New Delhi, December 21: The Finance Minister today chaired a pre-budget consultative meeting for the financial year 2017-18. The meeting was attended by top economists in the country along with the top brass of the Finance Ministry including Minister of State Arjun Ram Meghwal and the Secretary of Finance. The key issue that was brought up at the meet seems to have been the banking sector in India.
The Finance Minister further said that the banking sector is the backbone of our economy. He said that 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. He said that he doesn’t see any serious challenges as far as structural changes are concerned.
After discussion, suggestions were given by the representatives of the Bankers and FIs for consideration by the Government. The bankers, suggested special efforts for digitization of primary agriculture cooperative societies, regional rural banks and co-operative banks to promote digital transactions and e-payments. It was also suggested that there is need for recapitalization of banks in the Current Financial Year 2016-17 as well as in the next Financial Year 2017-18. There is need for Full Tax Exemption for NPA provisioning by the banks keeping in view their profitability.
The bankers said that liquidity in banks has improved post demonetization, but this could impact saving deposit rates. This makes senior citizens more vulnerable as their income is adversely affected, the bankers said, suggesting that some sort of exemption need to given to them under the Income Tax Act.
After demonetization, the Budget should focus on boosting consumption to create demand, the bankers said, adding that one way to achieve this was by encouraging low-cost housing by relaxing the rules. At the moment, “the digital acceptance infrastructure is loss-making,” the bankers informed Mr. Jaitley, suggesting that there need to be incentives for this in the Budget.
Many shopkeepers don’t sell using digital means as they do not want to pay taxes. So there is need to give some tax rebate to these shopkeepers to use digital means and for better compliance. Same way, consumer may also be given a tax rebate at the yearend if his digital purchase is more than a certain amount. Micro Finance Sector has seen a little increase in default as most of the people pay in cash.
In digital payments, issues of internet connectivity are there. Hence, 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. Some sort of incentive should be given to them. To fight unemployment, 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. This directly links tax rates with job generation.