Why in News?

• The 15th Finance Commission has scheduled meetings with the Reserve Bank of India (RBI) and with the Banks and Financial institutions

FC meeting with RBI:

• In the meeting with the RBI, headed by Governor Shri Shaktikanta Das, the Commission is likely to discuss the following issues:-
• Views on key macro-economic assumptions for the Fifteenth Finance Commission (FCXV), keeping in view the key parameters central to macro-financial
• Views on the cost of borrowings of the Centre and the States during the award period of the FCXV.
• Modalities for ensuring that the borrowing cost becomes increasingly market- driven.
• Issues in quantifying contingent liabilities of States and off-budget transactions of States, and other issues of public financial
• Views on possible debt trajectories of States and State-specific consolidation road map.
• Requirements of recapitalisation of banks and their impact on the cost of borrowings of Governments
• Possible scenarios of the Bimal Jalan Committee Report on surplus capital available with the RBI for transfer to the Government of India
• RBI’s own assessment of the dividends and surpluses that can be transferred to the Government of India during the award period of FCXV

FC meeting with other Banks:

• In the meeting with the Banks and Financial Institutions the following issues are likely to be raised:-
• Cost of borrowings of the Centre and the States during the award period of the FCXV.
• Modalities for ensuring that the borrowing cost becomes increasingly market- driven.
• Recapitalization of banks and their impact on the cost of borrowings of governments.

15th Finance Commission:

• The 15th Finance Commission was constituted on November 27, 2017 and is headed by former Revenue Secretary and former Rajya Sabha MP N.K. Singh. The terms of reference (ToR) of the Fifteenth Finance Commission have raised some questions

Background Information:

• The Finance Commission is a constitutional body created by the President of India under Article 280 of the Constitution of India
• It is touted as balancing wheel of fiscal federalism in
• The provision of setting up Finance commission in the constitution was an original one and was not
• Article 280 of the constitution lays down following provisions with respect to finance commission
  the President considers necessary, by order constitute a Finance Commission which shall
• consist of a Chairman and four other members to be appointed by the President
• (b) It shall be the duty of the Commission to make recommendations to the President as to
• the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds
• The principles which should govern the grants in aid of the revenues of the States out of the Consolidated Fund of
• The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and municipalities in the State on the basis of the recommendations made by the Finance Commission of the State
• Any other matter referred to the Commission by the President in the interests of sound finance
• The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them
• The recommendations made by the Finance Commission are advisory in nature and, hence, not binding on the Government
• Finance commission (miscellaneous provisions) act 1951 was passed to give a structured format to the finance commission. It lays down qualifications of the members of commission, terms, eligibility and Powers
• The Chairman of a finance commission is selected from people with experience of public affairs
• The other four members are selected from people who:
• Are, or have been, or are qualified, as judges of a high court,
• Have knowledge of government finances or accounts, or
• Have had experience in administration and financial expertise;