Banks to set aside more money for bad debts

Provision for NPAs increased from 7.5 % to 8.5%

In order to give a boost to the banking sector, Union Minister for Finance and Corporate Affairs Arun Jaitley proposed to increase allowable provision for non-performing asset (NPA) from 7.5% to 8.5%. This will reduce the tax liability of banks. He also proposed to tax interest receivable on actual receipt instead of accrual basis in respect of NPA accounts of all nonscheduled cooperative banks also at par with scheduled banks. This will remove hardship of having to pay tax even when interest income is not realised.

Jaitley also said that the income tax for smaller companies with an annual turnover up to