BUDGETWISHLIST: Banking

CEO-SPEAK: R P Singh, CMD, Punjab & Sind Bank

"Nationalised banks are contributing to pension funds for their employees. This is exempt from Fringe Benefit Tax. However, some assessing officers have different views. Necessary clarification should be issued. Section 80-L should be reintroduced to bring back small depositors in the banking system. Saving bank deposits should be made attractive."

CHAMBER SPEAK

CII
Private banks are on a par with nationalised banks, both being part of the organised banking sector, and are treated equally for all practical purposes, including governance and regulation by the apex regulatory authority, the Reserve Bank of India.

Consolidation through amalgamation is an integral part of the banking business today to facilitate growth, achieve operational efficiency and to meet competitive challenges.

Hence, the benefit of Section 72A to carry forward and setoff unabsorbed business losses and accumulated depreciation should be extended to banks in the private sector to usher in a level-playing field

STATE OF PLAY

Robin Roy, Associate Director, PricewaterhouseCoopers

Reigning in lending costs of banks: With all reference rates left undisturbed by the RBI in its recent monetary policy announcements, banks have begun to introspect and review the operating costs that have an impact on lending costs. The Budget should provide some mitigating signals to the banks if they are expected to substantially revise their lending rates, particularly keeping in view the expected impact of the sub-prime crisis overseas. These could be product-specific or product-tenor specific.

Protecting margins in an era of rupee appreciation: Businesses impacted by the rising rupee are running on a one-way street without any speed-breakers, struggling to absorb the additional costs of the rupee (less export realisations) on revenues. Businesses in India are typically not geared to adopt risk containment measures, being caught unawares, during such exchange fluctuations. Certain enabling measures can be brought in the Budget to encourage adoption of professional risk management steps like allowing associated costs as business expenses.

Increasing retail presence in the capital markets: More the retail investors among shareholders of companies and mutual funds, less the chances of volatility in the stock markets as they are not so prone to "hot flows" of funds. Is there a logic in treating retail investors on a separate footing to make this happen more intensively?

Enhancing financial inclusion: Banks must be encouraged to bring products targeted at the grossly-untapped rural markets and increase penetration in these areas. All costs associated with distribution of financial products in these areas can be looked at separately for a set period of time to sustain such moves. Non-formal players like money-lenders, pawners and other local players should be encouraged.