Union Budget 2025 | Hoping govt will grant 'priority sector status' to gold loan NBFCs, says Muthoot Finance MD

The Union Budget for the upcoming financial year is all set to be presented on February 1, 2025, by Finance Minister Nirmala Sitharaman. According to reports, the Narendra Modi government may consider slashing income tax for individuals earning up to Rs 15 lakhs per annum and extend the tax relief bracket in a bid to provide relief to the middle class and boost consumption.

Various sectors have already put forth their expectations from the upcoming budget. Speaking on behalf of the NBFC sectors on the upcoming budget, Muthoot Finance MD George Alexander Muthoot said, "The forthcoming union budget is poised to chart the course for the new Indian government’s economic growth agenda. On the back of the political stability and resilient economy, it is expected to provide relief to various sections of the society and benefits for various sectors. The budget 2025 has the opportunity to help provide the NBFC sector and retail investors with the much-needed impetus."

As such, he has stated his "recommendations where government support will go a long way in providing last-mile credit"

As a prominent gold loan NBFC, Muthoot FInance hopes for the following in the budget, according to their MD, "We would like to continue to advocate to provide cushion and offer maximum benefit to customers by urging the government to grant eligible gold loan NBFCs with ‘priority sector status’. We believe that providing priority sector status to eligible gold loans NBFCs will be a step forward in driving financial inclusion as it majorly impacts the small borrowers whose borrowing needs are frequently less than Rs 50,000.

He added," We also propose for a ‘Gold linked credit line via UPI’ that can go a long way in helping households/small business owners meet their financing needs and monetise idle gold jewellery. Once the NBFCs are allowed to link with the UPI payment system, this will act as a secured credit that would be extended by NBFCs at a lower interest rate (12 per cent-18 per cent) compared to the high interest rates (around 36 per cent) charged by credit cards."

"We further seek a level playing field by bridging the disparity and aligning the single counterparty exposure limits for gold loan NBFCs in comparison with other NBFCs i.e. 20 per cent of Tier-1 capital. This restriction impacts the ability to lend credit and negatively impacts our potential customers.," he stated.

On the expectation for their retail NCD investors, he said, "With the growing impetus on diversifying the funding mix of NBFCs, we would urge the regulators and government to simplify the taxation compliance on the TDS on listed NCDs which is currently at 10 per cent TDS. The selling and re-selling of listed NCDs through stock exchanges ends up putting a taxation burden on the end investor. Since the TDS were introduced on listed securities keeping in mind that the customers are not paying the tax, however on ground there is an adequate trail of holders and interest payments."

He added, "Our other recommendation is for allowing additional interest rate on Public Issue of Secured Non-Convertible Debentures (NCDs) issued to retail investors, pensioners and senior citizens over and above the interest rate applicable to institutional investors. We believe these regulations are crucial in order to attract more retail investors and ensure fair compensations to all our investors and stakeholders."