Maharashtra banks start levying 0.25% duty on loans

The Maharashtra government's stamp duty ruling on loan agreements has started pinching small and medium enterprises (SMEs) in the state.

Some banks have already started collecting the levy of 0.25 per cent as they would not be in a position to recover the levy after the loan has been disbursed.

"Banks have already started charging stamp duty from borrowers such as me," said the proprietor of a small industrial unit in Navi Mumbai.

The proprietor had approached his bank for an overdraft when he was told that he will have to pay 0.25 per cent stamp duty on the amount sanctioned.

A banker from a public sector bank said the decision to levy stamp duty on loan agreements is here to stay and it does not make any sense to delay implementation in the hope that bank loans will get an exemption.

"What's important to note is that even the IBA (Indian Banks' Association) has not sought complete withdrawal of the levy. The bankers' body has only said the levy should be scaled down," another banker said.

The IBA has written to the state government asking it "to make stamp duty more reasonable as 0.25 per cent is exorbitant."

The IBA representation was in response to a clarification from the government that loan agreements are covered by the recent amendment to the Bombay Stamps Act. Corporates as well as individuals now have to pay the stamp duty on all forms of loans availed from banks.

Bankers said IBA is not in a position to push for exemption as they themselves used stamp paper for signing agreements with borrowers.

The state accounts for almost 30 per cent of all loans disbursed in the country. The total credit disbursement in the country is expected to be over Rs 3,00,000 crore in FY06.