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Budget 2024: Banking sector bats for fiscal discipline, steps to boost credit growth. Here is the wishlist
Budget 2024: Amid a growth spurt and consolidation wave, the banking sector's wishlist prioritises financial stability and economic acceleration.
Ahead of the Union Budget for FY25, to be presented by Finance Minister Nirmala Sitharaman on July 23, India's banking sector representatives, buoyed by recent growth and consolidation, have voiced their expectations from the government. Speaking with Livemint, many banking industry experts emphasised measures for financial stability and economic acceleration.
One key demand is strategic divestment. With public sector bank (PSU) valuations at an all-time high, there's a strong consensus that privatising certain institutions could attract investment and strengthen the financial system. Additionally, there is a clear call for the government to target specific sectors. Measures to stimulate credit growth in underperforming areas like industry, along with incentives for infrastructure and housing project lending, are high on the banking sector's wishlist.
Another common thread is the need to bridge the gap between deposit and credit growth. Banks are advocating for tax relief for depositors, specifically tax breaks on interest earned from deposits. This, they believe, would incentivise consumer savings and provide a much-needed boost to the financial system.
Beyond these specific points, the banking sector seeks continued fiscal discipline. Investing in technological advancements and prioritising job creation through targeted investments are also seen as crucial for a robust and inclusive economic future.
Expert Expectations
Rajeev Yadav, Deputy CEO, AU Small Finance Bank
Rajeev Yadav noted that the revised Union Budget for FY25, set to replace the interim budget of February 2024, is expected to continue the policy focus on prudent fiscal management with a target of achieving a fiscal deficit of 4.5 per cent by FY26. He believes this approach will support macro-stability and help India achieve its goal of becoming a developed nation by 2047.
Yadav underscores five key priority areas:
Reaffirming the commitment to fiscal discipline, which would enhance India's fiscal image and potentially lead to a sovereign rating upgrade, reducing borrowing costs.
Accelerating deposit mobilisation by offering tax incentives for fixed deposits, creating a level playing field for bank deposits.
Increasing technology investment in banking, with potential tax rebates to encourage upgrading technological infrastructure.
Prioritizing job creation to maximise India's demographic dividend, with a focus on government jobs, labour-intensive sectors, and doubling education funding.
Supporting demand-side economic activity through increased allocation for affordable housing and agricultural infrastructure, boosting rural incomes and indirect tax collections.
He concludes that the budget should balance fiscal discipline, inclusive consumption, and incentivising financial savings, private investment, and exports.
Prashant Kumar, MD & CEO, YES BANK
Prashant Kumar sees the Union Budget 2024 as crucial for shaping India's economic future, especially with robust tax revenue collections and a significant dividend from the RBI. He expects the government to focus on sustainable growth, financial sector reforms, infrastructure investment, and inclusive development to achieve 'Viksit Bharat' by 2047.
Kumar believes that maintaining fiscal discipline is essential for economic stability and investor confidence. However, he also emphasises the need for economic growth and adequate social sector outlays to ensure inclusive development. He highlights the importance of skill development, manufacturing sector support, and small business growth. Yes Bank is prepared to support digital infrastructure enhancement and financial inclusion, aligning with initiatives in green mobility, affordable housing, healthcare, and education.
Divyesh Dalal, Managing Director & Head – DBS Bank India
Dalal views the upcoming Union Budget as an opportunity to boost India's MSME sector. He advocates for Production-Linked Incentives, export promotion, digital adoption, tax simplification, and skill development to enhance MSME competitiveness. Dalal hopes for measures to strengthen enterprise resilience and cybersecurity, considering emerging risks. He expresses optimism about continued support for digital adoption, financial inclusion, green policies, market access, and entrepreneurship.
Ramesh Punugu, Global Head of Buy Side Research at Acuity
Punugu highlights the growth and resilience of India's banking sector, especially after the mega-public sector bank mergers in 2020. With PSU banks showing strong credit fundamentals, he expects no budgetary allocation for bank recapitalisation.
He stresses the importance of divestment, given high PSU bank valuations, and suggests privatising IDBI and Yes Bank along with other PSBs to align with SEBI's directive. Punugu also notes the sluggish credit growth to industry and advocates for improved incentive schemes for PLI sectors, higher government focus on infrastructure and SMEs, and expanding eligibility for housing under PMAY. He suggests tax relief for consumers to support deposit growth and consumption.
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Business NewsIndustryBankingBudget 2024: Banking sector bats for fiscal discipline, steps to boost credit growth. Here is the wishlist
First Published:19 Jul 2024, 07:56 PM IST
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