After an announcement of union budget 2021, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that the budget has proposed several structural measures which would improve the functioning of the financial sector in the near to medium term.
As per the report, the budget 2021 has proposed measures which are structurally positive for the banking sector, especially public sector banks (PSBs). The creation of an asset reconstruction company and an asset management company to acquire and consolidate the stressed assets of PSBs and offload the same to alternative investment funds could realise better value of stressed assets for PSBs, thereby reducing their provisioning requirements and therefore the need for the government of India to infuse more capital in these banks.
Ind-Ra further highlighted other positive measures for the banking sector include the focus on improving the access of bank deposits, up to Deposit Insurance and Credit Guarantee Corporation limit in case of a bank coming under stress. This would enhance the confidence of deposit holders.