In a pre-Budget meeting with finance minister Arun Jaitley on Tuesday, heads of banks and financial institutions suggested the government to postpone fiscal deficit reduction roadmap to boost public investment. Bank also sought significant tax breaks from the government to promote savings.
With private investment growth remaining weak, bankers sought higher government spending to boost growth, while higher savings would in turn lead to pick in investment activity. “Everybody was of consensus that public expenditure is necessary and if that is necessary then a balance will have to be done between fiscal deficit and expenditure, and may be it (fiscal consolidation) has to be delayed,” HDFC Bank managing director Aditya Puri said.
The government plans to reduce fiscal deficit to 3.9 per cent of gross domestic product by end March.
To promote savings, banks pitched for reducing maturity period for tax-free term deposit to 1 year. They also suggested increasing tax exemption limit on savings to Rs 2.5 lakh per annum from Rs 1.5 lakh per year at present, finance industry development council chairman Raman Aggarwal said.
“One major point that came out of the meeting was that overall savings in our country needs to be increased much further through a series of actions,” Yes Bank managing director Rana Kapoor
Banks suggested increasing interest income of up to Rs 50,000 should be exempt from levy of tax deducted at source (TDS), as against the current ceiling of Rs 10,000.
“The major suggestions included increase in exemption limit to Rs 2.5 lakh for savings under the Income Tax Act, incentives for encouraging cashless transactions including through debit/credit cards, focus on promoting growth and increase in public spending till private sector investment picks-up,” the finance ministry said in a statement.
Suggestions were made for listing of non-life insurance public sector undertakings while retaining majority government control, and allowing banks to issue off-shore rupee bonds for funding infrastructure sector, the finance ministry said.
The ministry said banks and financial institutions also argued direct benefit transfer of fertilizer subsidy to the farmers.