Back to Basics-Day 04 & 05

Jan Aushadhi Scheme

  • The Jan Aushadhi Scheme (Public Medicine Scheme) is a direct market intervention scheme launched by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, Govt. of India, to make available quality generic medicines at affordable prices to all citizens through a special outlet known as Jan Aushadhi Store (JAS) opened in each district of the States. 
  • Around 108 such outlets have been in operation as in September 2015. 
  • Jan Aushadhi stores have been set up to provide generic drugs, which are available at lesser prices but are equivalent in quality and efficacy as expensive branded drugs. Jan Aushadi is also a campaign to make people aware that brand value has no correlation with quality or efficacy of the formulations and to encourage doctors to prescribe more of such generic medicines.
  • JAS can be opened and operated by any NGO/Institution/Co-operative Society identified by State Governments on the free space provided in the premises of Government Hospital by the State Governments. 
  • Further, any NGO/Society/Trust/Institution/Self Help Group having experience of operation in welfare activities for 3 years and having space and financial capacity or any individual including un-employed pharmacist / medical practitioner having space and financial capacity can open a JAS store.

Kisan Credit Card

  • Kisan Credit Card is a pioneering credit delivery innovation for providing adequate and timely credit to farmers under single window. 
  • It is a flexible and simplified procedure, adopting whole farm approach, including short-term, medium-term and long-term credit needs of borrowers for agriculture and allied activities and a reasonable component for consumption needs.
  • Credit card and pass book or credit card cum pass book provided to eligible farmers facilitate revolving cash credit facility. 
  • Any number of drawals and repayments within a limit, which is fixed on the basis of operational land holding, cropping pattern and scale of finance can be made. Each drawal has to be repaid within a maximum period of 12 months and the Card is valid for 3 to 5 years subject to annual review. Conversion/reschedulement of loans is permissible in case of damage to crops due to natural calamities. Crop loans disbursed under KCC Scheme for notified crops are covered under Rashtriya Krishi Bima Yojana (National Crop Insurance Scheme), to protect farmers against loss of crop yield caused by natural calamities, pest attacks etc.
  • Kisan Credit Card (KCC) Scheme, which enables the farmers to purchase agricultural inputs such as seeds, fertilizers, pesticides, etc. and to draw cash to satisfy their consumption needs has since been simplified and converted into an ATM enabled debit card (Rupay KCC- RKCC).

Kisan Vikas Patra (KVP)

  • Kisan Vikas Patra (KVP) is a saving instrument launched by the Government for individual savers, wherein invested money doubled during the maturity period. This savings scheme was first launched by the Government on 1 April, 1988 and was distributed through post offices. It was discontinued in 2011 and later reintroduced in 2014.
  • KVP is considered a part of the National Small Savings Fund. (for details on the accounting of the funds thus collected, please see the write up on National Small Savings Fund). In Hindi, Kisan stands for farmers, Vikas for development and Patra for certificate.
  • However, as the name might suggest, this is not a scheme intended only for farmers nor is the raised money used only for farmers’ development. In fact, the Scheme does not distinguish between rural or urban investors. Rather, it had an urban bias. Further, the money raised through KVP is invested in central and state government securities, thus financing the respective Governments indirectly.
  • In KVP, a single holder type certificate was issued to an adult for himself or on behalf of a minor, or jointly to two adults. When introduced initially, it was available in denominations of INR. 100/-, 500/-, 1000/-, 5000/-, 10,000/-, in all Post Offices and INR. 50,000/- in all Head Post Offices.
  • Further, there was no limit on investment under KVP. In addition, it was easily transferrable like a bearer instrument. It had longer maturity than a term deposit and had higher interest rate than a government security of a comparable maturity. The maturity period of the scheme, when launched, was 5 ½ years and the money invested doubled on maturity. However, KVP is not a tax saving instrument as it does not offer any income tax exemption.
  • However, the Committee set up for comprehensive review of National Small Savings Fund (NSSF) headed by Smt. Shyamala Gopinath, Deputy Governor, Reserve Bank of India which submitted its report in June 2011 had recommended discontinuation of Kisan Vikas Patra.
  • However, in view of the popular demand and to revitalize Small Savings, the Finance Minister vide para 27 of his Budget Speech of 2014-15 (July) announced that Kisan Vikas Patra (KVP) will be reintroduced. This was implemented with effect from 18 November 2014.
  • The major concern regarding KVP has been addressed now as KYC norms (Know your client norms) regarding all National Savings Schemes (NSS) are now applicable in post offices and banks w.e.f. January, 2012.
  • The re-launched Kisan Vikas Patra (KVP) will be available to the investors in the denomination of Rs. 1000, 5000, 10,000 and 50,000, with no upper ceiling on investment. The certificates can be issued in single or joint names and can be transferred from one person to any other person / persons, multiple times. The facility of transfer from one post office to another anywhere in India and of nomination will be available. As in the case of previous issue, the certificate can also be pledged as security to avail loans from the banks and in other case where security is required to be deposited. Though, initially the certificates will be sold through post offices, it is intended to make it available to the investing public through designated branches of nationalized banks, in contrast to the original KVP.
  • As in the previous issue, Kisan Vikas Patras have unique liquidity feature, where an investor can, if he so desires, encash his certificates after the lock-in period of 2 years and 6 months and thereafter in any block of six months on pre-determined maturity value. The investment made in the certificate will double in 100 months (8 years and 4 months).

Krishi Kalyan Cess (KKC)

  • Krishi Kalyan Cess is a levy/tax imposed by the Union Government on all services, which are liable to service tax, at the rate of 0.5% for financing improvement of agriculture and welfare of farmers. (‘Krishi’ means ‘farming’ and ‘Kalyan’ means ‘welfare’ in Hindi)
  • A tax of 0.5% translates into a tax of 50 paisa on every one hundred rupees worth of taxable services. This cess is levied in addition to any cess or Service Tax levied at present, like, Swachh Bharat Cess.
  • KKC comes into effect from 1 June 2016. Input tax credit of this cess is available upon payment of this cess.

Legal provisions

  • Krishi Kalyan Cess (KKC) was announced in the Union Budget, 2016-17. A legal provision was made through the Finance Bill, 2016 (Chapter VI, clause 158) for levying the Cess.
  • In fact, Finance Bill defines KKC as a service tax on all or any of the taxable services at the rate of 0.5 percent on the value of such services for the purposes of financing and promoting initiatives to improve agriculture or for any other purpose relating thereto.
  • The legal provisions related to service tax including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Krishi Kalyan Cess.
  • The proceeds of the Krishi Kalyan Cess are first credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament, utilise the money for such specified purposes as it may consider necessary.

Krishi Kalyan Surchage

  • Krishi Kalyan Cess is different from the Krishi Kalyan Surcharge which is announced by the Government in the same Union Budget, 2016-17. In order to provide a stable and predictable taxation regime and reduce black money, it was announced in the budget that domestic tax payers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge (means an addition to the existing tax) at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Such declarants will have immunity from prosecution.
  • The Finance Minister while declaring the above provision mentioned that Surcharge levied at 7.5% of the undisclosed income will be called as Krishi Kalyan Surcharge, to be used for agriculture and rural economy.


  • Kudumbashree ( which means prosperity of the family) is one of the largest women-empowering projects in the country and is a model for implementing various poverty implementing programmes at the local self government level in Kerala. 
  • The programme has 37 lakh members and covers more than 50% of the households in Kerala. The three pillars of this programme are micro credit,entrepreneurship and empowerment of women. Kudumbashree perceives poverty not just as the deprivation of money, but also as the deprivation of basic rights.
  • Kudumbashree was conceived as a joint programme of the Government of Kerala and NABARD and is implemented through Community Development Societies (CDSs) of poor women, serving as the community wing of Local Governments.
  • Kudumbashree is formally registered as the “State Poverty Eradication Mission” (SPEM), a society registered under the Travancore Kochi Literary, Scientific and Charitable Societies Act 1955. It has a governing body chaired by the State Minister of LSG. There is a state mission with a field officer in each district. This official structure supports and facilitates the activities of the community network across the state.
  • A major problem in Kerala is the problem of Waste Management and Kudumbashree is actively involved in solid waste management in cities in Kerala. Kudumbashree is also involved in a variety of initiatives such as holistic health, rehabilitation of destitute families, special schools etc.


  • Mumbai Inter-Bank Offer Rate (MIBOR) and Mumbai Inter-Bank Bid Rate (MIBID) are the benchmark rates at which Indian banks lend and borrow money to each other. The bid is the price at which the market would buy and the offer (or ask) is the price at which the market would sell.  These rates reflect the short term funding costs of major banks. In other words, MIBOR reflects the price at which short term funds are made available to participating banks.
  • MIBID is the rate at which banks would like to borrow from other banks and MIBOR is the rate at which banks are willing to lend to other banks. Contrary to general perception, MIBID is not the rate at which banks attract deposits from other banks.
  • MIBOR is the Indian version of London Interbank Offer Rate (LIBOR). MIBOR is fixed for overnight to 3 month long funds and these rates are published every day at a designated time. Of the above tenors, the overnight MIBOR is the most widely used one which is used for pricing and settlement of Overnight Index Swaps (OIS). Corporates use the OIS for hedging their interest rate risks. The MIBID/MIBOR rate is also used as a bench mark rate for majority of deals struck for Interest Rate Swaps (IRS), Forward Rate Agreements (FRA), Floating Rate Debentures and Term Deposits.
  • The London Inter-bank Offer Rate (LIBOR) is the primary global benchmark for short term interest rates and has been used for pricing and settlement of large varieties of interest rate and derivative contracts. Hundreds of trillions of dollars worth of outstanding loans and financial contracts world-wide are estimated to be linked to LIBOR. Before the rate fixation scandal, British Bankers’ Association (BBA) used to calculate LIBOR. Now the responsibility for its administration has been transferred to Intercontinental Exchange (ICE). Thus, BBA Libor is now known as ICE Libor.
The Indian foreign exchange and Rupee interest rate benchmarks are used by the banking sector mainly for two purposes, i.e.
  • pricing and settlement of foreign exchange and Rupee interest rate contracts,
  • periodic valuation of various foreign exchange and Rupee interest rate related assets and liabilities.

Market Intervention Scheme (MIS)

  • Market Intervention Scheme (MIS) is a price support mechanism implemented on the request of State Governments for procurement of perishable and horticultural commodities in the event of a fall in market prices. The Scheme is implemented when there is at least 10% increase in production or 10% decrease in the ruling rates over the previous normal year.
  • Market Intervention Scheme works in a similar fashion to Minimum Support Price based procurement mechanism for food grains, but is an adhoc mechanism.
  • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of bumper crop during the peak arrival period when prices fall to very low level. Thus it provides remunerative prices to the farmers in case of glut in production and fall in prices.
  • Proposal of MIS is approved on the specific request of State/Union Territory (UT) Government, if the State/UT Government is ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation. Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes cost of the commodity procured plus permitted overhead expenses.

Implementation of MIS

  • The Department of Agriculture & Cooperation is implementing the scheme. Under MIS, funds are not allocated to the States. Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them.
  • Under the Scheme, in accordance with MIS guidelines, a pre-determined quantity at a fixed Market Intervention Price (MIP) is procured by NAFED as the Central agency and the agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier. 
  • The area of operation is restricted to the concerned state only.
Masala Bonds
  • “Masala Bonds” are the 10 year off-shore rupee bonds issued by International Finance Corporation (IFC), a member of the World Bank group, in the international capital market in November 2014, to raise funds for supporting private sector infrastructure development initiatives in India. Masala bonds are listed in London Stock Exchange.
  • Subsequently, on 29 September 2015, RBI put in place a framework for issuance of Rupee denominated bonds overseas within the overarching External Commercial Borrowing (ECB) policy, in order to facilitate Rupee denominated borrowing from overseas. (ECBs refer to commercial loans in the form of bank loans, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares), buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of 3 years.)
  • The term Masala bonds now extends to any rupee denominated bonds issued to overseas buyers even though RBI has not resorted to the use of this name in their guidelines.
  • The term “masala” stands for Indian spices, which gives Indian cuisine its characteristic flavour, and helped India gain a place in the global trade map.
  • By usage of the term, Masala Bonds are similar to dimsum bonds -bonds issued outside China but denominated in Chinese currency. But they are different from samurai bonds which are Yen (Japanese currency)-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.


  • Masala bonds, like any other off-shore bonds, are intended for those foreign investors who want to take exposure to Indian assets, yet constrained from doing it directly in the Indian market or prefer to do so from their offshore locations. The settlement of the bonds will be in US dollars but since they are pegged to the Indian currency -rupee-, investors will directly take the currency risk or exchange rate risks. Settlement is done in US dollars because of the limited convertibility of rupee.
  • Masala bonds are the first rupee bonds listed on the London Stock Exchange. 
  • They are the longest-dated bonds in the offshore rupee markets, building on earlier offshore rupee issuances by IFC at three-, five-, and seven-year maturities. However, these earlier bond issuances were not issued under the nomenclature of masala bonds. Further, as on date, the present issue of masala bonds is a one-time issue. 
  • Hence, subsequent issuances of the off shore rupee bonds by IFC may also not be under this nomenclature.

Advantages and Disadvantages

  • Offshore bonds have its own set of advantages and disadvantages for both the issuer and the investor as well as for the economy. 
  • Competition from offshore markets may induce improvements in domestic bonds markets such as strengthening of domestic market infrastructure, improving investor protection and removing tax distortions that hinder domestic market development etc. 
  • Against these benefits come the risks associated with financial openness and sudden shifts in capital flows, and the risk that offshore markets may draw liquidity away from the domestic market.

RBI Framework for issuance of rupee denominated bonds overseas

  • As per the September 2015 and the April 2016 guidelines of RBI, any corporate or body corporate as well as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) can issue such off-shore rupee denominated bonds. 
  • They can issue only plain vanilla bonds and the issue has to be either placed privately or listed on exchanges as per host country regulations.
Source: Wiki & Arthapedia

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