Budget 2024: The Union Budget is scheduled to be presented by Finance Minister Nirmala Sitharaman on July 23, which is why banking stocks are surging. The market for corporate loans may rise as a result of increased expectations around the potential privatisation of certain public sector banks and new initiatives to increase private capital spending. There is also anticipation that some of the smaller state-owned banks may receive capital infusions from the government.
Infrastructure Push to Enhance Banking Health
Increased funding for infrastructure projects including electricity, roads, urban development, and railroads is seen by analysts as a major strategy to improve the general health of the banking industry and increase credit offtake.
Tax Adjustments on Deposit Interest
The industry also seeks changes to the deposit interest tax, ideally achieving a flat tax rate. Enhancing the appeal of deposit rates has the potential to boost family savings and strengthen bank balance sheets.
Addressing Non-Performing Assets
In order to handle issues with non-performing assets (NPAs), provisioning, and write-offs, recapitalization initiatives are essential. The 2019 Budget unveiled a unique plan around Rs 70,000 crore for bank recapitalization, aimed at supporting Public Sector Banks (PSBs) in strengthening their capital reserves and improving credit availability to the economy.
NBFC Sector’s Wishlist
In order to maintain growth, the Non-Banking Financial Company (NBFC) sector anticipates further digitalization efforts and improved financial inclusion. The industry’s representative, the Finance Industry Development Council (FIDC), has proposed creating a unique refinancing entity for housing finance businesses, similar to the National Housing Bank (NHB).
Potential Impact of Reforms
The banking industry and related sectors may profit if these financial reforms are included in the 2024 Budget because they may boost lending, encourage deposit taking, and accelerate credit offtake. Additionally, privatising some lenders would encourage investors to enter the equity markets and support fiscal reduction.
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