Q. With reference to State Finance Commission (SFC) consider the following statements:
1.It is established by the Chief Minister of State every four years.
2.SFCs have not been effective in ensuring rule-based devolution of funds to local governments.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: B
Notes:

Statement 1: Statement is incorrect. The State Finance Commission is set up by the Governor of the state every five years.

Statement 2: As per the recent report of RBI, SFCs have not been effective in ensuring rule-based devolution of funds to local governments. The report also said governments have not set up SFCs in a regular and timely manner.

Source: The Indian Express