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Overview of Cabinet approvals on March 4, 2020

On March 4, 2020, Union Cabinet headed by Prime Minister (PM) Narendra Damodardas Modi has approved the following proposals:Cabinet approves Public Sector BanksCabinet approves the Foreign Direct Investment policy on Civil Aviation
The Union Cabinet has approved an amended Foreign Direct Investment (FDI) policy on civil aviation which permits non-resident Indian (NRI) nationals to own 100% stakes of Air India.

  • The present FDI policy permits 100% FDI in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic up to 49% and Government route beyond 49%). For NRIs, 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937.
  • It should be noted that Air India has a debt of nearly Rs 58,351 crore (as on March 31, 2019). The Centre has given ‘in-principle’ approval for its strategic disinvestment and has invited bids from interested parties with March 17, 2020 as the deadline.

Cabinet approves Mega Consolidation of ten PSBs into four w.e.f. 1.4.2020
The Union Cabinet has approved the mega consolidation of following ten PSBs into four which would be effective from 1.4.2020.

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Amalgamating Bank  Amalgamated Bank
Oriental Bank of Commerce (OBC) and United Bank of India (UBI) Punjab National Bank (PNB)
Syndicate Bank Canara Bank
Andhra Bank and Corporation Bank Union Bank of India
Allahabad Bank Indian Bank

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Key Points:

-This would result in creation of seven large PSBs with each amalgamated entity having a business of over Rs 8 lakh crore, and five smaller ones. There were 27 PSBs in 2017 and now there would be 12.

-The above amalgamation will be in addition to State Bank of India (SBI), Bank of Baroda (BoB), and Bank of India (BoI).

-The five smaller PSBs are Central Bank of India (CBI), Indian Overseas Bank (IOB), UCO Bank, Bank of Maharashtra (BOM), and Punjab and Sind Bank.

Cabinet approves Companies (Second Amendment) Bill, 2019
The Union Cabinet has approved the Companies (Second Amendment) Bill, 2019 to amend the Companies Act, 2013. With this approval 72 amendments will be made to the Companies Act.

  • As a part of amendments, 23 offences would be recategorised out of 66 compoundable offences under the Act. Also, 7 compoundable offences would be omitted under the Act.
  • It is proposed to remove imprisonment and reduce punishment under the act. Besides, the quantum of penalty will also be reduced.
  • Earlier, the Companies (Amendment) Act, 2015 amended certain provisions of the Act to remove difficulties faced in implementation of various provisions of the Act.
  • The Amendment Bill, inter alia, would enable the listing of Indian companies on stock exchanges in foreign jurisdictions, which is expected to increase the competitiveness of Indian companies in terms of access to capital, broader investor base and better valuations.
  • The framework for enabling such listing under the foreign exchange and securities laws would be finalised by the Ministry of Finance in consultation with Ministry of Corporate Affairs, Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).