Budget 2024: Banking Sector Awaits Boost from Vote on Account
Banking Sector’s Expectations from Vote on Account
On February of next year, Union Finance Minister Nirmala Sitharaman will present a vote on account for Budget 2024. The banking industry is expecting a boost in existing schemes but unlikely to introduce any major regulatory change. Sitharaman during her recent clarification mentioned that citizens should not anticipate big announcements from the vote on account budget, though reports indicate that government policies would continue with extra speed, providing some booster dose to capital expenditure and maintaining the profitability of state-owned companies and banks after BJP’s landslide victory in three states during the recent state assembly elections.
Industry experts suggest that Budget 2024 may have announcements towards perk up the performance and profitability of Public Sector Banks (PSUs) and allocation for credit guarantee schemes for MSMEs and PLI schemes, and an increment in government subsidies for small businesses.
Budget 2024: Focus on NPA management
The government had earlier expressed interest in the divestment of two public sector banks. However, reports suggest that relatively small banks, like Bank of Maharashtra and Indian Overseas Bank, have been under the government’s scrutiny for privatisation. Nevertheless, Karan Gupta, Director & Head – Financial Institutions, India Ratings & Research added that clarity on the already announced divestment of two PSBs is unlikely without a full budget presentation post the election.
Non-Performing Assets (NPA) management, one of the significant concerns for Indian banks, may also see some significant developments. Also, some suitable policy decisions may be required to boost the activities of the National Asset Reconstruction Company Limited’s (NARCL), created to tackle stressed assets and NPAs. The formation of NARCL and India Debt Resolution Company Limited announced in Union Budget 2021 has seen limited results. A separate institution, the National Bank for Infrastructure Finance and Development (NABFID), was also set up to provide long-term financing for infrastructure segments and needs suitable policies to enhance its effectiveness in achieving its objectives.
Enabling Emerging Fintech Firms and Infrastructure Development
Incorporation of emerging fintech firms with suitable incentives and boosting their role as stakeholders in the financial sector is expected to play a crucial role in credit growth and management. The Budgetary announcements must focus on infrastructure development projects with emphasis on specific segments of sectors as they are likely to boost capital expenditure, which, in turn, can lead to incremental loan growth.
With the upcoming vote on account scheduled in February, it’s essential to note that the banking industry’s expectations from Budget 2024 are to maintain stability, profitability, and strengthen economic growth.
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The material in this article was compiled using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. The completeness and correctness of the material ensured with due diligence. It is required of users of this material to consult the relevant, applicable legislation. The data given may change without prior notice and does not constitute professional advice. As a result, Estabizz Fintech disclaims all liability for the results of using such material.
