In a meeting with Finance Minister Nirmala Sitharaman ahead of the presentation of the Union Budget next month, banking and financial sector players pitched for the need to set up a dedicated liquidity window for NBFC sector to contain the stress in the market.
Easing of norms relating to provisions that banks need to make against expected loan losses, review of interest rates on small savings for better transmission of policy rate cuts, and tax incentives to boost retail participation in term insurance and bonds were among the suggestions made by market players to the Centre. Financial and capital markets players also recommended enhanced role of Financial Sector Development Council (FSDC), the setting-up of debt Exchange Traded Fund and the need to distinguish between solvency and liquidity issues of the NBFC sector.
The Union Budget for 2019-20 is scheduled to be presented on July 5. “(The meeting) discussed how to enhance investor participation in corporate bond market. At present retail investors invest through mutual funds. If some tax benefits can be extended to retail investors also, just like it has extended to mutual funds, they would benefit and corporate bond market,” IDBI Bank CEO and MD Rakesh Sharma said after the meeting. Insurance Regulatory and Development Authority of India Chairman Subhash Chandra Khuntia said that he suggested additional tax incentives for term plans to encourage investments, like in the case of National Pension Scheme (NPS). Industry heads also suggested review of banking NPAs provisions through setting-up a committee, domestic capability building in audit and credit rating and rationalisation of various taxes like Security Transaction Tax (STT) in capital market. Even as the Reserve Bank of India has issued a revised circular on framework for resolution of stressed assets, banks are seeking certain relaxations in provisions norms against likely loan losses.
The idea of setting-up of a separate bond exchange was also mooted. Currently, listed bonds are traded on the National Stock Exchange and BSE. “A lot of suggestions have come regarding infrastructure financing, reviving the economy and what tax benefits can be given for encouraging investments in MSME, and exports,” said State Bank of India Chairman Rajnish Kumar. Allowing banks to invest in InvITs (infrastructure investments trusts) to access broader market and reduction in the corporate tax rate were among other suggestions. Apart from the Finance Minister, the meeting was attended by Minister of State for Finance Anurag Thakur and top bureaucrats of the ministry.
Punjab National Bank MD and CEO Sunil Mehta said the issue of capital infusion in the public sector banks was not discussed. “It was a wide consultation with the stakeholders (which can be taken into the Budget preparations),” said Mehta, who is also Chairman of Indian Banks’ Association. Apart from heads of banks and financial institutions, Reserve Bank of India Deputy Governor NS Vishwanathan, Securities and Exchange Board of India Whole Time Member G Mahalingam also attended the meeting.