The forthcoming budget, prepared in the backdrop of a new government, low oil price and current account deficit, will be the most historic budget presentation in the Indian economy. Embarking on the path to become a global manufacturing hub through the ‘Make in India’ campaign, the focused approach adopted by the government is laudable. As the current government has been very active on accelerating reforms, fast tracking pending project backlog to put economy back on track since it came to power, we expect a similar pro-growth stance from the government, with focus on forming stronger policies and implementing them in the forthcoming budget.
We envisage that given the significant role played by NBFCs in supplementing the banking industry, the forthcoming budget will strengthen the role of NBFCs in the economy. As financial empowerment through financial inclusion is one of the key mottos of the government, we expect that the budget will have measures directed towards reinstating gold loan under priority sector lending as we believe that gold loans can be a useful tool in achieving the objective of Pradhan Mantri’s Jan Dhan Yojana.
Further, considering the reach of NBFCs to the underserved population, NBFCs should be considered as an integral part of the larger banking system and not as Shadow Banks. Thus, we expect that the sectoral arbitrage may be reduced and the government extends the provisions of SARFAESI Act to good well-run NBFCs as we believe that this reform can totally transform the lending and repayment habits in a large swathe of our country.
In addition, as NBFCs, specially gold loan NBFCs, are purveyors of credit to the sectors where credit gap exists and they facilitate the bottom of the pyramid by providing affordable, adequate and timely credit, measures to have a separate strong regulatory body for this sector may be realistic like NHB for Housing finance companies. This will boost the confidence of the investors as well as lenders and NBFCs will be able to raise funds cheaply which will ultimately result in cheap credit to the poor and needy and thereby, playing a crucial role in implementing many initiatives of the government targeted at financial inclusion of the masses.
Recently, Service Tax on Money Transfer was introduced by the government which is a deterrent for NRIs who remit their funds to India and we expect that in this forthcoming budget, this may be withdrawn fully so as to encourage non-repatriable fund inflow to the country. Moreover, ATM intercharge of Rs 15 per transactions makes the business unvariable for White Label operators and hence we expect that the ATM intercharge may be increased to Rs 20 per transaction. This will encourage putting more ATMs in unbanked areas whereby access to the cards issued under Jan Dhan Yojana project is substantially improved.
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