'Liquidity in NBFC, social protection key in Budget'

Budget 2021 | Reduction of govt stake in PSBs, liquidity to NBFCs key expectations this year

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By Arun Singh

The government and the RBI have taken various initiatives to improve credit flow to the real economy in the post Covid-19 era. However, more initiatives and streamlining of operational guidelines are required to achieve a credit growth led economic revival. Against this backdrop, some key expectations for the BFSI sector in the Union Budget are:

-Over the last few years, the NBFC sector has been facing a heavy liquidity crunch, especially the smaller NBFCs. Hence, we expect some measures to enhance liquidity in the sector.

-As recommended by the Internal Working Group (constituted by the RBI to review extant ownership guidelines and corporate structure for Indian private sector banks), well-governed large NBFCs should be permitted for conversion into banks and large corporate/industrial houses should be allowed to promote banks.

-A roadmap to reduce the government’s stake in public sector banks over the coming years is expected. Measures to strengthen governance across the banking spectrum is also expected, given that bank frauds more than doubled in value in the previous fiscal year.

-The importance of life and health insurance cannot be less stressed during times like the current pandemic. However, the penetration in India is very low compared to other countries. Hence, we expect measures, including an increase in the 80C and 80D limits and a reduction in the GST rates on insurance premiums, to improve social protection.

(The author is Global Chief Economist at Dun and Bradstreet)