FIs ask FM to bring down interest rates

After the three hour meeting, Kotak Mahindra Finance vice-chairman Uday Kotak told reporters that rationalisation of tax structure for Non Banking Finance Companies NBFC and reviving sentiments in the financial and capital markets was also discussed with the minister.

Kotak said focus of the meeting was financial and markets in general along with corporate restructuring, development of mutual fund, venture capital industry and tax rationalisation on mutual fund schemes.

Disinvestment of Public sector units PSUs shares to the retail investors at a discount to market price was also discussed to revive the primary market. quot;We discussed with the finance minister to revive the sentiment in the stock markets by disinvestment of government holding in PSUs at discount and providing various fiscal incentives to the mutual fund industryquot; Bombay Stock Exchange BSE president J C Parekh said.

Parekh said demands were placed to bring down capital gains tax to 10 per cent for domestic investors to have level playing field with foreign investors. Currently foreign institutional investors FIIs pay 10 per cent long-term capital gains tax compared to 20 per cent by domestic investors.

However, he said no specific incentives were demanded for Unit Trust of India UTI schemes. Among other important issues discussed in the meeting were improving the financial health of various financial institutions and tax incentives for infrastructure sector. Revival of investor confidence and development of secondary markets was also discussed.

In order to revive the primary market removal of various entry barriers like continuous dividend track record of three years and action against vanishing companies were discussed. Parekh said providing safety net for public issues and market making was also suggested. Under the safety net, a merchant banker would buy the shares from investors at issue price if the share prices fell below that level.

Today8217;s meeting was attended by UTI chairman P S Subramanyam, ICICI managing director K V Kamath, IDBI chairman G P Gupta, Infrastructure Development and Finance Corporation IDFC chairman Deepak Parekh.

Others who attended the meeting included NSE managing director R H Patil, J M Financial and Consultancy services chairman Nimesh Kampani and primary market expert Prithvi Haldea.

An official release said that FIs sought removal of tax problems arising from ambiguity in respect of certain income tax laws. FIs wanted the housing sector to be promoted taking advantage of the decline in the value of land and steps to be taken to remove the bias against house owner under the existing tax regime.

The benefit of infrastructure bonds should be extended to encourage FIs so as to switchover to a lower interest rate regime. FIs insisted liberalisation of financial sector should be matched by regulation to ensure investor protection. They said fiscal measures alone were inadequate and deterrent action was needed against fraudulent companies to enhance investor8217;s confidence.

Entry barriers should be relaxed so that primary markets can be promoted, FIs demanded at the same time asking for enhanced access to post-issue information by providing access to SEBI and stock exchanges through the website.

Speculators should be discouraged and investors encouraged to mobilise funds for industry. Tax incentives should be provided for investment in mutual funds on the lines of those in the United States.

FIs said anomalies with regard to tax benefits to NBFCs vis-a-vis other FIs should be removed. Tax deduction under Section 88 of it laws be enhanced to Rs 60,000. And, the two per cent interest tax should be abolished.