Budget: Long tenure deposits to get a tax break?

Rising inflation has forced the Reserve Bank to tighten its monetary policy. As a result, cost of funds has gone up. The banking industry hopes the finance minister will announce policy measures to reduce the impact on banks’ margins. The biggest demand of the banking sector is tax breaks on longer tenor deposits to help deposit growth. Bankers also expect the government to announce subsidies for each no-frills or zero balance account opened so that banks can service first time customers and meet the target of opening 50 million such accounts in 73,000 villages with a population of at least 2,000 by next year. But, that’s not all. Banks expect the government to come out with a roadmap for takeout financing that will address the issue of infrastructure lending. One such measure could be allowing banks to issue infrastructure bonds with tax benefits. The banking industry also wants government subsidy or concessions on interest rates provided on lending to State Electricity Boards given their weak financial health. That will do away with asset quality concerns in power financing segment.