Here are the 5 major decisions that interim Finance Minister Piyush Goyal took while Arun Jaitley was away

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Arun Jaitley is back. After a three-month hiatus due to a kidney transplant surgery, Jaitley was re-assigned the responsibility of the finance ministry on 23 August. While he was recovering, Piyush Goyal, the minister for Railways, was asked by Prime Minister Modi to step into the role of interim finance minister.

Leading the finance ministry is said to be one of the busiest jobs in the Indian government and Goyal’s stint was no different. He completed a number of tasks and took a lot of important decisions over the course of the summer. Here is a rundown of what he did:

Reduction of GST rates on certain items

In Jaitley’s absence, Goyal presided over the 21 July meeting of the GST Council. After the meeting, he announced a rate cut on a number of items such as sanitary pads, which were made fully exempted of tax, toiletries, lithium batteries, vacuum cleaners, washing machines, water heaters and hair dryers as well as raw materials like marble, wood and ethanol. The cuts were meant to benefit middle-class consumers and small business owners.

Goyal added that rates on more items would be reduced as tax compliance increases in the future. In the 4 August meeting of the GST Council, he also decided to form a special sub-committee to focus on the problems of micro, small and medium-sized enterprises in the country.

Withdrawal of FDRI Bill

After a minor furore was caused last year over the safety of Indians’ bank deposits, the government finally withdrew the contentious the Financial Resolution and Deposit Insurance (FRDI) Bill under Goyal’s leadership this July. The bill was introduced in the Lok Sabha in the Monsoon Session in 2017.

The bill had come under criticism for its “bail-in” clause which suggested that the deposits of bank account holders could be used to capitalise banks in the event of their failure and subsequent resolution. The ensuing panic caused deposit-holders to withdraw their cash from banks in states like Andhra Pradesh and Telangana.

During the Monsoon session of Parliament, Goyal wrote to the the Chairman of the Joint Parliamentary Committee and called for the bill’s withdrawal. Reacting to the move, Goyal said that the government was taking public concerns into account.

Amendment to the bankruptcy law

Earlier this month, the Parliament approved an amendment to the Insolvency and Bankruptcy Code (IBC) that was introduced by Goyal. The amendment comprised a clause that allowed homeowners to be classified as financial creditors and another that allowed the owners of small businesses facing bankruptcy to bid for their own firms. The amendment replaced an ordinance that was approved by India’s President Ram Nath Kovind in June.

The main goal of the amendment was to empower homebuyers, who up until then, did not have a say in the resolution process of real estate developers and construction companies, as well as small-business owners. The new bill also reduced the minimum percentage of votes required to approve a resolution plan for 75% of creditors to 66%. This was done to ensure the quick resolution of cases, especially smaller ones, as opposed to liquidation.

Approval of LIC’s takeover of IDBI

At the beginning of August, Goyal approved a bailout of struggling public sector lender IDBI Bank by Life Insurance Company Corp (LIC), a government-owned insurer. Speaking to the press, Goyal termed LIC’s acquisition of a 51% stake in IDBI as a “ win-win situation” for both parties. The deal, which will likely involve the deployment of policyholders funds, will see LIC pump around ₹130 billion into the bank in order to provision for bad loans and support credit growth. As a result, the government’s share in IDBI will come down to around 45%.

Launch of Project Sashakt to tackle bad loans

After meeting with the leaders of various Indian banks in early July, Goyal announced “ Project Sashakt” - a programmed aimed at the resolution of stressed assets at public sector banks. Under the scheme, a number of independent asset management companies will be established to purchase non-performing accounts from banks, including a specialised agency to deal with accounts above ₹5 billion. It also involves an intercreditor agreement - signed by the banks - for the resolution of accounts between ₹500 million and ₹5 billion. The agreement dictates that the resolution plan prepared by the lead creditor only requires 66% approval from all creditors to be passed.
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