The biggest break for banks is the grant of infrastructure status to affordable housing loans and widening the definition of affordable homes. HDFC chairman Deepak Parekh said the status would enable large investors, like the Employees Provident Fund Organisation, to invest in housing. Insurance firms are mandated to put a portion of their funds in infrastructure, and home loan companies are allowed to raise funds through external commercial borrowing against their affordable home loan portfolio.
According to India Ratings, public sector banks will require Rs 75,000 crore of capital to grow 8-9% in FY19.As against this, the tax breaks on setting aside funds for bad loans is only marginal and overall will be negative for PSBs. But while public sector banks will face growth constraints, they will find it easier to deal with bad loans. Also, banks can now get a tax break of 8% on the capital that they set aside towards bad loans as against 7.5% earlier.
In his Budget speech, finance minister Arun Jaitley said, “Listing and trading of security receipts issued by a securitisation company or a reconstruction company will be permitted in stock exchanges. This will enhance capital flows into the securitisation industry and will particularly be helpful to deal with bank NPAs.“
Newly licensed payment banks and small finance banks will stand to gain from digitisation. The government proposes to push banks into installing 20 lakh points of sales devices.
Source : TOI dated 2nd feb