Budget 2022: 5 key expectations of banking and finance sector

Since the outbreak of the COVID-19 pandemic, the Indian banking and finance sector has been taking cautious calibrated steps to stabilise various sectors, and support them in their growth endeavours. 

Over time, the Indian financial sector has diversified into multiple segments, from commercial banks to non-banking financial companies (NBFCs) and fintech players.  

Each finance segment is growing from strength to strength. So much so that while the commercial banks own over 64% share of total assets, the new age fintech industry is expected to reach $160 billion by 2025.

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It is this diversification that has infused immense capabilities in the sector for designing innovative financial products and offerings while serving people across socioeconomic strata and businesses amidst unprecedented global disruptions spanning over two years. 

With the COVID influences continuing into 2022, the financial institutions look forward to the upcoming budget expecting bold policy measures that will further add to the health of the sector and enable them to support the country's journey towards Atmanirbhar Bharat. 

Also Read: Budget 2022: Bank privatisation may get a fresh push 

The following are some of the key expectations that the sector has from Budget 2022:-
 

• Increasing the foreign direct investment (FDI) cap. The banking and finance sector expects that the foreign direct investment (FDI) limit in public sector banks (PSBs) would be raised as much as by 54% from the current 20% cap. This would bring PSBs at par with private banks where 74% FDI is already permitted. This move will further strengthen the health of government banks and create a more level playing field for both sectors.  
• Reducing government's stake in public sector banks. The government is expected to bring more policy and regulatory changes aimed at reducing sovereign shareholding in PSBs and driving speedier privatisation of government banks.  
• Tax Incentives for the banking industry. The sector is hoping for supportive incentives for the banking industry in the form of tax reductions, subsidies, or reimbursements of certain costs. Furthermore, tax waiver for online transactions at the cooperative banking level will boost cashless payments.  
• Conducive policies for Fintech and NBFCs. The two sectors are looking forward to a relaxed taxation regime to ease financial liquidity. They also hope for the implementation of more favourable compliance policies which would enable them to support MSMEs who are still not active in the folds of institutionalised banking.  
• Technology development and R&D. The banking sector has been driven by advances in technologies and strong R&D. Fintechs and technological start-ups aim to invest more in R&D in order to create new products and expand into new markets. In the digital age, the institutions are looking forward to progressive and supportive policy-making to encourage the development and deployment of new-age technologies in the banking and finance sector.

(The author is Executive Chairperson, Religare Enterprises Limited.)