Nirmala Sitharaman holds pre-Budget consultations
The interaction was part of the finance minister’s pre-budget consultations with stakeholders of various sectors. The Budget for 2019-20 is scheduled to be presented on July 5.Updated: Jun 14, 2019 07:11 IST
Financial sector and capital market experts on Thursday suggested that finance minister Nirmala Sitharaman review interest rates on the government’s small savings schemes and create a dedicated liquidity window for non-banking financial companies (NBFCs) to make cheaper loans available to industry that can boost investments and accelerate growth.
Commercial banks are unable to compete with the government’s small savings schemes such as post office deposits, National Saving Certificates (NSC), Public Provident Fund (PPF) and Sukanya Samriddhi that offer 8% interest, which is higher than rates offered by bank fixed deposits and savings account deposits (ranging between 4% and 7.35% depending on tenure and scheme), government and industry officials present in the meeting said requesting anonymity.
The interaction was part of the finance minister’s pre-budget consultations with stakeholders of various sectors. The Budget for 2019-20 is scheduled to be presented on July 5.
Earlier, speaking at a meeting of the Confederation of Indian Industry (CII) in New Delhi on June 3, Kotak Mahindra Bank MD and CEO Uday Kotak had said that more than liquidity, the high price of liquidity was the major issue. Banks could not offer cheaper loans because of high costs of deposits, mainly to remain competitive in the same market where small savings deposits are more attractive, officials quoted above said.
With a view to give a boost to the market, the stakeholders submitted several suggestions, including infusion of capital in niche and regional banks and enhancing the role of the Financial Sector Development Council. They also suggested that the government review banking non-performing assets (NPAs) provisions by setting-up a committee, enhance financial literacy programmes, set up Debt Exchange Traded Fund and incentivise agricultural marketing.
SBI chairman Rajnish Kumar said a lot of suggestions had come regarding infrastructure financing, reviving the economy and what tax benefits could be given for encouraging investments in the micro, small and medium enterprises (MSMEs). Besides Sitharaman, the meeting was attended by minister of state for finance Anurag Thakur and senior finance ministry officials.
Sitharaman held another pre-budget consultation with stakeholders of climate change and infrastructure sector in the evening. The discussion revolved around issues relating to the need for more capital requirement to boost infrastructure sector and incentives for electric vehicles, a statement issued by the finance ministry said.
“With an eye on creating sustainable and stable opportunities, suggestions... included containing the rising cost of infrastructure projects, rationalisation of various levies in infrastructure sector, introduction of tax-free bonds to boost investment, streamlining of land acquisition process, creation of Green Technology Acceleration Fund, incentivising domestic manufacturing of solar energy equipment, fiscal incentives for development of Electric Vehicles industry, user development fee for up-gradation of railway stations, inclusion of telecom towers in plant and machinery category for GST purposes, promotion of non-fossil fuel based energy, redevelopment of wasteland and greater emphasis on recycling/up-cycling of waste material, imparting Infrastructure Status to Renewable Energy sector, provisions related to scraping of old vehicles and incentivising higher investment in R&D in automobile sector among others,” the statement said.