The Union Budget, though does not have direct measures for the banking sector, the measures to boost consumption are likely to benefit the sector, bankers said.
“Banks have been enjoying higher credit growth phases over the last six to nine months. The capex investment of the government will percolate down directly or indirectly, which will ultimately get funded by the banks. On the consumption side, lower taxation for the middle class increases the propensity for additional consumption which can be propelled by cash or credit. On both aspects there could be support for credit growth,” said Rajeev Yadav MD & CEO, Fincare Small Finance Bank, said at an ETBFSI panel discussion on the Budget
Housing boost
The increase in the allocation for PM Awas Yojana by 66 per cent to Rs 79,000 crore is seen as a positive for the affordable housing loan portfolio. The relaxation of income tax slabs is also expected to provide more disposable income for the common man, which could lead to growth in the affordable homes sector. The creation of an Agriculture Accelerator Fund is expected to improve banks’ understanding of the farm sector while the targeted Rs 20 lakh crore agriculture credit from the banking sector is also expected to improve credit pick-up.
Higher capital outlay
The Budget proposes to increase the capital investment outlay by 33 per cent to Rs 10 lakh crore, which is nearly three times the outlay in 2019-20. The decision to extend the 50-year interest-free loan to state governments for another year is expected to spur investment in infrastructure and provide a push for credit growth. The increased investment limits across various small savings instruments and the improved tax regime could result in increased competition for deposits.
The Budget provides a boost to the business activities in the GIFT City by allowing acquisition financing by international financial services centre units of foreign banks and allowing carry forward of losses on strategic disinvestment. This will expand opportunities in GIFT City and aid the banks doing business there.
