FM calls for united efforts from financial institutions towards strengthening Indian economy

Union Finance Minister Pranab Mukherjee while addressing the CMDs/CEOs of Banking and Financial Institutions in a pre-Budget meeting urged all banks and financial institutions whether public or private to work together to attain the common objective of working towards a healthy economy. The Finance Minister was of the belief that this is a very challenging year for the nation and that there was a need to work together to meet these challenges of economy. He sought suggestions from the various stakeholders in formulating the Budget for 2012-13 in the current economic situation.

Mukherjee opined that the gross domestic product (GDP) growth rate for the fiscal year 2011-12 is expected to be around 7.2 percent and due to current uncertainty in global economy as euro zone crisis is still unresolved and volatility in international commodity prices especially fuel, it may be difficult to contain the fiscal deficit at 4.6 percent as targeted during the last budget. The international crisis of 2008 and the ongoing Euro Zone crisis have impacted India also and resulted in problems of inflation, deceleration of GDP and fiscal deficit.

Banking and Financial Institutions’ representatives drew the attention of the finance minister on various issues concerning the sector. Voices of concern were raised over the credit to GDP ratio in India which is one of the lowest in the world while it was also mentioned that despite India’s savings rate being about 32 percent, only one third of it reaches the banks. Suggestions of launching education loan guarantee scheme and a separate taxation window for pension funds and long term funds also came to the fore while the representatives also advocated the need for removal of handicaps which banks face in mobilizing the deposits.

The bank representatives’ which included Pratip Chauduri of SBI and Chanda Kochhar from ICICI Bank among many others, underscored the significance of supporting India’s under-developed infrastructure. Right from demanding to make banks eligible entities to issue tax free infrastructure bonds to seeking clarity and broadening of the definition of the infrastructure, the CMDs/CEOs of Banking and Financial Institutions raised many concerns and gave their suggestions that would help in giving the much need boost to infrastructure sector.

The participants also advocated for an independent regulator for infrastructure, suggested that single window clearance for the infrastructure sector projects including power projects would go a long way in attracting huge investment in this sector. It was suggested that there was a need for rationalization of transaction charges in the secondary market and also to boost microfinance. Regarding financial inclusion, it was said that banks who have done well in this regard may be given incentives in order to take them to the second level of economic inclusion. Participants focused on the need to encourage agriculture lending, SME lending and highlighted the issues of rural ware housing and food inflation etc.