Banks demand cut in lock-in period for tax-saving deposits

New Delhi: Bankers today demanded that lock-in period for tax saving deposits be brought down to three years from five years to channelise more funds into the banking sector.

In a pre-budget consultation with Finance Minister P Chidambaram, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business.

"Tax saving bonds are already there (with banks), tax saving deposits are already there. So there was a requirement that this lock-in period should be reduced from five years to three years on the tax saving deposits to bring it in line with tax saving ELSS (equity linked saving schemes)," SBI Chairman Pratip Chaudhuri said.

Referring to capital markets, Chaudhuri said the domestic investor is not keen at equity market

He was talking to reporters after the meeting of bankers with the Finance Minister.

"Some of the banks...made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects," he said.

Bankers who attended the meeting include, Indian Overseas Bank CMD M Narendra, UCO Bank CMD Arun Kaul, Punjab National Bank CMD K R Kamath, ICICI Bank MD Chanda Kochhar, Axis Bank MD Shikha Sharma and Chairman of HDFC Ltd Deepak Parekh. Besides, RBI Deputy Governor K C Chakrabarty also attended the meeting.

On gold imports, the bankers said the import was also connected to jewellery exports and any efforts to bring down the inbound shipments would affect jewellery exports.

"Any restriction on gold import should be done carefully and in a calibrated manner because gold import has also a correlation with jewellery export," Chaudhuri said.

Referring to capital markets, Chaudhuri said the domestic investor is not keen at equity market.

"Domestic savings are going for gold and foreign capital is being brought for equity market. So these issues needs to be looked at," he added.

He further said banks suggested that either Security Transaction Tax (STT) should be abolished on equity market or Commodity Transaction Tax (CTT) should be imposed on commodity trading to attract investment in the capital market.

"...much of the money which could have been invested in the stock market is now going into this commodity market. Either you have a commodity transaction tax or you abolish the STT," he said.

Bankers also demanded tax benefits on certain categories of non-performing assets (NPAs) provisioning.

"So for the banks we have asked whatever is the provisioning done as per RBI norms and as certified and approved by the auditors should be allowed as tax deducted," the SBI chief said.

The bankers also suggested that something should be done to incentives and promote the electronic component and goods industry as has been done for the auto component industry.

After crude oil and gold, the biggest item of foreign exchange outgo is electronic component.

While external commercial borrowings (ECBs) are available for import of capital goods, the window is not there if procurement is done from the domestic manufacturer, which is making the the domestic capital goods industry uncompetitive, bankers said.


Updated Date: Dec 20, 2014 15:08 PM

Also Watch

IPL 2018: Royal Challengers Bangalore eye revival against Chennai Super Kings as 'Cauvery Derby' comes back to life
  • Thursday, April 26, 2018 In the Kanjarbhat community, a campaign against 'virginity tests' is slowly gaining ground
  • Tuesday, April 24, 2018 It's A Wrap: Beyond the Clouds stars Ishaan Khatter, Malavika Mohanan in conversation with Parul Sharma
  • Monday, April 9, 2018 48 hours with Huawei P20 Pro: Triple camera offering is set to redefine smartphone imaging
  • Monday, April 16, 2018 Rajyavardhan Singh Rathore interview: Sports can't be anyone's fiefdom, we need an ecosystem to nurture raw talent

Also See