Synopsis: Finance Minister Nirmala Sitharaman stresses the importance for banks to refocus on their primary roles of mobilizing deposits and providing loans, particularly in light of concerns over slowing deposit growth. Additional topics addressed include capital gains tax on property, angel tax resolution, employment generation schemes, disinvestment policy, and GST rate rationalization.
In a recent interview with the Economic Times, Finance Minister Nirmala Sitharaman emphasized the critical need for banks to prioritize their primary roles of mobilizing deposits and providing loans, especially amidst concerns about slowing deposit growth. She reiterated that while banks are free to pursue other activities, their core functions must remain a priority.
Core Functions of Banks:
Sitharaman underlined that the foundational duties of banks—mobilizing deposits and lending—must be refocused on. This directive comes as the Reserve Bank of India's (RBI) latest data shows that bank deposits grew by 11.1% as of June 28, compared to a 17.4% surge in credit, highlighting an unsustainable gap.
"Overall, the earlier approach that banks need to mobilize deposits has come down over the decades," the Finance Minister noted. She stressed that "banks need to focus on their core business, which is to mobilize deposits and lend money. Nothing stops them from doing anything else, but this is core."
Capital Gains and Angel Tax:
Addressing the newly announced 12.5% capital gains tax on property without indexation, Sitharaman described the measure as "fair". Additionally, she mentioned the government's intention to resolve ongoing angel tax cases. "It can't be that we've removed a tax but those litigations are going to hang fire for some time. That cannot be a fair treatment. We will have to work out something," she stated. The abolition of the angel tax will be effective from April 1, 2025.
Employment Generation and Disinvestment:
Sitharaman highlighted that extensive consultations with industry were held while designing employment generation schemes announced in the budget, and industry involvement will continue during the implementation phase. On the topic of disinvestment, she affirmed that the policy remains guided by the 2021 budget statement, which opens all sectors to private sector participation. She also acknowledged that asset monetization efforts "can be better".
GST Rate Rationalization:
The Finance Minister indicated that the GST Council will consider rate rationalization for daily-use goods, in line with the budget's efforts to raise rural incomes.
In conclusion, the finance minister Nirmala Sitharaman's recent statements underscore the necessity for banks to concentrate on their fundamental roles of deposit mobilization and lending.
While other financial activities are not discouraged, the core functions must not be neglected.
The minister also addressed various tax-related issues, employment generation schemes, and the ongoing focus on asset monetization and GST rate adjustments.
