RBI for ending tax sops for special deposit schemes

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New Delhi, Sep 15: Making a case for level-playing field for banks, the Reserve Bank has said that the government should do away with tax-related benefits and other incentives for special deposit schemes, as they constrain deposit mobilisation efforts of lenders.

Pointing out that such deposit schemes announced from time to time by the government hamper banks' efforts to garner funds from the public, the RBI's Report on Currency and

Finance said, "The policy anomaly arising out of tax benefits needs to be removed to provide banks a level-playing field."

On other operational constraints that banks face, the RBI report said unlike non-bank bodies, banks are often subjected to various regulatory requirements, such as directed learning, prudential regulations and limits on capital market exposures.

"While these measures promote financial stability, they constrain the diversification opportunities thrown by a developing financial system," it said.

The non-bank institutions, the report said, also enjoy the advantage of having a leaner cost structure and can quickly adopt new technology to offer higher returns to investors. Non-bank intermediaries like brokerages, asset management firms and MF firms also offer specialised services like cash management and wealth management for various investors, including high networth individuals, it said.

The RBI report also stressed that with sinkage of the traditional deposit base, the banks need "to extend their outreach to prospective depositors/investors by expanding the ambit of specialised financial services offered by them by repackaging and re-designing of products to suit individual needs". The changing demographic and employment patterns, the report said, would generate demand for a wide range of financial services such as insurance, housing and other financial products with innovative features.