New Delhi - Finance Minister Arun Jaitley on Monday nudged banks to think "out-of-box" while doing business and dealing with challenges, even as state-owned banks sought higher capital support from the government and tax incentives for senior citizens parking money in fixed deposits.
In their customary pre-budget meeting with Jaitley, bankers sought full tax exemption for NPA provisioning in view their profitability and demanded a Central Registry for GST registration for banks having branches across the country.
"The current Financial Year is not a conventional year as many major reformative decisions have been taken during the year. There is need for out of box thinking as series of steps are required about what the Government can do and what the banks can do," Jaitley said during the meeting.
Stating that the banking sector is the backbone of our economy, Jaitley said he "does not see any serious challenges as far as structural changes are concerned".
PSU banks on their part suggested that there is need for recapitalisation of banks in the current financial year as well as in the next Financial Year 2017-18.
"Post-demonetisation, liquidity in banks has improved. This may impact saving deposit rates. This makes senior citizens more vulnerable as their income is adversely affected. So, some sort of exemption need to be given to them under the Income Tax Act so that they have a decent income through their deposits," the banks demanded.
Pitching for incentives for digital transaction infrastructure, bankers suggested that there is need for exempting Banking Correspondents transactions from service tax.
It was informed that the overall mood about demonetisation in rural areas, including among farmers, is largely positive.
However, four sectors need special attention. These includes vegetable growers who depend on cash for their day to day dealings and cannot hold their crop for long as it is perishable, transport industry in rural India, and plantations in South.
It was suggested that there is urgent need for special efforts for digitisation of Primary Agriculture Cooperative Societies, Regional Rural Banks and Cooperative Banks to promote digital transactions and e-payments.
Emphasising that dairy sector has huge potential for employment generation, creation a new Dairy Infrastructure Development Fund for the purpose was suggested.
Pitching for use of latest technology in agri sector, bankers also suggested that a Krishi Udyam Nidhi be created for giving a boost to sector-related start-ups and IT applications.
It was also suggested that NABARD also need capitalization of worth Rs 2,500 crore.
After demonetisation, the Budget should focus on boosting the consumption to create demand, bankers demanded.
Finance Bill should mandate that all wages should be paid by the employers through banking channel or digital mode and Urban Local Bodies should be encouraged to collect Property Tax through online means, bankers suggested.
To further incentivise digitial payment, it was suggested that there is need to give some tax rebate to shopkeepers and consumers if they use digital means more than a certain amount.
Citing some of challenges, bankers also pointed out that micro finance sector has seen a little increase in default as most of the people pay in cash and also in SME sector are waiting for the withdrawal limits to be raised to start paying their workers.
Axis Bank representative specifically listed out steps taken by the bank's management against some erring officials and assured the Finance Minister that as a bank, they are fully committed to compliance of banking and government prescribed norms and standards.
To boost demand in the economy, bankers also said that low cost housing needs to be encouraged and ownership of a plot or land is required to avail finance for housing.
With regard to improving internet connectivity, it was suggested that each district may be allotted to a particular telecom company to improve internet connectivity.
Mutual Funds and Life Insurance Companies provide employment to a large number of youths through their distribution network, it was suggested that some sort of incentive should be given to them.
To fight unemployment, bankers suggested that a provision should be made that if a firm, that employ a certain number of people, increases the number of jobs by a certain degree, then 2-3 per cent tax relaxation would be given to it.
As far as the Government's Financial Inclusion drive is concerned, a Venture Fund for members of Scheduled Caste was launched with Rs 200 crore.
Under this, it was informed that 71 proposals have been screened so far. So the Government should continue to provide Rs 200 crore more in next budget. And a similar fund for STs should also be created.
Later in day, Jaitley met economists who believed to have shared their view on impact of demonetisation on economy, inflation and higher governmnent spending in various sector.
For full coverage of Union Budget 2017 click here.
Your guide to the latest election news, analysis, commentary, live updates and schedule for Lok Sabha Elections 2019 on firstpost.com/elections. Follow us on Twitter and Instagram or like our Facebook page for updates from all 543 constituencies for the upcoming general elections.
Updated Date: Jan 13, 2017 21:01:23 IST