Budget 2019 India: Proposals have been drafted keeping in mind covering the maximum number of people and entities
By R Baskar Babu
This Budget reveals a 360-degree approach taken by the government, touching each and every stratum of society. Finance minister Nirmala Sitharaman’s Budget envisages garnering more revenue by widening the tax net, job creation, reducing investment impediments besides focusing on schemes to propel the country towards the $5-trillion GDP objective.
It is heartening that GST-registered MSMEs will receive 2% interest subvention for fresh and incremental loans. Small finance banks have a significant role to play in this offering, given the depth of their relationships with MSMEs. The plan of setting up of 100 new clusters for traditional industries akin to the existing bamboo, honey and khadi clusters is good news for 50,000 artisans. The demand for credit will be created as a result of microfinance institutions and small finance banks being the major players.
The setting up of 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) to develop 75,000 skilled entrepreneurs in agro-rural industry sectors is another step in the direction of boosting credit offtake, increasing rural incomes besides preventing migration of rural folk to the cities.
The allocation of `70,000 crore for bank recapitalisation will provide a fillip to lending. Credit growth has revived significantly to 13.8% and is only bound to go up.
Moving the regulatory function of the National Housing Bank (NHB) to RBI will integrate regulatory oversight. Another positive move is the decision to allow NBFCs (deposit taking and systemically important non-deposit taking) to pay tax on interest received from bad or doubtful loans in the year they actually received it (receipt basis instead of accrual basis). This was allowed only for banks earlier.
Banks’ burden of cash handling will be eased with a 2% tax at source for annual cash withdrawals exceeding `1 crore. Waiving off the merchant discount rate on digital payments for both customers and businesses (with annual turnover of over `50 crore) will boost digital transactions.
The focus on building 1.95 crore houses for the poor by 2022 will generate employment. These houses will be equipped with amenities such as toilets, electricity and LPG connections. An additional interest deduction of `1.5 lakh for houses of up to `45 lakh is positive as it takes the total deduction to `3.5 lakh. This would work out to an overall benefit of around `7 lakh to middle-class homebuyers over a loan tenure of 15 years. In sum, this year’s Budget proposals have been drafted keeping in mind to cover the maximum number of people and entities.
(The author is MD & CEO, Suryoday Small Finance Bank)