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CSEET · Economic and Business Environment · Key Government Institutions

Which one of the following is a core function of the Finance Commission as a constitutional body?

The Finance Commission recommends how the net proceeds of taxes are divided between the Union and the States, and the principles for grants-in-aid to States. Regulation of insurers, pensions and banks falls to IRDAI, PFRDA and the RBI respectively.

  1. ARecommending the distribution of net tax proceeds between the Union and the StatesCorrect
  2. BRegulating the solvency margins of insurance companies
  3. CApproving the investment guidelines of the National Pension System
  4. DLicensing commercial banks to open branches

Explanation

The Finance Commission recommends the sharing of net proceeds of taxes between the Union and States and the principles governing grants-in-aid. Solvency regulation belongs to IRDAI, pension investment norms to PFRDA, and bank licensing to the RBI.

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