Budget expectations: Banking sector

21 Jan 2022 , 05:10 PM

The accommodative stance by RBI on the monetary policy and announcement of various relief measures has re-emphasised the government’s support to push economic growth, currently reeling under the impact of the pandemic. The financial services industry remains a significant pillar of the economy, and thus measures to incentivise retail credit growth, digital integration and financial inclusion should remain top priorities.

As the banking industry continues to focus on digital transformation, lowering taxes on cashless transactions and card spending would be appreciated by the consumer. An increase in the financial incentive over last year’s budgetary allocation of INR 1500 crores to promote digital payments can come in handy to compensate banks for Merchant discount rate (MDR) losses.

The FM may consider enhancing the standard deduction for the salaried class from INR 50,000 to at least INR 100,000 and an increase in the cap under Section 80C from INR 150,000 to at least INR 200,000 to prop up household savings. Also, Fixed Deposits (FDs) need a level playing field as an instrument of savings under 80C. Making FDs with lower tenure eligible for tax exemption will ensure parity with other products like ELSS. Furthermore, the standardisation of LTCG to one year and beyond will simplify tax procedures even more.

The author of this article is Prashant Joshi — MD & Head Consumer Banking Group, DBS Bank India.

The views and opinions expressed are not of IIFL Capital Services, indiainfoline.com