Union Budget 2019: Impact on Banking and Finance Sector

The Union Budget 2019-20 was announced by the Minister of Finance Nirmala Sitharaman in Parliament today. Banking and finance sector will receive a huge boost in credit with the allocation of Rs 70,000 crore for public sector banks (PSBs). The Finance Minister reported that there was a recovery of over Rs 4 lakh crore of bad loans due to Insolvency and Bankruptcy Code (IBC).

She also reported that the NPAs of commercial banks had dropped by more than Rs 1 lakh crore during the last year. At present, the Provision Coverage Ratio (PCR) has touched its highest level in the last 7 years. The domestic credit growth has also recorded an increase to 13.8%.

PSBs will now offer online personal loans and doorstep banking services through tech-based platforms to ensure ease of living to customers. Customers of one PSB will now be allowed access to the services offered by all PSBs. The government also plans on strengthening the governance in PSBs.

Non-Banking Finance Companies (NBFCs) who play a crucial role in maintaining consumption demand and building capital will continue receiving revenue from banks and mutual funds.

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The government shall provide a partial credit guarantee for six months to PSBs in case the purchase of high-rated pooled assets up to Rs 1 lakh crore during an assessment year attracts the first loss of up to 10%.

The Reserve Bank of India (RBI) will be the regulatory authority – though limited at present – for NBFCs. However, the Finance Bill shall include proposals which strengthen the RBI’s ambit over NBFCs.

The Finance Minister also announced the government’s intention to devote Rs.100 lakh crore in infrastructure during the next 5 years. An expert committee is proposed to be set up to study the long-term finance and development finance institution to learn about the current scenario is the finance sector.

The committee shall then come up with a feasible structure and necessary flow of funds via development finance institutions.

On the investment front, the government plans on taking various initiatives to expand the investment space. The measures include realignment of the government’s holding in central public sector enterprises (CPSEs), the introduction of investment options related to ETFs in the same line as ELSS.

The RBI will also be issuing a new series of Re 1, Rs 2, Rs 5, Rs 10 and Rs 20 coins for the public shortly  This will help the visually impaired identify the coins easily.