Banks seek tax breaks on deposit income Want Sops For Easier Infra Project Funding In a move that is likely to benefit consumers and boost infrastructure finance, bankers will seek tax breaks on deposits and longterm bonds. Public sector banks will submit to the government their capital requirements if credit is to grow by 16% during FY15. Finance minister Arun Jaitley will meet with CEOs of leading banks, financial institutions and economists as part of his pre-Budget consultations. Sources said that the meeting might not be restricted to just pre-Budget suggestions and that the finance minister might seek feedback on long-term capital requirements and consolidation in the banking industry . Bankers said that bad loan resolution was also one of the issues that they would raise. RBI has provided a special dispensation allowing banks to spread the losses arising out of sale of bad loans at a discount to asset reconstruction companies (ARCs) over the next two years. Banks said that they would seek some fiscal relief as well. “We have already sensitized the government on a few issues on the direct tax side and a few on the service tax side. We have also given our suggestion on larger policy matters on getting stalled projects up and running,“ said M V Tanksale, chief executive of the Indian Banks Association. One suggestion from the banks is that interest income from bank deposits should be subject to indexation benefit. In other words, tax would be paid only on the real returns above the rate of inflation. Speaking to TOI, a senior banker said that going forward mobilizing deposits to fund growth could be a challenge. Banks are facing competition from fixed maturity plans of mutual funds, government small saving schemes and taxfree bonds of financial institutions. “For tax payers, it does not make sense to maintain fixed deposits which attract tax. Post tax, the returns drop to around 6% which, in real terms, is a negative return after factor ing inflation,“ he said. The banker also said that creating avenues for longterm funds was imperative. “Given the state of Indian bond markets, the burden of funding infrastructure is going to fall on banks. Allowing banks to float long-term bonds, which are either taxfree or exempt from reserve requirement, would enable banks to provide long-term loans,“ he said. The consultation comes close on the heels of the FMs meeting with financial regulators -including Reserve Bank of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory Authority -in Mumbai on Saturday . Although the meeting was part of the quarterly gathering of regulators under the aegis of the Financial Stability Development Council, the finance minister had used the opportunity to obtain feedback from banks.
Posted on: Tue, 10 Jun 2014 11:20:59 +0000
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