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June 2021

Borrowing linked to reforms by the States, new public finance model: PM Modi

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Prime Minister Narendra Modi said on Tuesday that the new public finance model, in which states were only allowed to exceed their annual borrowing limits in 2020-2021 if they undertook certain pre-defined reforms, is a classic example of the new model of “reforms by conviction and incentives.”

In a blog posted on LinkedIn, Modi said India has seen a model of “stealth and coercion reform”. This is a new model of “reform by conviction and incentive”.

“It was a boost, prompting states to adopt progressive policies to obtain additional funds. The results of this exercise are not only encouraging, but also go against the idea that there are few takers for sound economic policies, ”Modi wrote in the blog.

Citing the example of four reforms, which state governments had to undertake to become eligible for the additional 1% loan, Modi said that each of the reforms was related to improving the comfort of life for the public, mainly the poor, the vulnerable and the middle class. It also promoted fiscal sustainability.

“Raising sufficient resources for public welfare while ensuring sustainability is proving to be one of the greatest challenges,” said the Prime Minister.

He added that states were able to raise an additional 1.06 trillion rupees in 2020-2021 through a central “Bhagidari” state approach.

“Officials who have worked on these reforms suggest that without the incentive for additional funds, enacting these policies would have taken years,” Modi said.

Elaborating on the first report, which is the One Nation One Ration card, Modi said the main benefit of this is that migrant workers can get their food ration from anywhere in the country.

“Seventeen states have completed this reform and obtained additional loans amounting to Rs 37,600 crore,” the prime minister said.

Regarding the second reform related to additional borrowing, which aims to improve the ease of doing business, Modi said that this reform (covering 19 laws) is particularly useful for micro, small and medium enterprises (MSMEs). This is because these companies suffer the most from the burden of the “inspector raj”.

It also promotes a better investment climate, larger investments and faster growth.

Twenty states have completed this reform and have been authorized to borrow an additional Rs 39,521 crore.

The third reform required States to notify the floor rates of property tax and water and sanitation charges. This was in line with indicative stamp duty values ​​for real estate transactions and current costs in urban areas.

“Eleven states have completed these reforms and obtained additional borrowing of 15,957 crore rupees in 2020-2021,” Modi said.

The fourth reform was the introduction of direct benefit transfer (DBT) instead of the free supply of electricity to farmers.

Additional borrowing of 0.15 percent of the government’s gross domestic product (GDP) was tied to it. A component has also been planned for the reduction of technical and commercial losses and another for the reduction of the gap between income and costs (0.05% of the GSDP for each).

Thirteen States have implemented at least one component while six States have implemented the LVD component. As a result, 13,201 crore rupees of additional borrowing was authorized.

Overall, 23 states have benefited from additional borrowing of Rs 1.06 trillion out of a potential of Rs 2.14 trillion.

“As a result, the total borrowing authority granted to states for 2020-2021 (conditional and unconditional) was 4.5% of the initially estimated GSDP,” Modi wrote.

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Private debt fund: the CSSF clarifies the concept of lending to the “public” – Finance and Banking

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Luxembourg: Private debt fund: the CSSF clarifies the concept of “public” lending

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The CSSF clarified its interpretation of the concept of “public” lending, which is relevant information for the non-bank lending sector and, in particular, for private debt funds carrying out a loan origination activity.


In general, the granting of loans to the public on a professional basis is a regulated activity which is subject to the authorization of the CSSF by virtue of article 28-4 of the law of April 5, 1993 on the financial sector. However, the law does not provide a legal definition of the term “public” for this purpose.

Legally, unregulated private debt funds cannot benefit from an exception to the authorization requirement. At the same time, direct lending strategies will generally not amount to lending to the “public”. This is an assessment that had to be made on a case-by-case basis, as the regulator has so far published only limited formal guidance on this particular context.

What has been clarified

The update of the Q&A provides greater regulatory certainty on situations where the CSSF considers that a lending activity is not oriented towards the public. This is true where:

  • loans are granted to a restricted circle of pre-determined persons; Where
  • the face value of each loan is at least 3,000,000 EUR (or the equivalent amount in another currency) and loans are granted exclusively to professionals.

To this end, a “professional” is defined as any natural person or any legal person, whether private or public, who acts, including through any other person acting in his name or on his behalf, at for purposes relating to its commercial or industrial, craft or professional activity.

The update further clarifies Luxembourg’s legal framework for non-bank lending and confirms the country’s position as an attractive domicile for private debt funds.

The update brings welcome clarity to Luxembourg’s legal framework for non-bank lending and reaffirms the country’s position as an attractive domicile for private debt funds.

To see the updated version of the CSSF Q&A, click here_

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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A tax commission to tackle the long-term strategy of public finances

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The government’s new Commission on Taxation is due to start its work today after Finance Minister Paschal Donohoe announced yesterday the composition of the 14-member panel.

he commission, which will provide high-level policy advice to government, is exploring new ways to generate sustainable revenues to fund government commitments over the next 20 years.

Two key areas to address are long-term demographic pressures on taxes and spending, as well as the implications of international corporate tax reform.

The independent body, chaired by Professor Niamh Moloney of the London School of Economics, is called upon to examine how best tax and social systems can support economic activity and promote increased employment and prosperity , while ensuring that sufficient resources are available to meet the rising costs of public services.

The commission is expected to report to the minister in July 2022 after a series of public consultations on how best to manage public finances to meet the economic challenges of the future.

This is only the fourth time in the history of the state that a Commission on Taxation and Social Protection has been convened.

The most recent commission in 2009 was tasked with making recommendations to institute local property taxes, carbon taxes and water charges – all highly controversial revenue measures.

The members of the committee are: Marie Bradley, Managing Director, Bradley Tax Consulting; Philip Brennan, former Assistant Secretary, Revenue Commissioners; Sandra Clarke, President of the Irish Tax Institute, Partner at BCC Accountants; Rowena Dwyer, Policy, Planning and Government Relations Manager at Enterprise Ireland; William Hynes, Senior Advisor to the Secretary-General of the OECD; Philip Kermode, former director, European Commission; Aoife Ní Lochlainn, Irish Environmental Network; Rena Maycock, CEO and Founder of Cilter Technologies; John-Mark McCafferty, CEO, Threshold; Tom McDonnell, Nevin Economic Research Institute and ICTU candidate; Fergal O’Brien, Director, IBEC; Barra Roantree, Institute for Economic and Social Research; and Anne Vaughan, former Assistant Secretary, Department of Social Welfare.

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