<div><p><strong><em>S Narendra</em></strong>,<br /><br />The Budget for Financial Year 2021-22 is growth-oriented with bold announcements of reforms in the banking, finance, insurance and infrastructure sectors. It can be called as ‘bankers and infra budget’, though there are no direct benefits to the real estate and affordable housing sectors.</p><p>Non Performing Assets (NPAs) of banks (crossing Rs 15 lakh crore by March 31, 2021), NBFCs and HFCs, which were the bane of the banking sector since 10 years, have only aggravated during the Covid-19 pandemic. The finance minister has now announced the setting up an ‘Asset Recovery and Asset Management’ company.</p><p>This new entity should pool the NPAs of the entire banking system including all banks, NBFCs and HFCs, not only of PSBs, with equity participation from the member banks and sell the assets/securities to an SPV managed by domain experts at fair valuations.</p><p>This can help drain the ‘bad cholesterol’ from the entire banking and lending institutions, which can later lend aggressively to priority sectors like infrastructure, housing, MSMEs and agriculture without any fear of ‘NPA baggage’.</p><p>The success of this plan will depend on the precision of execution in pooling of NPAs and selling of the acquired assets by the AIF, which should not get entangled into protracted litigations.</p><p><strong>Infra push</strong></p><p>Thrust has been given to infrastructure push (roads, highways, railways, power, ports and airports) to achieve a faster growth rate in our mission ‘$5 trillion’ GDP. The initiatives were through the National Infrastructure Pipeline (NIP) which has already completed projects worth Rs 1.1 lakh crore. The allocation for road transport and highways is as high as Rs 1.18 lakh crore in the overall CAPEX of Rs 5.54 lakh crore.</p><p>To fund the huge infra allocations and to avoid getting into the cascading effects of fiscal deficit which is now pegged at 9.5% of GDP for FY 21, 6.80% for FY 22, FM has boldly come out with monetisation of operational assets of PSUs, gas supply and highway toll receivables, realistic disinvestment plan to the extent of Rs 1.75 lakh crore, sale of government/ PSU lands which are under loss, privatisation of two public sector banks and a general insurance company and many other measures.</p><p>Special purpose vehicles are being launched for land ‘monetisation’ (various government agencies are holding 5 lakh hectares of land) and setting up of an innovative Development Financial Institution (DFI) with a corpus of Rs 20,000 crore, with a mandate to lend Rs 5 lakh crore in three years. This innovative model will augment long term funds to infra and real estate sectors through investment trusts (InvITs) and real estate investment trusts, thus overcoming ‘asset-liability’ mismatches.</p><p><strong>Wishlist remains</strong></p><p>Nothing concrete has been done for affordable housing except ‘rollover’ of income tax benefits for individual borrowers under affordable housing, by one more year, tax holiday on profits for affordable housing builders and a few other steps.</p><p><em>(The writer is a former banker.)</em></p></div>
<div><p><strong><em>S Narendra</em></strong>,<br /><br />The Budget for Financial Year 2021-22 is growth-oriented with bold announcements of reforms in the banking, finance, insurance and infrastructure sectors. It can be called as ‘bankers and infra budget’, though there are no direct benefits to the real estate and affordable housing sectors.</p><p>Non Performing Assets (NPAs) of banks (crossing Rs 15 lakh crore by March 31, 2021), NBFCs and HFCs, which were the bane of the banking sector since 10 years, have only aggravated during the Covid-19 pandemic. The finance minister has now announced the setting up an ‘Asset Recovery and Asset Management’ company.</p><p>This new entity should pool the NPAs of the entire banking system including all banks, NBFCs and HFCs, not only of PSBs, with equity participation from the member banks and sell the assets/securities to an SPV managed by domain experts at fair valuations.</p><p>This can help drain the ‘bad cholesterol’ from the entire banking and lending institutions, which can later lend aggressively to priority sectors like infrastructure, housing, MSMEs and agriculture without any fear of ‘NPA baggage’.</p><p>The success of this plan will depend on the precision of execution in pooling of NPAs and selling of the acquired assets by the AIF, which should not get entangled into protracted litigations.</p><p><strong>Infra push</strong></p><p>Thrust has been given to infrastructure push (roads, highways, railways, power, ports and airports) to achieve a faster growth rate in our mission ‘$5 trillion’ GDP. The initiatives were through the National Infrastructure Pipeline (NIP) which has already completed projects worth Rs 1.1 lakh crore. The allocation for road transport and highways is as high as Rs 1.18 lakh crore in the overall CAPEX of Rs 5.54 lakh crore.</p><p>To fund the huge infra allocations and to avoid getting into the cascading effects of fiscal deficit which is now pegged at 9.5% of GDP for FY 21, 6.80% for FY 22, FM has boldly come out with monetisation of operational assets of PSUs, gas supply and highway toll receivables, realistic disinvestment plan to the extent of Rs 1.75 lakh crore, sale of government/ PSU lands which are under loss, privatisation of two public sector banks and a general insurance company and many other measures.</p><p>Special purpose vehicles are being launched for land ‘monetisation’ (various government agencies are holding 5 lakh hectares of land) and setting up of an innovative Development Financial Institution (DFI) with a corpus of Rs 20,000 crore, with a mandate to lend Rs 5 lakh crore in three years. This innovative model will augment long term funds to infra and real estate sectors through investment trusts (InvITs) and real estate investment trusts, thus overcoming ‘asset-liability’ mismatches.</p><p><strong>Wishlist remains</strong></p><p>Nothing concrete has been done for affordable housing except ‘rollover’ of income tax benefits for individual borrowers under affordable housing, by one more year, tax holiday on profits for affordable housing builders and a few other steps.</p><p><em>(The writer is a former banker.)</em></p></div>