What are the Expectations of Banking Industry from Newly Formed Modi Government?

With the formation of the new government and the assignment of ministries to Union Cabinet Ministers, the BFSI (Banking, Financial Services, and  Insurance) industry in India is eagerly voicing its expectations and industry needs from the newly formed government.

Expectations of Top Bankers in India

PSB Divestments: Top bankers in India are eagerly awaiting the government’s final view on the divestment of Public Sector Banks (PSBs). They hope for clarity on this matter, which will have a significant impact on the banking sector.

Fiscal Deficit and Interest Rates: Bankers expect the new government to take measures to lower the fiscal deficit and interest rates. Lowering the fiscal deficit will reduce the government’s borrowing program, thus freeing up more resources for lending to the private sector. It will also contribute to keeping interest rates lower.

Credit Growth for SMEs: Enhancing credit growth, especially for Small and Medium Enterprises (SMEs), is another expectation of the banking sector. Bankers believe that targeted credit schemes, risk mitigation strategies, and supportive policies can help boost credit growth in critical sectors of the economy.

Tax Benefits and Savings Growth: Bankers suggest that tax benefits, such as increasing savings in time deposits as part of income deductibles, can stimulate savings growth. These benefits will not only support individual savings but also help banks gather more deposits.

Financial Inclusion and Digital Infrastructure

Bankers emphasize the importance of the government’s support for various financial inclusion activities, particularly in aspirational districts. They believe that measures to enhance credit growth for SMEs and critical sectors of the economy, along with risk mitigation strategies and supportive policies, are necessary.

Additionally, continued investment in digital infrastructure is crucial for banks to better serve their customers and improve operational efficiency.

Boosting Consumption and Investments

Bankers expect the government to implement measures to boost consumption through tax breaks. They also suggest the introduction of schemes similar to the Production-Linked Incentive (PLI) for SMEs to encourage investments. Initiatives for ease of doing business, enhancing transparency, and promoting a business-friendly environment are also sought after by the banking fraternity.

Focus on Infrastructure, Rural Development, and Digitalization

Bankers emphasize the need for increased government spending on infrastructure and development projects, particularly in rural areas. They believe that this will not only contribute to economic growth but also ensure more equitable distribution of development benefits across the country.

Moreover, the continuation of the government’s digital push is deemed imperative. Expanding digital infrastructure and promoting digital literacy are seen as important steps towards modernizing the Indian economy and making it more resilient and globally competitive.

Other Expectations

Bankers also call for measures to boost consumption, maintain capital expenditure (capex) at the current rate, forge Free Trade Agreements (FTAs) to improve export growth, and focus on improving farm productivity in general.

Overall, the BFSI industry has high hopes for the newly formed government to address critical areas such as fiscal deficit, interest rates, credit growth, financial inclusion, digital infrastructure, consumption, investments, ease of doing business, and rural development. The industry believes that these measures will contribute to the overall growth and prosperity of the Indian economy.