budget analysis of financial sector<br />
 Statement by Mr.Pranab Mukharjee<br />	“At times the biggest reforms are not the ones that make headlines, but the ones c...
 Current account deficit situation poses some concern.
 Must ensure that private investment is sustained.
 “The economy has shown remarkable resilience.”</li></li></ul><li>Budget 2011-12<br />
 Proposals(Banking & Microfinance)<br /><ul><li>Setting up of Central Electric Registry under SARFAESI Act.
Infusion of INR 6000 cr in Banks to maintain Tier I CRAR of 8 percent
Infusion of INR 500 cr in Regional Rural Banks to maintain CRAR of 9 per cent.
Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
Liberalisation of interest subvention scheme (of 1%) on housing loans upto INR 25 lakhs in urban areas and INR 15 lakhs fo...
Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector ...
INR 3,000crores to be provided to NABARD to provide support to handloom weaver co-operative societies which have become fi...
Extension of tax exemption for investments in infrastructure bonds :</li></ul>POSITIVE— puts greater thrust on funding of ...
Capital infusion into public sector banks : </li></ul>POSITIVE— will enable them to remain on a high growth path.<br /><ul...
Road map for banking licenses :</li></ul>POSITIVE — should invigorate the sector with higher activity levels (private bank...
“Appropriate legal framework” is put in place for enhancing microfinance services to the poor
Reduces the vulnerability and enhances income</li></li></ul><li>FDI over the past years<br />
India Lagging Behind China in FDI Inflows in spite of having high-tech industries and adapt workforce.<br /><ul><li>The ma...
China has a bigger market size than India, offers easy accessibility to export market, government incentives, developed in...
          FDIs & FIIs :<br />FII permitted :<br />POSITIVE-The Security and Exchange Board of India registered mutual fund...
 Effect of this decision<br /><ul><li>It would liberalize the portfolio investment route and enable Indian mutual funds to...
POSITIVE- Disinvestment target set for INR 40,000 crore in the year 2011-12.
EFFECT – Due to the disinvestment of government from Indian markets number of private players will increase.</li></li></ul...
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Analyses-Budget on financial sector

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Analyses-Budget on financial sector

  1. 1. budget analysis of financial sector<br />
  2. 2. Statement by Mr.Pranab Mukharjee<br /> “At times the biggest reforms are not the ones that make headlines, but the ones concerned with details of governance which affect the everyday life of aam aadmi (common man). In preparing this year’s budget, I have been deeply conscious of this fact.”<br /><ul><li> Food inflation remains a concern.
  3. 3. Current account deficit situation poses some concern.
  4. 4. Must ensure that private investment is sustained.
  5. 5. “The economy has shown remarkable resilience.”</li></li></ul><li>Budget 2011-12<br />
  6. 6.
  7. 7. Proposals(Banking & Microfinance)<br /><ul><li>Setting up of Central Electric Registry under SARFAESI Act.
  8. 8. Infusion of INR 6000 cr in Banks to maintain Tier I CRAR of 8 percent
  9. 9. Infusion of INR 500 cr in Regional Rural Banks to maintain CRAR of 9 per cent.
  10. 10. Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
  11. 11. Liberalisation of interest subvention scheme (of 1%) on housing loans upto INR 25 lakhs in urban areas and INR 15 lakhs for dwelling units under priority sector lending (with cost of house not exceeding INR 25 lakhs).</li></li></ul><li> Proposals(Banking & Microfinance)<br /><ul><li>Dividend distribution tax on Mutual Funds
  12. 12. Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
  13. 13. INR 3,000crores to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.</li></li></ul><li>EFFECT OF THESEPROPOSALS<br /><ul><li> SARFAESI Act, 2002 : </li></ul> The establishment of Central Electronic Registry under the SARFAESI Act, 2002 from March 2011 is expected to help banks mitigate frauds in loan cases involving multiple lending from different banks on the same immovable property.<br /><ul><li>EFFECT — This will make the bank loans more secure.</li></li></ul><li><ul><li>Higher limit for inclusion of housing loans as priority sector loans :</li></ul>NEUTRAL— Under “rural housing fund” FM has passed the provision of 3000 cr. , which earlier was 2000 cr.<br /><ul><li>EFFECT — easy accessibility to money for rural population.
  14. 14. Extension of tax exemption for investments in infrastructure bonds :</li></ul>POSITIVE— puts greater thrust on funding of infrastructure projects and also provides greater funding diversity for infrastructure financing companies.<br /><ul><li>EFFECT — extension of fiscal benefits in infrastructure bonds.</li></li></ul><li><ul><li>Wider tax base for life insurance services : </li></ul>SLIGHTLY NEGATIVE— widens scope of service tax to non- Ulip products and also raises taxes.<br /><ul><li>EFFECT — The increase in service tax on life insurance products will make both traditional and unit linked insurance plans more expensive.
  15. 15. Capital infusion into public sector banks : </li></ul>POSITIVE— will enable them to remain on a high growth path.<br /><ul><li>EFFECT -under- capitalize bank will not fall short of capital</li></li></ul><li><ul><li>Thrust on financial inclusion : </li></ul> POSITIVE— 27% higher target for direct agricultural loans (increases access to funding), and higher interest subvention for timely loan repayments (lesser interest burden helpful for asset quality performance), should channel greater funding into this segment<br /><ul><li>EFFCET — Liberal funding of loans in agriculture.
  16. 16. Road map for banking licenses :</li></ul>POSITIVE — should invigorate the sector with higher activity levels (private banks could face additional competition), RBI likely to come up with detailed guidelines.<br /><ul><li>EFFECT—participation from foreign banks and NBFC’s in financial inclusion motive</li></li></ul><li><ul><li>Instituting INR 100 crores India Microfinance equity fund with SIDBI is a welcome move.It enhances the ability of profits and cooperatives to achieve scale and efficiency in operations.</li></ul>Implications :<br /><ul><li>Disbursals are made with speed and focus
  17. 17. “Appropriate legal framework” is put in place for enhancing microfinance services to the poor
  18. 18. Reduces the vulnerability and enhances income</li></li></ul><li>FDI over the past years<br />
  19. 19. India Lagging Behind China in FDI Inflows in spite of having high-tech industries and adapt workforce.<br /><ul><li>The main cause behind this drawback is that India is not skilled enough to adopt the technological advancements at a fast pace.
  20. 20. China has a bigger market size than India, offers easy accessibility to export market, government incentives, developed infrastructure, cost-effectiveness, etc.</li></li></ul><li>FII over the last decade<br />
  21. 21. FDIs & FIIs :<br />FII permitted :<br />POSITIVE-The Security and Exchange Board of India registered mutual funds and unlisted bonds would be permitted to accept subscriptions from foreign investors to meet the KYC requirements for equity schemes.<br />POSITIVE - For foreign players, insurance limit increased from 26% to 49%<br />Retail FDIs :<br />NEGATIVE– Lack of FDI in retail was a disappointment<br />
  22. 22. Effect of this decision<br /><ul><li>It would liberalize the portfolio investment route and enable Indian mutual funds to have direct access to foreign investors in Indian equity market, which had hitherto been restricted to only Foreign Institutional Investors (FIIs), sub-accounts registered with SEBI and NRIs.</li></li></ul><li>PSUs<br /><ul><li>Government’s decision to disinvest :
  23. 23. POSITIVE- Disinvestment target set for INR 40,000 crore in the year 2011-12.
  24. 24. EFFECT – Due to the disinvestment of government from Indian markets number of private players will increase.</li></li></ul><li>Effect on Market<br /><ul><li>Indian Stock Markets Closing On Budget Day (On 28-feb-2011):</li></ul>Sensex up by 122 points to 17823.<br />NIFTY up by 29 points to 5333.<br /><ul><li>Last year(In 2010) :</li></ul>Sensex ended up by 175 points at 16429.<br />NIFTY ended up by 62 points at 4955 level.<br />
  25. 25. Comparison<br /><ul><li>The markets ended up the day when budget was announced but that increase was lesser than that in previous year.
  26. 26. The above data of two years show us that this year the budget has not been able to affect the stock market to the same extent how it affected the market last year.</li></li></ul><li>
  27. 27. Proposals(Financial Markets)<br /><ul><li>Infrastructure Debt Fund
  28. 28. POSITIVE – Under this fund the interest income will be tax free for the residents of India and Taxable @ 5% for the FII investors.
  29. 29. EFFECT – Promote FII and also the long term investment habits among the citizens.</li></li></ul><li>Suggestions<br /><ul><li>There should be no change in service tax on insurance plans : </li></ul>In India people take insurance plans not only as a safety device but also as an investment option, so due to increase in service tax these policies will now be expensive.<br /><ul><li>Increase in FDI in retail :</li></ul> This year we were expecting FDI in multiple retail branding to increase but it did not. The Finance Minister should increase the FDI in retail so that the retail market grows.<br />
  30. 30. <ul><li>Decrease tax rate on FDs :</li></ul> The Finance Minister could decrease the tax rates on FDs so as to promote savings of the citizens of India.<br /><ul><li>Taxable Time period on the returns of stocks should be decreased :</li></ul> At present the returns on stocks are tax free after 1 year, this time period could be reduced, say to 6 months.<br />
  31. 31. MADE BY-<br />ATUL KARAKOTI<br />NAVDEEP ARORA<br />NEHA SHARMA<br />SHWETA SHARMA<br />VIVEK SHARMA<br />

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