Tag: union budget

Centre to amend banking laws to facilitate privatisation of two PSU banks, BFSI News, ET BFSI

Banking & Finance

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To facilitate privatisation of two public sector banks (PSBs), the government is all set to introduce a banking laws amendment bill in the upcoming winter session starting Monday. Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this year had announced the privatisation of PSBs as part of disinvestment drive to garner Rs 1.75 lakh crore.

The Banking Laws (Amendment) Bill, 2021, to be introduced during the session is expected to bring down the minimum government holding in the PSBs from 51 percent to 26 percent, sources said.

However, sources said a final call in this respect would be taken by the Union Cabinet when it would vet the proposed legislation.

“To effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two Public Sector Banks,” according to the list of legislative business for the Winter Session.

These Acts led to the nationalisation of banks in two phases and provisions of these laws have to be changed for the privatisation of banks, sources said.

In the last concluded session, Parliament passed a bill to allow privatisation of state-run general insurance companies.

The General Insurance Business (Nationalisation) Amendment Bill, 2021, removed the requirement of the central government to hold at least 51 per cent of the equity capital in a specified insurer.

The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to better serve the needs of the economy by securing the development of general insurance business.

Government think-tank NITI Aayog has already suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatisation.

According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for the privatisation.

As per the process, the Core Group of Secretaries, headed by the Cabinet Secretary, will send its recommendation to Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.

The members of the Core Group of Secretaries include economic affairs secretary, revenue secretary, expenditure secretary, corporate affairs secretary, legal affairs secretary, Department of Public Enterprises secretary, Department of Investment and Public Asset Management (DIPAM) secretary and an administrative department secretary.



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UCO Bank out of PCA, will RBI blink in case of IOB, Central Bank?, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) has removed UCO Bank from its Prompt Corrective Action Framework (PCAF) but the fate of Central Bank and Indian Overseas Bank hangs in balance.

The central bank lifted the PCA on Uco Bank following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital.

However, RBI had reservations over the capital adequacy levels of the banks under PCA.

Interestingly, Indian Overseas Bank and Central Bank were reported to be among the four banks shortlisted by the government for privatisation.

The RBI objection

In FY21, the government infused Rs 20,000 crore in ve banks through the instruments. Central Bank of India was the biggest beneficiary with Rs 4,800 crore, followed by Indian Overseas (Rs 4,100 crore), UCO Bank (Rs 2,600 crore).

However, the RBI had raised questions over the government’s bank capital infusion programme through non-interest-bearing bonds, according to a report.

The RBI reasoned that capital infusion through bonds cannot be taken at face value and, therefore, these banks may still be short of regulatory capital, they said. In such a situation, they will continue under the PCA framework. Under the PCA regime, business restraints are imposed on struggling banks until they regain health.

The government went ahead despite RBI’s initial reservations and now the regulator had expressed serious concerns. The entire fund infusion through such bonds will then not count toward regulatory capital.

RBI is not inclined to pull these lenders out of the PCA framework based on such capital infusion and may further direct lenders to recalculate their capital adequacy ratio based on the actual value of the bonds.

The PCA status

Indian Overseas Bank, Central Bank have reported net non-performing assets (NPAs) below levels that trigger PCA. However, on the proforma net NPA front, Central Bank falls short as its NNPA is 6.58% against the 6% required to be out of PCA.

Even after PCA exit, these banks may still be under RBI watch. In the case of IDBI Bank, which has committed to comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, RBI has said the lender would be under continuous monitoring. “It has been decided that IDBI Bank be taken out of PCA framework, subject to certain conditions and continuous monitoring,” RBI had said.

Privatisation bid

Four banks on the privatisation shortlist included Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India.

Two public sector banks and one general insurance company are expected to be disinvested this year in addition to the divestment of IDBI Bank, Finance Minister Nirmala Sitharaman had announced during the Union Budget presentation.

Bringing the banks out of PCA could boost their valuations in the event of privatisation.



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Bad bank incorporated in Mumbai, RBI licence likely soon, BFSI News, ET BFSI

Banking & Finance

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The bad bank, which was proposed in the Union Budget this year, is moving fast to start operations.

The bad bank was registered as National Asset Reconstruction Co Ltd on July 7 with the Registrar of Companies, Mumbai with a paid-up capital of Rs 74.6 crore.

Lenders now plan to approach the Reserve Bank of India for a licence to start operations of the national asset reconstruction company, or bad bank, which was incorporated recently.

Taking shape

State-owned Canara Bank will be the lead sponsor of National Asset Reconstruction Company Limited with a 12 per cent stake in the entity.

The bad bank will be headed by Padmakumar Madhavan Nair, a stressed assets expert from the State Bank of India (SBI), as the managing director. Indian Banks’ Association chief executive Sunil Mehta, SBI deputy managing director Salee Sukumaran Nair and Canara Bank’s representative Ajit Krishnan Nair are the other directors of the bad bank.

Nair has been picked up for the CEO post of the proposed bad bank NARCL as he has a long exposure of handling resolution of stressed assets, they said. He will be joining the company on deputation basis for the moment.

Banks have identified 22 bad loans totalling Rs 89,000 crore to be transferred to the NARCL in the initial phase.

The State Bank of India plans to transfer bad loans worth around Rs 20,000 crore to the bad bank.

The Budget announcement

Finance Minister Nirmala Sitharaman in the budget for 2021-22 had announced that an asset reconstruction company or a bad bank would be set up to consolidate and take over existing stressed assets of lenders and undertake their resolution. Bad bank refers to a financial institution that takes over bad assets of lenders and undertakes resolution.

The new entity is being created in collaboration with both public and private sector banks. Sitharaman in the Budget 2021-22 had mentioned that the high level of provisioning by public sector banks of their stressed assets called for measures to clean up the bank books. “An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech. It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation, she added. National Asset Reconstruction Company Ltd (NARCL) will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

Government guarantees

The government guarantee would be invoked if there is a loss against the threshold value. Last year, Indian Banks’ Association had made a proposal for the creation of a bad bank for swift resolution of non-performing assets (NPAs). The government accepted the proposal and decided to go for the asset reconstruction company (ARC) and asset management company (AMC) model for this. The Reserve Bank of India has said that loans classified as fraud cannot be sold to NARCL. As per the annual report of the RBI, about 1.9 lakh crore of loans have been classified as fraud as of March 2020.



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Central Bank, IOB may be taken up for privatisation, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: The Centre may sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation initiative unveiled in the Union Budget in February.

While the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) may be a potential candidate for sale, sources familiar with the deliberations told TOI.

The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation.

While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.

Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.

Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas.

The Cabinet recently cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two staterun entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.

The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.

Among the dozen staterun lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.

It, however, was of the view that the better off entities would attract greater interest, resulting in the shortlisting of IOB and Central Bank. Based on the current share price, the two entities are together valued at around Rs 44,000 crore with IOB’s market cap estimated at Rs 31,641 crore.



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Bank unions threaten with aggressive protest against privatisation move, BFSI News, ET BFSI

Banking & Finance

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Bank unions across India have not yet given up and in order to support their stance against the proposed privatisation of some state-run banks, they have made threats of holding more strikes against the Union government. This comes after the general council meeting of the All India Bank Employees’ Association (AIBEA) on Sunday.

“The general council meeting has called upon all our unions and members all over the country to continue the struggle against bank privatisation, get ready for prolonged strikes and intensify our campaign to defend public sector banking and defeat attempts of privatization,” the union said in a statement.

FM Niramala Sitharaman announced in the Union Budget speech on February 1 that the government will conduct privatisation of two more public sector banks besides IDBI Bank, in the financial year 2022. Following this major development, on March 15 and 16, about 10 million bank employees participating from nearly 9 bank unions conducted a two-day bank strike

Bank unions have also begun engaging with customers and the public at large, on what they believe are the ill-effects of privatization.

In a statement AIBEA added, “Public sector banks provide permanent jobs for the educated youth. But we know the plight of the employees working in the new private banks where job security is totally absent. Fair wages are denied. Trade union rights are non-existent. Thus, privatisation of banks will enslave the young employees into these adverse conditions.”

The 2-day national bank strike led to Heavy losses of about Rs 16,500 crore due to clearance of cheques and payment instruments only on the first day of the strike. Payment instruments such as cheques, demand drafts and pay orders are processed by three large centres.

While Chennai handles 5.8 million instruments worth ₹5,150 crore every day, Mumbai handles 8.6 million instruments worth ₹6,500 crore and Delhi processes 5.7 million instruments worth ₹4,850 crore.

Also Read: Privatisation…Long (not) live Public Sector Banks



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Bank Nifty constituents hit new highs after Budget 2021, BFSI News, ET BFSI

Banking & Finance

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by Syed Fasiuddin

Bank Nifty constituents hit new highs shortly after Finance Minister Nirmala Sitharaman announced her budget for 2021. The Bank Nifty, since the announcement of the budget, which included numerous reforms aimed towards the BFSI sector, including the setting up of a bad bank, amendments towards the Insurance Act of 1938, the recapitalisation of public sector lenders, and the proposed divestment of two public lenders and one general insurer, amongst others, sparked cheer in the market – recording a 3074 point jump.

Public Bank stocks jump
Government owned lenders and constituents of the Bank Nifty Index – including the State Bank of India, Punjab National Bank (PNB), Bank of Baroda, recorded sharp single and double digit rises in values since February 1, when the budget was first announced. SBI within the day recorded a spectacular jump of 7.21%, closing at Rs 333.10 – rising by Rs 22.40. PNB and BoB recorded jumps of 1.26% and 1.01%, respectively, on February 2. PNB at the end of day traded at Rs 36.20, whilst BoB traded at Rs 74.65 – rising by 0.45 and 0.75 points, respectively.

Private lender stocks cheer
Private lenders RBL Bank, Federal Bank, HDFC Bank and Bandhan Bank recorded the highest jumps since the budget was first announced, rising by 11.52%, 10.08%, 9.9% and 9.84% respectively. RBL Bank recorded a jump of 25 points, closing at RS 242.00 at the end of market hours. HDFC Bank alone rose by 140.9 points, trading at Rs 1560, since the budget was announced, whereas Bandhan Bank rose by 30.40 points, to close at Rs 339.35, on February 2. Kerala based Federal Bank also recorded a 7.35 point jump to trade at Rs 80.25 by the close of the BSE.


Other constituents of the Bank Nifty, including ICICI Bank, Kotak Mahindra Bank and Axis Bank, recorded similar gains, jumping by 9.61%, 8.47% and 8.13%, respectively. ICICI Bank rose by 54.20 points to close at Rs 618.45, whereas Kotak Mahindra Bank and Axis Bank recorded an increase of 145.50 points and 53.65 points, respectively, to close at Rs 1863.50 and Rs 713.70.

Bankers remain optimistic
Both public and private bankers expressed optimism at the budget unveiled by Nirmala Sitharaman, on February 1. Dinesh Kumar Khara, Chairman of the State Bank of India (SBI), said “The Union Budget has unveiled a set of well-crafted and robust policies that encompasses the vision of an Atmanirbhar Bharat. The Budget has rightly envisaged a substantial jump in capital expenditure that has a strong multiplier impact on the economy. The decision to open up the insurance sector, setting up a DFI and an ARC, privatizing a couple of public sector banks are all positive steps for the financial sector.”

The Chairman of India’s largest lender further said “One of the cornerstones of this budget is fiscal numbers that are transparent and has the potential to surprise us on the upside. In principle, the budget has rationalized the off-balance-sheet borrowings and headline fiscal deficit numbers, which will overtly please markets and even rating agencies. The fact that the expenditure announcements in the budget have been matched with the status quo on taxes will please everyone and bolster market sentiments.”

Kotak Mahindra Bank founder Uday Kotak, expressing his views on the budget, tweeted “A Budget for growth with next-gen reforms. Focus on healthcare, infra, financial sector. A stable tax regime, higher borrowings for capex. Specific reforms: disinvestment & monetization, opening up of insurance, cleanup plan for stressed assets. Sign of a self confident India.”

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, noted “The government has prioritised spending on growth at this stage, in the hope that such growth would help manage the fiscal deficit subsequently. A substantial increase announced in the expenditure on healthcare and infrastructure will help boost economic growth, including the MSME sector and generate employment. Overall, it was a growth-centric Budget aimed at securing India’s long-term economic interest.



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Two PSBs, one insurance firm to be privatised

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The government is planning to set the ball rolling on privatisation of two public sector banks (PSBs) and a general insurance company in 2021-22.

It also plans to infuse ₹20,000 crore into PSBs to further augment their financial capacity.

“Other than IDBI Bank, we propose to take up the privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22,” said Finance Minister Nirmala Sitharaman in her 2021-22 Union Budget speech.

The Minister said privatisation of the aforementioned entities would require legislative amendments and she proposes to introduce the amendments in this (Budget) Session itself.

IPO of LIC

In 2021-22, the government will also bring the initial public offer (IPO) of the Life Insurance Corporation of India (LIC). For this move, too, the government will bring the requisite amendments in this session itself.

Currently, there are 12 public sector banks (PSBs) and 4 public sector general insurance companies.

In her 2020-21 Union Budget speech, Sitharaman had proposed to sell the balance holding of the government in IDBI Bank to private, retail and institutional investors through the stock exchange. The government and LIC currently hold 45.48 per cent and 49.24 per cent stake, respectively, in IDBI Bank.

Rajkiran Rai G, Chairman, Indian Banks’ Association (IBA), said: “Recapitalisation of Public Sector Banks to the tune of ₹20,000 crore will help the banks to shore up the capital and provides additional room for lending.

“Proposals for the privatisation of two public sector banks and an insurance company are bold reform measures announced in the budget.”

A bold move

Banking expert Hari Hara Mishra observed that the announcement on privatisation of two PSBs is a bold move on financial reforms. It will enhance competitiveness in the banking sector and improve efficiency.

“This will reduce pressure on the government to fund growth capital for these banks. The timing of the move could not have been better as BSE Sensex is near all-time high,” said Mishra.

Banking, insurance and financial services are among the four areas considered strategic by the government. Per the policy features of the “Disinvestment/Strategic Disinvestment Policy”, in strategic sectors, there will be bare minimum presence of the public sector enterprises (PSEs). The remaining Central PSEs in the strategic sector will be privatised or merged or subsidiarized with other CPSEs or closed.

In non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.

Capital infusion so far

Per the Budget document, ₹80,000 crore in 2017-18, ₹1,06,000 crore in 2018-19 and ₹65,443 crore in 2019-20 was infused for the recapitalisation of PSBs.

Further, a provision of ₹20,000 crore was made in 2020-21 for recapitalisation of PSBs.

In the FY 2020-21 so far, ₹5,500 crore has been infused by the government as fresh capital in PSBs through non-interest bearing special securities.

The government has also infused capital through issue of bonds in three other financial intermediaries – IDBI Bank (₹4,557 crore), EXIM Bank (₹5,050 crore) and IIFCL (₹5,297.60 crore).

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Govt to infuse ₹20,000-cr in PSBs in 2021-22

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Finance Minister Nirmala Sitharaman on Monday said the government will infuse ₹20,000 crore into public sector banks (PSBs) in 2021-22 to meet the regulatory norms.

 

For the current financial year also, the government had made a provision of ₹20,000 crore for recapitalisation.

“To further consolidate the financial capacity of PSBs, further recapitalization of ₹20,000 crore is proposed in 2021-22,” she said while presenting the Budget 2021-22 in the Lok Sabha.

During 2019-20, the government had proposed to make a ₹70,000-crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.

However, the government refrained from committing any capital for the PSBs in the Budget 2020-21, hoping that the lenders will raise funds from the market depending on the requirements.

In September 2020, Parliament approved ₹20,000 crore capital infusion for PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21.

Of this, the government provided ₹5,500 crore to Punjab & Sind Bank in November 2020, to meet the regulatory capital requirement.

 

The Finance Minister further said the government had approved an increase in the Deposit Insurance cover from ₹1 lakh to ₹5 lakhs for bank customers last year.

“I shall be moving amendments to the DICGC Act, 1961 in this Session itself to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover,” she said.

This would help the depositors of banks that are currently under stress, she added.

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Business correspondents seek rationalisation of GST, BFSI News, ET BFSI

Personal Finance

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Business Correspondents and companies working with them have sought rationalisation of GST, regulatory changes to ensure viability of the business correspondent business model.

Anand Kumar Bajaj, Founder MD & CEO at PayNearby says, “93% of our business correspondent network has been committed to working in tier 2 and tier 3 towns, serving as the sole point of cash disbursal in locations with limited financial infrastructure. However, the commission rates for BC services are very low to make it a profitable business. Additionally, BCs, by default, come under the 27% GST and 5% TDS on cash withdrawal even after the tax act having enabling provisions. This makes it difficult for them to stay afloat.”

Bajaj added, “We hope that this Budget takes into consideration the tough working condition of the BC network and make a few regulatory changes to ensure the viability of a community that has been vital to the cause of financial inclusion in the country.”

Spice Money founder, Dilip Modi said, “The earnings of the underbanked population are hit with taxes levied on basic money transfers. The government should consider providing some GST relief on smaller transactions conducted on the BC network. A special provision on GST and TDS for the BC model will help create visibility for this business.”

Modi noted, “The government showed support for the rural areas by deploying DBT schemes with the BC networks backing them by providing withdrawal services. The government should further this support by building BC networks as it will spell growth for the vision of Digital India beyond simple internet connectivity. It will allow more financial products and services to reach the remotest parts of India and accelerate the bridging of the gap in the access to banking services in India.”

The Business Correspondent Federation of India (BCFI) has also recommended the changes on the same lines around taxation structure.

Sunil Kulkarni, CEO and Head – BCFI said, “While urban banked customers are reaping the benefits of UPI and mobile banking services, the Business Correspondents (BC) Industry – the last mile in branchless banking, is hoping that the upcoming budget will implement the recommendation of RBI constituted “Report of High-Level Committee on Deepening of Digital Payments-May 2019” headed by Nandan Nilekani for under-banked urban/rural population by making BC originated and terminated transactions of IMPS and AEPS exempted from GST, which is currently levied at an effective rate of 27% on these customers.”

Kulkarni added, “Considering the business correspondent’s fraternity serves the lower bracket of the income pyramid, the tax bracket is very high. Additionally, for better penetration of financial services to the masses, BC’s should be permitted to offer products and services of more than one or two banks. The industry has already witnessed the critical role BC’s played during the pandemic lockdown by helping deliver banking and financial services to the last mile. We hope our concerns get highlighted and resolved with favourable policies during the budget announcement.”



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Three point-agenda for the upcoming Budget

Banking & Finance

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The Union Budget 2021-22 will be one of the most anticipated events in recent history. As the dust is settling after the torrid health catastrophe that affected millions and which has threatened to leave a permanent emotional scar, we are finally seeing the light at the end of the tunnel. India has had a faster than expected economic recovery and a low fatality rate from Covid-19. The distribution of the vaccines has also commenced.

The policies that will be introduced in the upcoming Budget are expected to set the tone for what steps the government takes next, and how quickly India is able to shrug off the crisis. The priority of the government will likely be measures on policies which will lead to sustained growth, boost consumption and encourage private investments. The Budget emphasis will probably lay on healthcare and livelihood creating sectors such as infrastructure and housing.

Job creation

Focus on jobs could be one of the main agendas of the Budget. The pandemic and the resultant job losses in some sectors is expected to have far-reaching implications on the Indian economy. For that reforms in sectors that create large-scale employment, such as housing and real estate, infrastructure, construction and manufacturing, will be required.

According to India’s Economic Survey 2017-18, nearly 90 per cent of the workforce employed in the real estate sector are engaged in the construction of buildings. Further, the sector is expected to require over 66 million people by 2022.

Housing is one of the largest employment generators in the economy with linkages to nearly 300 industries – both in terms of direct jobs and the jobs it creates in ancillary industries such as cement, steel, power etc.

It has been rightly said: “Don’t worry too much about GDP growth, worry about jobs. If we focus on jobs, GDP will take care of itself.”

Focus on housing

The government and the regulators have recognised the critical role housing and real estate plays in the Indian economy. In recent years, affordable housing has been at the forefront. For a rapidly growing country like India with a large young population that needs more homes at affordable price points, the following incentives could be considered:

1) Interest deduction on housing loans could be raised from ₹2 lakh to ₹5 lakh. The deduction could be reviewed on a periodic basis and linked to inflation.

2) The real estate sector has been facing challenges since 2017, and the demand for under-construction properties has slowed down significantly. Whilst SWAMIH (Special Window for Affordable & Mid-Income Housing Fund) is an excellent initiative, it is not practical for a single fund to resolve all the last mile funding issues.

Historically, some part of the funding for a project used to come from sale of under-construction properties. However, due to GST and other factors, the demand for under-construction properties has come down, resulting in projects that are 60-80 per cent complete, unable to receive last-mile funding.

Lenders are reluctant to lend to stressed projects as any fresh funding will be classified as a NPL on day one in the books of the new lender. The regulators may want to consider changing the regulations such that any secured fresh funding should be ring-fenced.

3) An additional option is to allow External Commercial Borrowings (ECBs) for real estate projects. Further, investment by foreign owned/controlled SEBI regulated investment vehicles up to 100 per cent under automatic route should be permitted in entities that acquire completed and under-construction residential projects.

4) The Credit Linked Subsidy Scheme (a component of PMAY) has been a major success. There is a need to extend PMAY benefits to more locations and extend the deadline for the Middle Income Group till March 2022.

5) There is a need to promote the rental market. Currently, the setoff and carry forward of losses from house property is restricted to ₹2 lakh. The earlier law which did not have such restrictions could be restored. Alternately, the limit should be increased to ₹5 lakh.

Personal tax reforms

Personal tax rates need to be further reduced. Surcharge on high taxpayers also needs to be rationalised as these are the people who have the capacity to spend the most and spur demand. Global data show that lower tax rates result in higher tax collections as compliance improves.

In fact, we just witnessed this example in Maharashtra when the State government lowered that stamp duty to 2 per cent for properties registered before December 31. Mumbai recorded historic registrations of house sale deeds in November and December.

As a result, the State government’s treasury collection from registrations increased, inferring that strong home sales have more than compensated for the lower stamp duty.

The Budget could also consider removing the long-term capital gains tax for investments in equity shares or by raising the period from one to two years. Additionally, doing away with taxing dividend income could be considered. Such steps will put more disposable income into the hands of the individual.

Continual reforms have been a priority for the current government. It is often said that India performs best in a crisis. The pandemic may just become a catalyst to bring in further reforms in ease of doing business, development, jobs, growth and a stable tax regime to ensure India’s sustained long term growth.

The writer is VC & CEO at HDFC Ltd

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