Money & Banking
Bankers seek slew of tax incentives in next Budget

In their pre-budget consultations with the Finance Minister, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business

New Delhi: Bankers have demanded tax sops like increasing the tax deducted at source (TDS) limit on fixed deposit to Rs25,000, incentives for investment in infrastructure bonds and a reduction in the lock-in period for tax saving deposits to three years, reports PTI.

 

In their pre-budget consultations with Finance Minister P Chidambaram, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business.

 

Representatives from 22 banks and financial institutions pitched for increasing the TDS limit on fixed deposit to Rs25,000. At present, TDS on interest earned from fixed deposits of Rs10,000 and above.

 

They also sought tax exemption of Rs20,000 under Section 80CCF for investing in infrastructure tax free bonds and suggested inclusion of housing sector in the infrastructure segment.

 

After the meeting with the Finance Minister, SBI Chairman Pratip Chaudhuri said: "There was a requirement that this lock-in period on tax savings deposits be reduced from five years to three years to bring it in line with tax saving equity linked saving schemes (ELSS)".

 

While seeking transparency in gold and real estate transactions at par with equity transaction, bankers suggested that any restriction on gold import should be done carefully and in a calibrated manner.

 

"Gold import has also a co-relation with jewellery export. So if we try to bring down gold import, it could also affect jewellery export," Chaudhuri told reporters

 

Chidambaram in his opening remarks said: "Without vibrant and viable financial market architecture, there cannot be any sustainable economic growth. Efficient intermediation by financial markets lead to higher economic growth by increasing savings and their optimal allocation for productive uses".

 

Chidambaram said financial institutions have the capacity to promote economic growth as they allocate savings to those investments which have potential to yield higher returns.

 

Major steps have been taken to reform India's regulatory framework in line with international best practices, he said, adding that the country is now one of the most vibrant and transparent markets in the world.

 

Other suggestions made by the bankers include extension of agriculture interest subvention scheme to self-help groups and exemption of social security insurance schemes from service tax.

 

"Some of the banks...made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects," Chaudhuri said.

 

Bankers who attended the meeting include, Indian Overseas Bank CMD M Narendra, UCO Bank CMD Arun Kaul, Punjab National Bank CMD K R Kamath, ICICI Bank MD Chanda Kochhar, Axis Bank MD Shikha Sharma and Chairman of IDFC Ltd Deepak Parekh.

 

Besides, RBI Deputy Governor KC Chakrabarty also attended the meeting.

 

Chaudhuri said that banks suggested that either security transaction tax (STT) should be abolished on equity market or commodity transaction tax (CTT) should be imposed on commodity trading to attract investment in the capital market.

 

"...much of the money which could have been invested in the stock market is now going into this commodity market.

 

Either you have a commodity transaction tax or you abolish the STT," he said.

 

Banks also suggested that some tax concessions should be given for issuing perpetual bonds, which is counted as Tier I or equity capital.

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RBI cancels registration of Emcorp Finance, Care Credit and Investments

Certificate of registration of Chennai-based Emcorp Finance was cancelled on 3rd December, while that of Coimbatore- based Care Credit and Investments Company was cancelled on 10th December

Mumbai: The Reserve Bank of India (RBI) said it has cancelled registration of two non-banking financial companies (NBFCs)-- Emcorp Finance Ltd and Care Credit and Investments Company Pvt Ltd, reports PTI.

 

"Following cancellation of the registration certificate the companies cannot transact the business of a non-banking financial institution," the RBI said.

 

Certificate of registration of Chennai-based Emcorp Finance was cancelled on 3rd December, while that of Coimbatore- based Care Credit and Investments Company was cancelled on 10th December.

 

The RBI, however, did not provide reasons behind cancellation of the certificates of registration.

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RBI may allow partial SLR conversion to meet Basel-III norms

Currently, the SLR is pegged at 23%, while the average industry holding is above 28% and the central bank has hinted at allowing part of it as liquid assets under Basel-III

Mumbai: The Reserve Bank of India (RBI) has hinted at allowing part of the statutory liquidity ratio (SLR) holdings of banks to be treated as liquid assets under the Basel-III guidelines, which will come into effect next fiscal, reports PTI.

 

"We already have quite a bit of liquidity ratio requirement.... If you look at our SLR, it is supposed to be maintained continuously.

 

"Therefore, question arises whether we add some more liquidity on top of SLR, which will be definitely not good for our banks. So, we are looking at carving out SLR so that a part of it can become usable," RBI Deputy Governor Anand Sinha told reporters on the sidelines of an event.

 

However, Sinha did not offer any details on how much of the SLR holdings can be converted. Currently, the SLR is pegged at 23%, while the average industry holding is above 28%.

 

The Basel III framework, which was adopted in the wake of the 2008 global financial crisis to safeguard banks in case of stress, seeks a higher liquidity coverage ratio that requires banks to hold marketable high quality liquid assets.

 

As per the RBI estimate, domestic banks need Rs1.4-1.5 trillion for complying with the guidelines.

 

Referring to the Basel committee meeting, which extended the final implementation deadline by a year to March 2019, Sinha said now banks have to be 100% compliant with the liquidity management from 2019, but he did not elaborate on its impact on the domestic banks.

 

Yesterday, banks got a respite when the global regulators extended deadline for Basel-III compliance by a year to 2019.

 

They also broadened the definition of liquid assets to include shares, retail mortgage-backed securities, among others.

 

Referring to final new bank licence norms, Sinha said that the central bank would come up with new regulations soon.

 

He, however, did not divulge any timeline.

 

Earlier, addressing a seminar on the proposed guidelines on non-banking finance companies (NBFCs), Sinha said the concerns of the industry would be taken into consideration but they could not be treated at par with banks.

 

Allaying fears regarding the new benchmark of Rs25 crore for registration, the deputy governor said they would not be out of business due to this proposed norm as feared by many analysts.

 

He also stressed on the stringent liquidity management measures implemented for NBFCs to protect them against any systemic failure.

 

Talking about the proposed guidelines regarding maintaining higher tier-I capital by most NBFCs, Sinha said as per global standards, the gap between capital adequacy ratio between banks and NBFCs have to be shortened.

 

The apex bank released the final draft guidelines on NBFCs last month based on the recommendations of the Usha Thorat committee report.

 

The key recommendations of these reports are higher tier-I capital ratio, reduction of NPA recognition period, higher liquidity assets, among others.

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