New Delhi: Over 20 representatives of the financial sector, who met with finance minister Pranab Mukherjee on Friday as a part of the government’s pre-budget consultations with stakeholders, identified raising resources for infrastructure lending as a challenge and asked for tax incentives to direct household savings into long-term financial instruments.
“For long-term products they should come out with something special under section 80C (of the Income-tax Act),” J. Hari Narayan, chairman of Insurance Regulatory and Development Authority, the country’s insurance regulator, said after meeting the finance minister.
Section 80C allows investments in designated avenues of savings, subject to a limit of Rs1 lakh, to be deducted from an individual’s total taxable income. Therefore, tax is levied on a smaller income.
Policy watch: Pranab Mukherjee. Ramesh Pathania / Mint
Bankers, insurers, mutual funds, non-banking finance companies (NBFCs) and insurance and pension regulators attended the meeting. Bankers present included O.P. Bhatt, chairman of India’s largest bank, State Bank of India (SBI), and Chanda Kochhar, CEO of ICICI Bank Ltd.
In addition to tax incentives for long-term savings, all sections of the financial sector also asked the finance minister to take steps to strengthen India’s bond market, said Raman Aggarwal, director of Association of Leasing and Financial Services Companies, the industry body for NBFCs.
Other than common demands, different segments of the financial sector put forth individual demands.
Uday Kotak, managing director of Kotak Mahindra Bank Ltd, said he had requested Mukherjee to accept the recommendations of the Raghuram Rajan Committee’s (report on financial sector reforms) proposal on financial services holding companies.
Kotak heads a business group with interests across the financial sector, including insurance and mutual funds, each of which has an separate regulator. Kotak was also a member of the Raghuram Rajan committee.
The Rajan committee in its September 2008 report proposed the government allow holding company structures with the parent holding company owning regulated subsidiaries. The holding company would be supervised by a Financial Sector Oversight Agency, and each of the subsidiaries by the respective regulator.
Bankers had also asked enhanced tax deductions when they made provisions for non performing assets (NPAs), Kotak said.
According to Aggarwal, the NBFC industry asked Mukherjee to include them in the Securitization and of Financial Assets and Enforcement of Security Interest Act, (Sarfesi), 2002, which would give them greater leeway to take over assets of borrowers who default.