FY 2016-17 not a conventional year as major reformative decisions were taken. There is need for out of box thinking-Finance Ministry

FY 2016-17 not a conventional year as major reformative decisions were taken. There is need for out of box thinking-Finance Ministry

FY 2016-17 not a conventional year

Ministry of Finance

Dated: 20-12-2016

Press Release

FM: Current Financial Year 2016-17 is not a conventional year as major reformative decisions have been taken; There is need for out of box thinking; Doesn’t see any serious challenges as far as structural changes are concerned.

The Union Finance Minister Shri Arun Jaitley said that the current Financial Year 2016-17 is not a conventional year as many major reformative decisions have been taken during the year. He said that there is need for out of box thinking as series of steps are required about what the Government can do and what the banks can do. The Finance Minister Shri Jaitley was making his Opening Remarks at the Pre-Budget Consultative Meeting with the representatives of Banks and Financial Institutions. The Finance Minister further said that the banking sector is the backbone of our economy. He said that he doesn’t see any serious challenges as far as structural changes are concerned.

After that number of suggestions were given by the representatives of the Bankers and FIs for consideration by the Government. Some of the major suggestions are as follows-

It was suggested that there is need for recapitalization of banks in the Current Financial Year 2016-17 as well as in the next Financial Year 2017-18. There is need for Full Tax Exemption for NPA provisioning by the banks keeping in view their profitability.

Post -demonetization, liquidity in banks have improved. This may impact saving deposit rates. This makes senior citizens more vulnerable as their income is adversely affected. So, some sort of exemption need to given to them under the Income Tax Act so that they have a decent income through their deposits.

In  case of GST,  there is need for Central Registry for GST compliance by the banks which have branches on pan India basis. In case of digitization, digital acceptance infrastructure is loss making at present. So digital acceptance infrastructure need to be incentivized. Another suggestion was that there is need for exempting Banking Correspondents transactions from service tax.

It was informed that the overall mood about demonitisation in rural areas including among the farmers is largely positive. However, four sectors need special attention. These are- (i) Vegetable growers who depend on cash for their day to day dealings and can’t hold their crop for long as it is perishable. (ii) Brick kiln labourers as their owners used to pay them in cash. (iii) transport industry in rural India, and (iv) Plantations in South.

It was suggested that there is urgent need for special efforts for digitization of Primary Agriculture Cooperative Societies, Regional Rural Banks and Co-Operative Banks to promote digital transactions and e-payments.

Dairy sector has huge potential for employment generation. Milk production in India is increasing but milk processing capabilities and infrastructure required for the same has not increased accordingly. Hence, dairy processing sector requires fresh infusion of funds. It was suggested to create a new Dairy Infrastructure Development Fund for this purpose.

Use of latest and high technology in agri- sector needs to be improved. A lot of people are coming forward to set-up new Start-Ups in agri-sector. A Krishi Udyam Nidhi be created for helping such Start-Ups. Also IT Applications in agriculture need to be given further boost.

It was also suggested that NABARD also need capitalization of worth Rs.2,500 crore.

After demonitisation, the Budget should focus on boosting the consumption to create demand. Urban Local Bodies should be encouraged to collect Property Tax and Utility Tax through online means. Finance Bill should mandate that all wages should be paid by the employers through banking channel or digital mode. Many shopkeepers don’t sell using digital means as they do not want to pay taxes. So there is need to give some tax rebate to these shopkeepers to use digital means and for better compliance. Same way, consumer may also be given a tax rebate at the year end if  his digital purchase is more than a certain amount.

Micro Finance Sector has seen a little increase in default as most of the people pay in cash. Also in SME sector, employers are waiting for the withdrawal limits to be raised to start paying their workers. Axis Bank representative specifically listed out the steps taken by bank management against some erring officials and assured the Finance Minister that as a bank, they are fully committed to highest level compliance of banking and Government prescribed norms and standards.

To kick start demand in the economy, low cost housing need to be encouraged. Ownership of a plot or land is required to avail finance for housing. Some customers do not own land in their own names, hence this norm may be relaxed.

In digital payments, issues of internet connectivity are there. Hence, each district may be allotted to a particular telecom company to improve internet connectivity.

Mutual Funds and Life Insurance Companies provide employment to a large number of youths through their distribution network. Some sort of incentive should be given to them. To fight unemployment, a provision should be made that if a firm, that employ a certain number of people, increases the number of jobs by a certain degree, then 2-3 per cent tax relaxation would be given to it. This directly links tax rates with job generation.

As far as the Government’s Financial Inclusion drive is concerned, a Venture Fund for members of Scheduled Caste was launched with Rs 200 crore. Under this, 71 proposals have been screened so far. So the Government should continue to provide Rs 200 crore more in next budget. And a similar fund for STs should also be created.

Skilling of the personal for ongoing digitization drive is an imperative. Also revenue model for business correspondence model to be revamped as many of these business correspondents are struggling and leaving the companies after some time.

In the meeting, along with the Union Finance Minister, Shri Arun Jaitley, the Minister of State for Finance and Corporate Affairs, Shri Arjun Ram Meghwal, Finance Secretary, Shri Ashok Lavasa, Secretary, Department of Economic Affairs (DEA),  Shri Shaktikanta Das, Revenue Secretary, Dr.Hasmukh Adhia, Secretary ,Financial Services(DFS), Mrs Anjuli Chib Duggal, Secretary, DIPAM, Shri Neeraj Kumar Gupta, Chief Economic Adviser(CEA), Dr Arvind Subramanian, and other senior officers of the Ministry of Finance also participated.

The representatives from Banking and Financial Institutions include Shri S.S. Mundra, Deputy Governor, Reserve Bank of India (RBI), Shri Nachiket M. Mor, Deputy Governor, Reserve Bank of India(RBI), Mrs. Arundhati Bhattacharya, Chairman, State Bank of India(SBI), Dr. Harsh Kumar Bhanwala, Chairman, NABARD, Shri Rajeev Rishi, Chairman, Indian Banker’s Association and CMD,  Shri S.B. Nayar, Chairman & MD, Indian Infrastructure Finance Com. Ltd.(IIFCL), Shri Ashwani Kumar, CMD, Dena Bank, Ms. Chanda Kochhar, MD & CEO, ICICI Bank Ltd., Shri V.K. Sharma, Chairman (incharge) & MD, LIC , Shri Aditya Puri, MD, HDFC Bank Ltd., Shri Chandrasekhar Ghosh, Chairman Bandhan Bank, Ms. Shikha Sharma, MD & CEO, Axis Bank Ltd., Shri Kishore Kharat, MD & CEO, IDBI, Shri A Balasubramanian, Chairman, Association of Mutual Funds in India, Shri M.G. George Muthoot, Chairman, The Muthoot Group, Shri Y.M. Deosthalee, CMD, L&T Finance Holding, Shri Uday Kotak, Exec. Vice Chairman and MD, Kotak Mahindra Bank, Shri Pankaj Razdan, CEO & MD, Birla Sunlife Insurance, Shri Raman Aggarwal, Chairman, Finance Industry Development Council(FIDC), Shri Milind Kamble, Chairman, Dalit Indian Chamber of Commerce & Industry and Shri D. Sattaiah, Chairman, Basix-Microfinance,


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