Pre-Budget Expectations
George Alexander Muthoot, MD, Muthoot Finance Ltd
The current government has been very active on accelerating reforms, fast tracking pending project backlog to put economy back on track since it came to power. So this budget we expect a similar pro-growth stance from the government, with focus on not only on forming stronger policies, but more importantly on timely execution of the same, which will results in accelerated growth for the country.
We see the Union Budget focusing more on infrastructure, measures to increase saving to GDP ratio, clear GST implementation roadmap and last but not the least measures to increase capital flow to the country.
The financial inclusion drive being one of the top priorities of the government, NBFCs can play a very instrumental role in achieving the same to ensure viability, scalability and sustainability for all the stakeholders. We want the government to recognise us as an extension of the Indian banking system rather than as shadow banks. Also, we urged the Finance Minister to end the Government’s and the RBI’s step-motherly treatment to the NBFCs vis-à-vis the banks and sought a level-playing field. We appreciate the regulators vision towards issuing payment banks/ Small banks licenses to NBFCs for increasing the financial inclusion but we expect that the government should recognize that there are NBFCs which are bigger in size and wider in reach and thus grant more universal bank licenses to the NBFCs like ours.
From gold financing NBFCs point of view, classify gold loan financing as a priority sector lending (PSL). The PSL recognition will facilitate the banks to finance gold loan NBFCs, reducing their cost of funds and improve the lending rates to customers. We also expect the budget recognisethe gold loan in low risk category. Given that gold jewellery provides financial empowerment and can be easily used as an asset even by the poorest in India to secure a financial loan, bias against gold-loan products should be removed.
We request the Finance minister; the service tax on money transfer recently introduced is a deterrent for NRIs to remit their funds to India and may be withdrawn fully to encourage non repatriable fund inflow to the country. At present, ATM interchange fee is Rs.15 per transaction, thus making the business invariable for white label operators and hence we urged the interchange fee be increased to Rs. 20 per transaction. This will encourage putting more ATMs in unbanked areas where by access to the cards issued under Jan Dhan Yogana project is substantially improved.
Thus, the environment with easy lending and easy access to credit and an uncomplicated regulatory mechanism will boost the financial connectivity and pave way to reach deeper interiors of the country.
Umesh Revankar, MD, Shriram Transport Finance Ltd
1. Union Budget should address financing needs of small businesses: Union Budget has to emphasize on the need of the small businesses, which the current banking system is not able to address. Most of the small businesses are still either funded through their own funds, funds from family, friends or NBFCs and moneylenders. It is only once they built their track record then they can expect funds from Banks. So in the initial stage of business building happens through private capital, including NBFC funding. The Union Budget has to identify the way and methods of financing, creating a fund or a refinancing option for the NBFCs. Last year Budget has informed about financing support to small businesses and a committee was formed under Mr Kamath. We would appreciate if the budget can share the progress and recommendations made by the committee if any.
2. Creation of fund for scrapping of old vehicles: The owners of very old vehicle are mostly individuals, depending on the vehicle for their livelihood. There has been discussion on scrapping laws for old vehicles, but instead of creating scrapping laws, a fund should be created, which would create a freely tradable credit note for scrapping of old vehicles Since the note is tradable, the owner who scraps the vehicle can in-turn can trade it for a price to a fleet operator or anyone who is buying the new vehicle, who can then encash it from the government/manufacturer or the fund so created thus getting the benefit.
3. Distribution tax on special purpose vehicle (SPV) be removed: There is a distribution tax on special purpose vehicle (SPV), when it is routed through pass through certificate (PTC) route. Since the income is taxed at 30% TDS, less income goes to the bank, making the securitisation deal costly and less attractive for the bank. So to that extent Securitisation as a product, which was an efficient product for banks to meet their PSL requirements, has become less attractive. The Union Budget so address this by removing this taxation at the SPV level.
4. Expect clear roadmap on the GST implementation: Beyond the NBFC wish list, we would certainly like the Union Budget to give a clear roadmap on the GST implementation, which will enable us to get a clear vision on how the businesses will transform. We believe the implementation of GST will certainly go a long way in helping small industries scale up, make them more competent and export efficient. However enough care to be taken to ensure that small operator not to be unnecessarily burdened with implementation GST.
5. Address Infra Bottlenecks: Union Budget should also address the speedy removal of the infra bottlenecks that has occurred at various levels. Lot of investments from various corporate, contractors, amongst others has gone in various stages of these projects and these investments are stuck. If the Union Budget addresses those bottlenecks on priority basis, then these funds could be released and utilized for investing in to newer projects. The Surface and Road transport minister has given lots of positive outlook on construction road projects and the same need to outline with target-based approach.
6. The single window clearance and SEZ: “The make in India” would be possible only if government comes with incentive based and time bound approvals put in place. Bringing all state government on same page and also creating competitive environment among states by creating “ease of doing business as priority” as sole criteria for all resource allocation should encourage state government to be participative.
