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Business News/ Budget / Budget Expectations/  Budget 2024: Here is what the banking sector expects from vote on account

Budget 2024: Here is what the banking sector expects from vote on account

Budget 2024: Union Finance Minister Nirmala Sitharaman will present a vote on account in February next year. Though it is unlikely to introduce any major regulatory tweaks, the banking industry is looking for some boost to existing schemes

Union Finance Minister will present the vote on account budget in February next year. (PTI)Premium
Union Finance Minister will present the vote on account budget in February next year. (PTI)

The landslide victory of the BJP in three states in the recent state assembly elections is considered an indication of the voter mood for the upcoming Lok Sabha Elections. The increased confidence of the central government is likely to be reflected in the upcoming Union budget in February 2024, where there can be announcements to perk up the performance and profitability of PSU banks, industry experts say.

As the year 2024 is the election year, the government will present a vote on account in February. The full budget will be presented after the elections. 

Recently, Finance Minister Nirmala Sitharaman clarified that the citizens should not expect big announcements from the vote on account budget. However, most market experts believe that government policies would continue with extra speed. There is also the possibility of some announcements to maintain the profitability of state-owned banks. 

“Though, it would be a vote on account, but focus on infrastructure expenditure and maintaining the profitability of state-owned companies and banks may get some booster dose when the Union Finance Minister Nirmala Sitharaman presents her vote on account in the parliament," said Avinash Gorakshkar, Head of Research at Profitmart Securities.

In addition to agreeing with the popular opinion that the interim budget is unlikely to make big changes, Rakesh Kaul, CEO, of Clix Capital, believes that “a little favourable tweak to the existing policies can ensure sustaining the growth of the Indian economy."

An enhanced focus on credit guarantee schemes for MSMEs and PLI schemes and, an increment in government subsidies for small businesses can also be expected, according to Kaul. 

Budget 2024: Focus on NPA management

Industry specialists are also eyeing some announcements related to non-performing asset (NPA) management. Once a big nightmare for Indian banks, NPAs have come down significantly in the past few years. However, experts believe that there is a need to do more to clean up stressed assets.

“NARCL (National Asset Reconstruction Company Limited) was created to tackle the issues of stressed assets and NPAs. However it has seen only limited success so far and suitable policy decisions may be required to boost its activities," said Jyoti Prakash Gadia, Director at Resurgent India.

To deal with the NPA menace, the finance minister announced the formation of NARCL and  India Debt Resolution Company Limited (IDRCL) in the Union Budget 2021.

“Similarly a separate institution was set up for infrastructure financing viz NABFID (National Bank for Infrastructure Finance and Development), which has also shown limited results as yet and needs to be suitably pepped up," he added.

NABFID (National Bank for Infrastructure Finance and Development) was set up with the intent to provide long-term finance for infrastructure segments.

Clarity on divestment of PSBs

In previous budgetary announcements, the government had expressed interest in the divestment of two public sector banks. According to media reports, relatively small banks like Indian Overseas Bank, Bank of Maharashtra, etc have been under the government’s scrutiny for privatisation. However, there has been no official update on the matter.

“We expect clarity on the already announced divestment of two PSBs," said Karan Gupta, Director & Head - Financial Institutions, India Ratings & Research, adding that announcement is unlikely in the interim budget set to be presented in February.

“Privatisation of a few banks was earlier hinted at through the budgetary announcement, but the same seems to have been put on the back burner. The issue may get some concrete shape in the future budget," notes Gadia.

According to Gupta, budgetary announcements on infrastructure projects with a focus on certain sectors could help in boosting capital expenditure. This, in turn, will boost loan growth. 

Underlining the emerging role of fintech firms in credit growth, Gadia said, “Fin-techs are emerging as important stakeholders in the financial sector and their role needs to be boosted with suitable incentives for them."

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Published: 08 Dec 2023, 09:22 PM IST
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