Saturday , February 16 2019

Banks eyeing big-ticket reforms in Budget

Banks are guessing a hike in FDI limit for public sector investors to 49 percent and additional capital infusion to lift credit growth.


New Delhi: Banks expect Finance Minister Arun Jaitley to declare a slew of measures for the sector in Budget 2017-18, plus a hike in FDI limit for public sector moneylenders to 49 percent and extra capital infusion to boost credit growth, giving to a report.

The Ficci-IBA Survey of Bankers, which included responses from 17 public, private as well as foreign banks representing 52 percent of the whole banking industry by asset size, said that the creditors witnessed a slowdown in credit demand owing to the cash crunch post demonetization which led to lower feasting.

However, many defendants expect credit demand to improve after 3-6 months as economic activities are expected to pick up by that time. On the other hand, flush with liquidity, a majority of banks (82 percent of those questioned) reported a growth in their low cost CASA securities during the period July-December 2016.

In fact, 53 percent of the defendant banks reported a substantial increase in CASA deposits and accredited the same to demonetization, besides their own efforts to mobilize opening of savings account.

Notably, in the prior survey round, only 25 percent of defendants had reported a significant increase, while 50 percent had testified a moderate increase in such credits.

Creditors trust on hike in foreign direct investment (FDI) limits for state-owned banks (from 20 percent to 49 percent) will help in levitation on further capital and thereby meeting capital requirements below Basel-III norms.

In the Budget, banks also suppose to the government to boost consumption demand and investment through reduction in corporate as well as personal income tax, and by providing extra deductions under section 80C and interest on home loans.

With a push on less-cash economy, banks are also eyeing extra incentives for digital transactions, with tax benefits for clients as well as wholesalers. They have also urged for enhancing capital expenses, particularly for infrastructure. Other key suggestions include procedures to fast-track NPA resolution, creation of a Central Corporate Repository and attentiveness payment on CRR balance.

Banks also felt interest subsidy for farm loans should be parked with them in advance, as it takes 7-8 months for settlement of claims, leading to interest loss. They also want the government to publicize extra tax incentives for customers on term deposits, such as reduction in lock-in period for tax saver fixed securities, and rise in tax exception limit for interest income from term securities.

The survey exposed that iron and steel, substructure and textiles continue to account for a large attentiveness of non-performing properties (NPAs). Complete, the number of banks reporting a growth in the level of NPAs is lower in the present round of the survey as against the previous round.

While 76 percent of the participating banks described that a rise in the level of NPAs during July-December, 85 percent had reported so for the previous six month period. Going forward, the key sectors recognized by banks which could see a greater demand for long-term credit include infrastructure, automobiles and food processing.


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