This will be the first year for the Modi government after coming to power in May 2014, when the condition of the country’s banking sector is looking good. Despite Corona, the profit of public sector banks has been increasing continuously for the last three quarters, the bad debt (NPA) situation is seen to be under control, the speed of loan disbursement is also showing signs of increase and cost due to adoption of new technology. There are also signs of happening. In such a situation, the Indian banking sector is not expected to get special financial help in the general budget 2022-23. But the central government can come out more openly about taking forward bank privatization. Preparations are also on to present a complete roadmap for privatization of public sector banks and for this, the roadmap for amendments in the necessary laws should also be put forward. Despite the announcement of privatization of two banks and insurance company in the last general budget The government has not taken even a single step on that.
Banking industry sources say that the government would like to complete the work of privatization of public sector banks or insurance companies during this calendar year itself. Just before the general elections in April-May 2024, the government would not like to give the issue of bank and insurance privatization to the opposition. It is almost certain that the amount that the public sector banks get from the budget every year will not be given this time. It is also possible that the government may try to bring some policy clarity in the budget regarding the entry of big corporate houses in the banking sector. Due to lack of policy clarity in this regard, the road to bank privatization is not going easy. The banks have also submitted a list of their demands to the Finance Minister.
One of the major demands of banks is that over the years the attractiveness of deposit rates has eroded quite rapidly. With the advent of new investment options in the market, attracting further deposits will not be easy. In such a situation, some special steps should be taken to encourage banking deposits and the interest rate payable for tax exemption on home loan should be increased from the existing limit of Rs 2 lakh. Similar demand has also come from the real estate industries. There are indications of special focus on non-banking financial companies (NBFCs) in the upcoming budget.
This is a segment that has been receiving a lot of attention since the start of the Covid pandemic in the year 2020. The government has agreed that it will not be able to reach every person and every village of the country without NBFC. During the last two years, the RBI and the Finance Ministry have helped them in many ways, but right now this sector is not able to play its role according to its potential. Funds are the biggest challenge before NBFCs and there have been discussions within the Finance Ministry in the past on new ways of providing funds to them.