What are the three things you wish for from the Budget?
Banking has been the hub of the economic activity taking place in the economy. In recent times, banks’ role of financial intermediation is witnessing intense competition from domestic and international banks as also from post offices/mutual funds in garnering resources from the household sector. There is scope and need for a level playing field. Mutual funds have the privilege of accepting deposits under the tax saving scheme (section 80C) with a lock-in period of three years; for banks, the same is five years. There should be a uniform three-year lock-in, with loans allowed against these deposits, which should also be TDS-exempt.
Prior to 2004-05, interest from bank deposits, etc., was allowed as annual deduction up to Rs12,000 under section 80L of the Income-tax Act. This was withdrawn by the Finance Act, 2005, making bank deposits less attractive.
Infrastructure projects aimed at development of the irrigation system and the reclaimed land should form part of priority sector lending. Reintroduction of section 10(23)(g): Under the erstwhile section 10(23)(5), banks were allowed to claim the interest earned on long-term lending on infrastructure industries as an allowable deduction. This section helped in channelling the investment/credit to infrastructure sector. The tax benefits available to the banks were taken into account while fixing the interest rate on advances for such infrastructure projects. The deletion of this section has not only resulted in a fall in interest income due to application of finer interest rates but also more tax liability.
If you could end one thing, what would that be?
While preparing the budget, the finance minister and his team obviously take an overall view of the performance of various sectors of the economy—the problems and hurdles faced by the sectors in their growth process and how these sectors support the overall growth of the economy. Of late, the focus has justifiably been on development of infrastructure and education in line with the need of the times. I am, therefore, of the opinion that the provisions in the budget are in sync with the need of the country and no item could be singled out which can be done away with in one go.
If you were finance minister, what would be the one thing outside your industry you would want in the Budget?
Extending the net of service tax to more number of services, encouraging microfinance institutions as a tool to reduce rural indebtedness and increased outlay for education towards bringing about 100% literacy in the country.
What is the one thing, you don’t want to change?
Corporate tax may be kept at the same level with a view to stimulating growth in the economy.
Which budget disappointed you most?
In a way, none of the budget disappointed me so far, as each budget sets its own focus and growth dimension.
One proposal you think is shot down in every budget but shouldn’t be?
I do not find any proposal of the public and institutions/forums which has not been considered consistently in the budget. That way it should be conceded that our finance minister has been quite responsive to the demands of every section of the society/sector in a balanced manner.
What would you consider to be inclusive growth?
Inclusive growth means the benefits of growth permeate to the lowest strata of the society for economic upliftment of the downtrodden sector. Financial inclusion is including the unbanked population of our society by making available all the banking facilities to them. This means not just opening banking account or providing insurance/credit but sustained capacity build-up. This will in the long run facilitate mass contribution to economic growth. As suggested by the Rangarajan committee, all bank branches should contribute and speed up financial inclusion within a short time frame.
M.S. Sundara Rajan is chairman and managing director of Indian Bank.
By Vidhya S.