Financial sector seeks flexibility in NBFC standards, sustained credit flow
CII chairman TV Narendran said the upcoming budget should “continue the push for growth and reform, and ensure fiscal and political stability.”
Finance Minister Nirmala Sitharaman on Thursday held virtual pre-budget consultations with representatives of the financial sector and capital markets, who submitted a range of proposals, including the need for flexibility while regulating non-bank financial companies ( NBFC).
Sustained credit flows to critical sectors of the economy, a structured development of the corporate bond market and the need for parity between banks and shell lenders in certain tax provisions were also at the heart of the consultation meeting. .
Earlier today, the Minister of Finance met with industry bodies and experts on infrastructure and climate change, some of whom have suggested the government must remain focused on sustaining an economic growth rate of more than 8% in the coming years. Government officials expect double-digit growth for fiscal 22.
On Friday, the Minister will hold consultations with representatives of the trade and services sector in the morning; and with a second group of representatives of industry organizations and experts in infrastructure and climate change in the afternoon.
Amid increased central bank efforts in recent months to harmonize regulations for all lending institutions, the Financial Industry Development Council (FIDC), a shadow banking body, said that regulating NBFCs like banks would damage the “typical NBFC lending model”. , most of whose beneficiaries are “the unbanked and underbanked segments of society”.
At the same time, there is a need to extend to NBFCs the more attractive tax and collection arrangements currently enjoyed by banks. For example, while large banks are exempt from withholding tax (TDS) on their interest income, NBFCs do not get this exemption, analysts said.
CII chairman TV Narendran said the upcoming budget should “continue the push for growth and reform, and ensure fiscal and political stability.” “This will help to firmly anchor the nascent signs of recovery currently seen in private investment,” he said, adding that the increase in government capital spending must continue.
To help Indian industry to better integrate into the global value chain, it has been suggested that the government adopt a roadmap to bring the import duty slabs to a competitive level over a period of 3 years. – slab at the lowest duty or zero for raw materials, 2.5-5% for intermediate and final products in the standard slab with the exception of a few products only.
Assocham Chairman Vineet Agarwal called for the introduction of a Vivad Se Vishwas-type program, which has helped reduce litigation in the areas of taxation, customs, telecommunications, mining, l electricity and other sectors as well. There are many legacy court cases in these areas, often arising from the interpretation of regulations / policies. Taking into account the imposition of interest rates and penal penalties, by the time these cases are decided, the amounts owed could become 5 to 6 times the principal amount in dispute, Agarwal said.
Some speakers suggested that the government should develop the municipal bond market so that local urban organizations can raise funds to invest in infrastructure with a high multiplier effect.
IFCD Director Raman Aggarwal said retail credit to individuals and small businesses provided by NBFCs should be treated differently from loans to large businesses.
In a Nov. 12 circular, the RBI said the date of the NPA classification of borrower accounts applicable to all loans, including retail loans, regardless of the size of the institution’s exposure. credit, will reflect the asset classification status of an account on the day-end of that calendar date.
The economy is recovering from the shocks induced by Covid and is expected to grow 8.7% to 10.5% in the current fiscal year. A massive credit surge is therefore needed for companies to run smoothly and begin to expand, some stakeholders argued.
Non-food bank credit growth accelerated to 6.9% in October, from 5.2% a year earlier. However, credit to industry grew only 4.1% in October, even on a contracted basis.
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