensive and integrated approach for technology development, transfer and investment promotion
  • promote environment-friendly and energy-efficient materials and construction practices

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Hindustan Prefab Limited (HPL)

• Established in 1953
• Public Sector Undertaking functioning under the Ministry of Housing and Urban Poverty Alleviation
• Located in New Delhi
• HPL provides civil engineering services such as conventional construction as well prefab materials
• HPL pioneered the production of pre-stressed concrete railway sleepers
• HPL is the first company in India to produce precast pre-stressed concrete railway bridge girders

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Housing and Urban Development Corporation Limited (HUDCO)

• Established in 1970
• HUDCO is a Public Sector Enterprise under the Ministry of Housing and Urban Poverty Alleviation
• Headquartered in New Delhi
• HUDCO’s focus is on the social aspects of housing and infrastructure development, with preferential access to disadvantaged
• One in every 16 houses in the country has availed of HUDCO’s assistance
• Objectives of HUDCO include
• Provide long term finance for housing construction
• To finance or undertake the establishment of new or satellite towns
• To finance or undertake the establishment of industrial enterprises of building materials

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JOHAR..

INDIAN ECONOMY: BANKING IN INDIA

INDIAN ECONOMY: BANKING IN INDIA

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Overview

• Organized banking in India originated in the late 18^th century
• The State Bank of India, headquartered in Mumbai, is the largest bank in India
• Currently, India has 88 Scheduled Banks – 27 public sector banks, 31 private banks and 38 foreign banks
• The public sector banks hold over 75% of banking assets in the country, followed by private banks (18.2%) and foreign banks (6.5%)
• Central banking in India is the responsibility of the Reserve Bank of India
• Banking in India is the responsibility of the Department of Financial Services, Ministry of Finance
• Currently there are 170 scheduled commercial banks, which includes 91 regional rural banks, 19 nationalised banks, 8 banks in the SBI group and the IDBI
  
• There are 4 non-scheduled commercial banks in the country
  

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History of banking in India

• The oldest banks in India were the General Bank of India and the Bank of Hindustan, both founded in 1786. However both banks are now defunct
• The oldest existing bank in India is the State Bank of India. The origins of the SBI go back to the Bank of Calcutta (founded 1806, renamed Bank of Bengal in 1809)
• The Bank of Madras was established in 1843 and the Bank of Bombay in 1868
• The Bank of Bengal, Bank of Bombay and Bank of Madras merged to form the Imperial Bank of India in 1921. The Imperial Bank of India was renamed the State Bank of India in 1955. Although a normal commercial bank, the Imperial Bank of India also functioned as a central governmental until 1935
  
• The Reserve Bank of India was established in 1935
• The oldest joint stock bank is the Allahabad Bank, established in 1865. 
  
• The first entirely Indian joint stock bank was the Oudh Commercial Bank (Faizabad, 1881). However, it failed in 1958. The next oldest is the Punjab National Bank (Lahore, 1895)
  
• The Dakshina Kannada and Udipi districts of Karnataka (called South Canara), is known as the Cradle of Indian Banking

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Nationalisation of banks

• The Government of India nationalised 14 of the largest banks in 1969
• This achieved by an ordinance to the effect in July 1969. This was formalized by the Banking Companies (Acquisition and Transfer of Undertaking) Bill 1969
• The banks that were nationalized in 1969 were: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharastra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India and United Bank of India
• In 1980, six more banks were nationalized. The banks that were nationalized in 1980 were: Andhra Bank, Corporation Bank, Oriental Bank of Commerce, Punjab and Sind Bank, New Bank of India and Vijaya Bank
• In 1993, the New Bank of India was merged with Punjab National Bank. There are 19 nationalized banks in operation today
• Following this, the GoI controlled about 91% of the banking business in India

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RESERVE BANK OF INDIA

Overview

• The Reserve Bank of India is the central bank of India
  
• It was established in 1935 and nationalised in 1949. Its headquarters was initially Calcutta, but moved to Bombay in 1937. It is currently headquartered in Mumbai.
  
• The first Governor of the RBI was Sir Osborne Smith. The current Governor of the RBI is Dr. Duvvuri Subbarao
  
• The RBI functions under the provisions of the Reserve Bank of India Act 1934
  

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Objectives

• Maintain price stability
• Ensure adequate flow of credit
• Protect depositor’s interests
• Provide cost-effective banking services to the public
• Facilitate external trade and payment
• Promote development of foreign exchange market in India
• Provide supplies of currency notes and coins in the country

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Functions

• Formulates, implements and monitors monetary policies
• Regulates operations of banking and financial services sector in the country
• Manages the Foreign Exchange Management Act 1999
• Issues, exchanges and destroys currency notes and coins
• Perform promotional functions to support national objectives
• Acts as banker to banks by maintaining accounts of all scheduled banks
• Acts as banker to the Central and state governments

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List of RBI Governors

S. No.	Governor	Tenure	Notes
1	Sir Osborne Smith	1935-1937	First Governor of the RBI Did not sign any bank notes
2	Sir James Taylor	1937-1943	Governor during WWII Started the practice of signing bank notes
3	Sir C D Deshmukh	1943-1949	First Indian Governor of RBI Oversaw Independence & Partition Represented India at the Bretton Woods Conference 1944 Served as Minister of Finance 1950-1956
4	Sir Benegal Rama Rao	1949-1957	Longest serving Governor Was Indian Ambassador to USA prior to RBI Witnessed commencement of Five Year Plans, and transformation of Imperial Bank of India to SBI
5	K G Ambegaonkar	Jan 1957 – Feb 1957	Did not sign any bank notes
6	H V R Iyengar	1957-1962	Witnessed introduction of decimal coinage Variable cash reserve ration (CRR) introduced
7	P C Bhattacharya	1962-1967
8	L K Jha	1967-1970	Witnessed nationalization of banks (1969) Appointed as Ambassador to US in 1970
9	B N Adarkar	May 1970 – June 1970	Served as India’s Executive Director at the IMF
10	S Jagannathan	1970-1975	Witnessed oil shock, expansion of banking services, shift to floating rates Relinquished office to serve as Executive Director at IMF
11	N C Sen Gupta	May 1975 – Aug 1975
12	K R Puri	1975-1977
13	M Narasimhan	May 1977 – Nov 1977	Only Governor to be appointed from the Reserve Bank cadre Chairperson of Committee on Financial System (1991) and Committee on Banking Sector Reforms (1998) Served as Executive Director for India at the World Bank and the IMF
14	Dr. I G Patel	1977-1982	Served as Secretary at the United Nations Development Programme (UNDP) Witnessed demonetisation of high denomination bank notes and “gold auctions” Witnessed nationalization of six banks (1980) Secured IMF’s Extended Fund Facility (1981). This was the largest arrangement of the IMF at the time
15	Dr. Manmohan Singh	1982-1985	Witnessed comprehensive legal reforms in banking sector
16	A Ghosh	Jan 1985 – Feb 1985
17	R N Malhotra	1985-1990	Served as Executive Director of IMF prior to RBI Made efforts to develop money markets
18	S Venkitaraman	1990-1992	Managed balance of payments crisis Adopted IMF’s stabilisation programme Supervised devaluation of the Rupee Witnessed launch of economic reforms
19	Dr. C Rangarajan	1992-1997	Ushered in unprecedented central bank activism Introduced comprehensive measures to strengthen and improve efficiency of banking sector Establishment of unified exchange rate Cap on automatic finance by the Bank to the Government
20	Dr. Bimal Jalan	1997-2003	Represented India on the Executive Boards of the IMF and World Bank prior to RBI
21	Dr Y V Reddy	2003-2008	Executive Director to IMF prior to RBI
22	Dr. D Subbarao	2008-Present	Prior to RBI, he has been Secretary to the PM’s Economic Advisory Council (2005-2007) Lead economist in the World Bank (1999-2004) Finance Secretary to the Government of Andhra Pradesh (1993-1998) Joint Secretary, Dept. of Economic Affairs (1988-1993)

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STATE BANK OF INDIA

• The State Bank of India is derived from the Imperial Bank of India (1921), which was nationalised in 1955
• The State Bank of India is the oldest bank in India. It traces its ancestry to the Bank of Calcutta, founded in 1806.
• It is headquartered in Mumbai
• The State Bank of India is also the largest bank in India. It has a market share of about 20% in deposits and advances
  
• The State Bank Group consists of the SBI and its subsidiary banks viz. State Bank of Indore, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore
  
• The SBI is one of the Big Four Banks in India, along with ICICI Bank, Axis Bank and HDFC Bank
  
• The SBI was ranked as the 29^th most reputable company in the world by Forbes in 2009

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CATEGORIES OF BANKS IN INDIA

Structure of banking in India. Number of banks given in brackets

• Commercial Banks
  • Commercial banks are those that cater to the regular banking and financial needs of the public
    
  • Commercial banks include public sector banks and private sector banks.Public sector banks include the State Bank Group and other nationalised banks, while private sector banks include Indian banks and foreign banks
    
• Cooperative Banks
  • Cooperative banking is retail and commercial banking organised on a cooperative basis. Cooperative banks include credit unions, savings and loans associations and building societies and cooperatives
  • Cooperative banks operate on the principles of cooperation – mutual help, democratic decision making and open membership
  • They are governed by controls of the RBI as well as state governments.Cooperative banks in general operate under the Cooperative Credit Societies Act 1904, but large Urban Cooperative Banks operate under the Banking Regulation Act 1949
    
  • Cooperative banks in India are the primary financiers of agricultural activities, small scale industries and self-employed workers
    
  • Cooperative banks in India were first established in the late 19^th century, following the success of such banks in Britain and Germany
    
  • The Anyonya Cooperative Bank Ltd. (ABCL) was the first cooperative bank in India. It was established Vithal Laxman (aka Bhausaheb Kavthekar) in 1889 under the name Anyonya Sahayakari Mandali Cooperative Bank Ltd. The bank closed functioning in March 2008 following an order by the RBI. Re-opening is under consideration
    
• Regional Rural Banks
  • Regional Rural Banks (RRBs) were first established in 1975
    
  • Initially five RRBs were established at Moradabad (UP), Gorapkhpur (UP), Bhiwani (Haryana), Jaipur (Rajasthan), Malda (WB). Currently there are 91 RRBs
    
  • RRBs exist in all states except Goa and Sikkim
  • The share of RRBs in agricultural credit is around 5%
    
• Scheduled Banks
  • Scheduled Banks are those banks that have been included in Second Schedule of the RBI Act 1934
    
  • Scheduled Banks must fulfil two conditions
    
    • The paid up capital and collected funds of the bank must not be less than Rs 5 lakhs
    • Any activity of the bank should not adversely affect the interest of deposition
  • Scheduled Banks enjoy the following benefits
    • They are eligible for obtaining loans on Bank Rate from the RBI
    • They acquire membership of the clearing house
  • Scheduled Banks include commercial banks, cooperative banks and regional rural banks
  • There are around 302 Scheduled Banks in operation
• Non-Scheduled Banks
  • Non-Scheduled Banks are those that are not included in the list of Scheduled Banks
  • They have to follow the Cash Reserve Ratio (CRR) condition. However, they are not compelled to deposit these funds with the RBI
  • They can avail loans from the RBI only under emergencies, and not for daily activities
  • There are only 4 Non-Scheduled Banks in operation

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GOVERNMENT ENTITIES IN BANKING

1. Small Industries Development Bank of India (SIDBI)
   1. Established in 1990, headquarters Lucknow
   2. The main objective of the SIDBI is to aid the growth and development of micro, small and medium scale industries in India
   3. It provides direct credit to micro, small and medium enterprises, supports microfinance institutions and refinancing to state level finance bodies
2. Industrial Development Bank of India (IDBI)
   1. Established in 1964, headquarters Mumbai
   2. The IDBI is the tenth largest development bank in the world. It is one of India’s largest public sector bank
   3. Its main objective is to provide credit and other banking facilities to industries in India
   4. However, in 2004 the IDBI was re-designated as a commercial bank, following the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003, and renamed IDBI Ltd
   5. Following this, the commercial banking division, IDBI Bank was merged into IDBI
3. Industrial Finance Corporation of India (IFCI)
   1. The IFCI is the first development finance institution in the country to cater to the needs of Indian industry
   2. Established 1948, headquarters New Delhi
   3. The IFCI was established to provide long term low interest credit to corporate borrowers
   4. In 1993, the IFCI was re-registered as a commercial company under the Indian Companies Act 1956, and renamed IFCI Ltd
4. National Bank for Agricultural and Rural Development (NABARD)
   1. Partly owned by the RBI
      
   2. Established 1982, headquarters Mumbai
   3. NABARD serves as the apex development bank in India for economic activities in rural areas
   4. The main objective of NABARD is to facilitate credit flow for agriculture and small scale industries
   5. NABARD provides refinance to State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Commercial Banks and other financial institutions approved by the RBI
      
   6. NABARD coordinates the rural financing activities of all institutions engaged in developmental work
      
   7. NABARD has 28 regional offices (state capitals), one Sub Office (in Port Blair) and one Special Cell (in Srinagar)
      
   8. NABARD is famous for its Self Help Group (SHG) Bank Linkage Programme, which serves as an important tool for microfinance
5. National Housing Bank (NHB)
   1. Wholly owned subsidiary of the RBI
   2. Established in 1987, headquarters New Delhi
   3. Established mainly to provide long term finance to individual households
6. Export-Import Bank of India (EXIM Bank)
   1. Established 1981, headquarters Mumbai
   2. The main objective of the EXIM Bank is to provide financial assistance to exporters and importers with a view to promoting the country’s international trade
   3. It acts as the apex financial institution for financing foreign trade in India
7. Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL)
   1. Wholly owned subsidiary of the RBI
   2. Established in 1995, headquarters Bangalore
   3. Main function is to augment the product of bank notes to meet demand
   4. The company manages two presses: Mysore and Salboni (West Bengal)
8. Deposit Insurance and Credit Guarantee Corporation (DICGC)
   1. Wholly owned subsidiary of the RBI
   2. Established in 1962, headquarters Mumbai
   3. India was one of the first countries to provide deposit insurance
   4. Main objective is to provide insurance to depositors against collapse and bankruptcy of banks
   5. Provides deposit insurance coverage up to Rs 100,000

Sources: Reserve Bank of India, Government of India, Ministry of Finance, Wikipedia

THANKS

JOHAR.

INDIAN ECONOMY: INSURANCE IN INDIA

INDIAN ECONOMY: INSURANCE IN INDIA

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Overview

• The first insurance company in India was the Oriental Life Insurance Company, founded in Calcutta 1818. However, it is now defunct
• The first Indian insurance company was the Bombay Mutual Life Assurance Society, founded 1870
• The oldest existing insurance company is the National Insurance Company, founded 1906
• Insurance was nationalised in 1956 and then opened up to private sector in 1999.
• Currently the government allows 26% FDI in the insurance sector
• The largest life insurance company in India is the Life Insurance Corporation
• Insurance falls under the purview of the Department of Financial Services, Ministry of Finance
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Nationalisation of insurance

• Life insurance in India was nationalised by the Life Insurance Corporation Act 1956
• All 245 life-insurance companies in India at the time were merged to form the Life Insurance Corporation (LIC).
• The General Insurance Business Act 1972 nationalised general insurance companies
• The existing 100 general insurance companies were amalgamated into the General Insurance Corporation of India (GIC).
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GOVERNMENT BODIES IN INSURANCE

All government bodies in insurance function under the Ministry of Finance unless otherwise noted

Life Insurance Corporation (LIC)

• Established 1956, headquarters Mumbai
• The LIC is the largest life insurance company in India and also the nation’s largest investor
• It funds close to 25% of the government’s expenses
• The LIC owns the following subsidiaries
  • Life Insurance Corporation of India International: provides USD denominated policies to NRIs
  • LIC Nepal
  • LIC Lanka
  • LIC Housing Finance
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General Insurance Corporation (GIC)

• Established 1972, headquarters Mumbai
• The GIC is a holding company for four subsidiary companies
  • Oriental Insurance Company Ltd (New Delhi)
  • New India Assurance Company Ltd (Mumbai)
  • National Insurance Corporation Ltd (Kolkata)
  • United India Insurance Company Ltd (Chennai)
• The GIC is the sole re-insurance company in India
• The GIC covers insurance for the entire spectrum of the economy from shoes to aircraft, from agricultural wells to oil wells, from chemical manufactures to satellite launches etc
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Insurance Regulatory and Development Authority (IRDA)

• Established 2000, headquarters Hyderabad
• The IRDA was set up to protect the interests of policy holders, and to regulate the growth of the insurance industry
• Some of the functions of the Authority include
  • Regulate investment of funds by insurance companies
  • Regulate maintenance of margin of solvency
  • Adjudicate disputes between insurers and intermediaries
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Agriculture Insurance Company (AIC)

• Established 2003, headquarters New Delhi
• The AIC is promoted by the GIC and NABARD
• The AIC is under administrative control of Ministry of Finance, but under operative control of Ministry of Agriculture
• The AIC offers area based and weather crop insurance schemes to farmers
• It is one of the largest agriculture insurance companies in the world
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POLICIES AND PROGRAMMES

Social Security Scheme

• A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker sections of society
• The SSF is administered by the LIC
• The SSF provides up to Rs 5000 on death from natural causes and Rs 25,000 upon death/disability due to accident
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Janashree Bima Yojana (JBY)

• The Janashree Bima Yojana was launched in 2000
• The JBY is a group insurance scheme. The minimum membership of the group should be 25 persons
• The JBY is administered by the LIC
• The JBY provides for insurance protection to rural and urban poor. The scheme covers BPL people and above poverty line people who belong to certain identified occupational groups
• The scheme provides for cover of Rs 20,000 on natural death. The scheme also provides pension of Rs 200
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Aam Aadmi Bima Yojana (AABY)

• Launched in 2007
• Provides insurance to the head of the family of rural landless households
• Covers natural death and accidental death/disability
• The scheme also provides additional benefit of scholarships for max two children between 9^th and 12^th standards
• Administered by the LIC
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Universal Health Insurance Scheme (UHIS)

• The UHIS is meant to improve access of health care to poor families
• Scheme provides for reimbursement of medical expenses, death and compensation due to loss of earning capacity
• The UHIS targets only BPL families
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National Agriculture Insurance Scheme (NAIS)

• Launched in 1999
• Protects farmers against losses due to natural calamities such as flood, drought, pestilence etc
• Scheme is implemented by the Agriculture Insurance Company (AIC)
• The Scheme is available to all farmers irrespective of the size of their land holdings
• The Scheme covers all food crops and oil seeds. It also covers some commercial and horticultural crops
• The scheme has until now covered more than 1.3 million farmers and 211 million hectares of land

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Pilot Weather Based Crop Insurance Scheme (WBCIS)

• Launched in 2007, on a pilot basis
• The WBCIS aims to cover farmers against anticipated crop failure due to adverse weather conditions
• The scheme is based on the fact that weather parameters can affect crop yield even when the farmer has taken all care to ensure a good harvest
  
• The payouts are based on historical data that determine weather thresholds/triggers beyond which crop losses are expected 
  
• The WBCIS is implemented by the AIC
• The scheme is currently being implemented on 30 major crops including horticultural crops
  
• Currently the scheme covers more than 110,000 farmers and 1.4 million hectares of land

THANKS

JOHAR.