Synopsis
The Union Budget prioritizes ease of business, tax reforms for domestic spending, and enhanced financial resources for farmers and MSMEs, while upholding financial discipline, as stated by IBA Chairman M.V. Rao.Key Takeaways
- Focus on Ease of Business
- Tax Reform for Consumption
- Support for Farmers and MSMEs
- Increased Loan Limits
- Financial Discipline Maintained
New Delhi, Feb 1 (NationPress) The Union Budget has primarily concentrated on facilitating ease of doing business, reforming the personal income tax brackets to stimulate domestic consumption, and enhancing the flow of institutional financial resources to farmers, MSMEs, and exports, while importantly upholding financial discipline, stated M.V. Rao, Chairman of the Indian Banks’ Association (IBA) and Managing Director and CEO of Central Bank of India, on Saturday.
The adjustment in the loan ceiling under the Modified Interest Subvention Scheme, raising it from Rs 3 lakh to Rs 5 lakh for loans acquired through the KCC and India Post, along with the role of India Post Payment Banks in invigorating the rural economy by providing services such as DBT, cash withdrawals, EMI collections, credit services for micro-enterprises, insurance, and assisted digital services, demonstrates the direct engagement of the banking sector.
“The proposal to back the National Cooperative Development Corporation (NCDC) for lending activities in the cooperative sector is anticipated to positively impact the rural economy,” Rao noted.
Banks are crucial in financing the MSME sector, and the budget includes multiple proposals aimed at this sector.
Significantly, the budget proposes an increase in the investment and turnover thresholds for classifying all MSMEs to promote further growth, an enhancement of the credit guarantee coverage for MSMEs, startups, and well-performing exporter MSMEs, and the introduction of customized credit cards with a limit of Rs 5 lakh for micro-enterprises registered on the Udyam Portal. These are positive initiatives for the MSMEs and are likely to support banks in further boosting financing to these sectors.
“Increasing the cap on Foreign Direct Investment in the insurance sector from 74% to 100% for companies that invest all premiums in India, introducing a partial credit enhancement facility for corporate bonds for infrastructure by NaBFID, creating a Grameen Credit Score framework by Public Sector Banks to meet the credit requirements of SHG members and rural communities, and forming a high-level committee for regulatory reforms to assess all non-financial sector regulations to enhance governance and the investment friendliness index of states, all align well with the financial sector's demands,” Rao stated.
The Budget has leaned more towards domestic growth drivers while ensuring fiscal discipline, which could also aid monetary policy.
