Budget to have marginal impact on banking

MUMBAI, MAR 6: The budget measures will have a marginal impact on bank profitability, a policy research paper released recently by SBI Ca...

MUMBAI, MAR 6: The budget measures will have a marginal impact on bank profitability, a policy research paper released recently by SBI Capital Markets said. It added that though the budget contained a lot of provisions for the banking sector, many of its demands had not been met.

One positive step, however, is in the direction of asset-quality improvement, for which the budget has provided some tax-deductibility measures for provisioning of doubtful debts, though these are far less than international standards. But this concession is not expected to have any substantial impact given the huge provisioning requirement of banks for bad debts and for standard debts, the report added.

SBI Caps’ policy research paper also said that with no amendments being proposed in the legal framework to quicken the pace of recovery of bad loans of banks – the gross NPAs of scheduled commercial banks have crossed Rs 45,000 crore – these measures and the setting up of new debt-recovery tribunals will remain a half-heartedattempt.

In its impact analysis of the union budget 1999-2000, Crisil Research and Information Service said that though the strengthening of investor interest in mutual funds was not likely to pose a significant threat to inflow of deposits into the banking system, the mutual funds were likely to evolve as significant savings vehicle in the medium-to-long term. The release adds that the gold-deposit scheme may pose a similar threat to some banks who are not in a position to attract such deposits, but the scheme’s cost effectiveness will depend on the movement in gold prices at the time of redemption.