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- Budget 2023; Sujan Hazra, Chief Economist, Anand Rathi Shares
Now only 6 days are left in Budget 2023. Like every year, this year also people have high expectations from the budget. Meanwhile, Sujan Hazra, Chief Economist, Anand Rathi Shares, believes that the Reserve Bank is continuously raising interest rates to curb inflation. Due to this, the funding cost of banks has increased. The gap between deposit and credit growth is widening. In such a situation, the banking sector is expecting a development based budget.
The tax rate on the interest earned on bank deposits is higher than the tax on returns from other investment instruments in the market. Due to this, the share of bank deposits in the total savings of the families is decreasing. It is expected that the government will reduce the tax rate on bank interest in the budget.
It is expected that measures will be taken to increase the participation of banks in the Indian equity and debt market in the budget – Sujan Hazra
According to economist Hajra, some banks may need additional capital due to increased credit growth. In the medium term, these banks may have to raise equity funding from the market. He said- We hope that measures will be taken in the budget to increase the participation of banks in the Indian equity and debt market. Which will make it easier for banks to raise equity capital. Along with this, their access to the international finance market will also improve.
There is a huge difference in funding cost of India and developed countries. If the government brings in regulatory reforms to allow banks to use their discretion in raising foreign funds, the cost of raising funds for banks can come down significantly.
Link small savings rates to external benchmarks
RBI has directed banks to link a wide range of lending rates either to marginal cost of funding or to an external benchmark. However, no such clear rule is applicable to various small savings schemes of the government (such as Sukanya Samriddhi Yojana). Since bank deposits compete with these schemes, it is necessary that the rates of small savings schemes are also linked to the same benchmark.
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