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Laws may be tweaked to make every large firm & PSBs spend on CSR
New Delhi: The laws governing limited liability partnership (LLP) firms and the PSBs may be amended to make them spend 2% of their net profit in corporate social responsibility (CSR) initiatives.
Department of Financial Services (DFS) and Ministry of Corporate Affairs (MCA) officials are said to be engaged in the task of drafting the necessary amendments to the relevant acts in this regard.
Currently, LLPs and Public Sector Banks (PSBs) are governed by the LLP Act, 2008, and the Banking Regulation Act, 1949, and these laws have no provisions for compulsory CSR spending.
The absence of legal provisions for compulsory CSR spending has been seen to have encouraged many big entities incorporated under the Companies Act, 2013 to migrate to the framework of LLP.
At present, CSR spending is mandatory for Limited Companies. Section 135 of the 2013 Companies Act mandates that firms with a net worth of at least `500 crores or revenue of `1,000 crore or net profit of `5 crores are required to spend at least 2% of their average net profit posted during the three preceding financial years on public sanitation, education, the environment, poverty-alleviation and health-care.
Small firms are, though, exempted.
It is pointed out that if private sector HDFC Bank can spend `535.31 crores in 2019-20 on CSR initiatives, what prevents the SBI that has been posting profit even in grim times to invest in CSR projects.
It may be added that Among the large CSR spenders in FY20 were Reliance Industries Ltd ( `908.71 crores), Tata Consultancy Services Ltd ( `602 crores), and ONGC ( `582.35 crores).