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The government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming <keyword id="6358021" type="General" weightage="20" keywordseo="budget" source="Orion">Budget</keyword> as their financial health has improved significantly and they are on track to earn a combined profit of Rs 1 lakh crore, sources said. Their capital adequacy ratio is much above the regulatory requirement and varies between 14-20 per cent. To augment their resources, banks are raising growth funds from the market and also by selling their non-core assets, they added. The government last provided capital support to banks in 2021-22. It had earmarked Rs 20,000 crore for recapitalisation of PSBs through supplementary demands for grants. The government infused Rs 3,10,997 crore to recapitalise banks during the last five financial years i.e., from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks. Finance Minister <keyword id="129243" type="General" weightage="80" keywordseo="nirmala-sitharaman" source="Orion">Nirmala Sitharaman</keyword> is scheduled to present the fifth and final full Budget of the Modi 2.0 government on February 1. All the 12 public sector banks earned a cumulative profit of about Rs 15,306 crore in the first quarter which increased to Rs 25,685 crore in the September quarter. On a year-on-year basis, the growth was 9 per cent in the first quarter while it surged to 50 per cent in the second quarter. During the second quarter, <keyword id="13451504" type="COMPANY" weightage="80" keywordseo="sbi" source="Orion" meta.marketcap="528426.26077014" meta.tagname="State Bank of India" meta.tagpopularcount="0" meta.sectorid="15" meta.entitytype="company" meta.matchtype="exact" meta.aum="0" meta.entityid="11984" meta.tagseoname="state-bank-of-india" meta.sector="Banks" meta.tagnameorg="State Bank of India">SBI</keyword> reported the highest-ever profit of Rs 13,265 crore. On a year-on-year basis, this was 74 per cent higher. In the first half of FY23, the cumulative net profit of all PSBs increased by 32 per cent to Rs 40,991 crore. The combined profit more than doubled to Rs 66,539 crore in 2021-22 despite COVID-19 pressure. Many state-owned banks after a hiatus also declared dividends in last financial year. In all, nine banks, including SBI, declared dividends of Rs 7,867 crore to shareholders. Recently, the Finance Minister had said the government's efforts to reduce bad loans are yielding results with 12 PSBs reporting a 50 per cent jump in combined net profit at Rs 25,685 crore in the September quarter. NPAs declined as a result of the government's 4Rs strategy of Recognition, Resolution, Recapitalisation and Reforms, she had said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-breaches-80-level-against-usd-for-the-first-time-in-2-months/articleshow/97241273.cms">Rupee breaches 80 level against USD for the first time in 2 months</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/banks/news/canara-bank-q3-profit-surges-92-to-2882-crore/articleshow/97245895.cms">Canara Bank Q3 profit surges 92% to ₹2,882 crore</a>

Govt may not announce capital infusion for PSU banks in Budget 2023-24

<ul><li>Public sector banks will be given ₹70,000 crore capital to boost credit growth in the country. </li><li>Government will start raising a part of its borrowings in external markets. </li><li>One-time six month partial guarantee will be given for loans to high-rated pooled assets of financially sound NBFCs amount to ₹1,00,000 crore. </li></ul>The Finance Minister today gave a shot in the arm for public sector banks. They will be given ₹70,000 crore capital to boost credit growth in the country, which has been slow for the last few years. Added to that, the government will take some of its own loans away from Indian banks. The country’s biggest borrower is the government and banks love to lend them because of security. Now, this will change as the government will raise money internationally. “India’s sovereign external debt to GDP is among the lowest globally at less than 5%. The Government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have a beneficial impact on demand situation for the government securities in the domestic market,” the Finance Minister Nirmala Sitharaman said in the Budget speech on Friday. Gains from ‘Cleaning’ The stress in the banking sector and overall liquidity has been eased by other measures as well. The Finance Minister also said that the banking system has gained from ‘cleaning’ of the system. "NPAs of commercial banks have reduced by over ₹1,00,000 crore over the last year, record recovery of over ₹4,00,000 crore due to Insolvency and Bankruptcy Code and other measures has been affected over the last four years,” said Sitharaman. Helping NBFCs She also directed banks to not turn unduly risk averse of lending to non-banking financial companies (NBFCs). Banks have steering clear of any lending to them after IL&amp;FS defaulted on payments to them, dragging down as many as eight banks with them. Ever since, the funding pipe for NBFCs has died up. “NBFCs are playing an extremely important role in sustaining consumption demand as well as capital formation in small and medium industrial segment,” she said. The government is also walking the talk. It will provide a one-time six month partial guarantee to public sector banks (PSBs) for the first loss of up to 10%, for high-rated pooled assets of financially sound NBFCs amount to ₹1,00,000 crore. “Since the liquidity crisis, the banks have become more conservative and were wary of lending to NBFCs or providing interest rate reductions. Enhancing credit guarantee for portfolio purchases will definitely improve the flow of funds to healthy NBFCs with a good quality asset pool,” said Hardika Shah, Founder of Kinara Capital. SEE ALSO <a href="https://www.businessinsider.in/ilfs-management-had-deviously-bulldozed-rating-agencies-leading-to-the-scam/articleshow/70066909.cms">IL&amp;FS management had 'deviously' bulldozed rating agencies leading to the scam</a> <h1 style="line-height:1.44;margin-top:0pt;margin-bottom:8pt;border-bottom:solid #eeeeee 0.75pt;background-color:#ffffff;padding:0pt 0pt 15pt 0pt;"> </h1>

Indian banks will now have more cash to lend for more reasons than one

Ahead of the <keyword id="6360189" type="General" weightage="50" keywordseo="union-budget" source="Orion">Union Budget</keyword>, Finance Minister <keyword id="129243" type="General" weightage="50" keywordseo="nirmala-sitharaman" source="Orion">Nirmala Sitharaman</keyword> said on Sunday that she was aware of the pressures of the middle class but also recalled that the present government has not imposed any fresh taxes on them. <keyword id="679937" type="General" weightage="70" keywordseo="sitharaman" source="Orion">Sitharaman</keyword> will present Union Budget for 2023-24 in the Lok Sabha on February 1 amid expectations that the government will raise the income tax limit and provide relief to the middle class taxpayers, besides others. "I too belong to the middle class so I can understand the pressures of the middle class. I identify myself with the middle class so I know," she said while speaking at a function organised by the Panchjanya magazine, an RSS- associated weekly. In the same breath, the minister reminded the audience that the present Modi government has not imposed any fresh taxes on the middle class. Also, she added, income of up to Rs 5 lakh is exempt from the income tax. She said the government has taken various measures like developing the metro rail network in 27 cities and building 100 smart cities to promote ease of living. The minister assured them that the government can do more for the middle class as its population is growing and it has become sizeable now. "I quite recognise their problems. The government has done a lot for them and continue doing the same," she said without making any commitment. Sitharaman said the government has been raising the outlay on capital expenditure in each Budget since 2020. For current financial year, she said, it has been increased by 35 per cent to Rs 7.5 lakh crore as it has a multiplier effect on the economy. On the banking sector, she said, the government's 4R strategy --Recognition, <keyword id="1518048" type="General" weightage="50" keywordseo="recapitalization" source="Orion">Recapitalization</keyword>, Resolution and Reform--has helped in revival of public sector banks (PSBs). As a result of this, non-performing assets (NPAs) have declined and health of PSBs has improved greatly, she said. The government implemented an unprecedented recapitalization programme for PSBs amounting to Rs 2.11 lakh crore to support capital adequacy and prevent their default. PSBs turned the corner during 2020-21 with a combined net profit of Rs 31,820 crore supported by massive recovery, reduction in NPAs and windfall gains on their bond portfolio. Subsequently, the combined profit more than doubled to Rs 66,539 crore in FY22 despite COVID-19 pressure. They had booked collective losses to the tune of Rs 2,07,329 crore for five straight years from 2015-16 to 2019-20. The <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword> last month said, banks' gross NPA ratio has fallen to a seven-year low of 5 per cent and the banking system remains sound and well-capitalised. Speaking about farmers, Sitharaman said the government is committed to doubling their income and has taken various steps in that direction. On trade with Pakistan, she said the neighbouring country never offered Most Favoured Nation (MFN) status to India. Trade relations with Pakistan have suffered since the Pulwama terror attack in 2019, she said. With regard to freebies, the minister said, promises have to be made keeping in mind the financial health of the state and there has to be full transparency about it. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/more-unicorns-focused-on-profitability-now-than-just-burning-cash-as-funding-winter-sets-in/articleshow/97030045.cms">More unicorns focused on profitability now than just burning cash as funding winter sets in</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/over-5-4-lakh-housing-units-to-be-completed-across-top-7-cities-in-2023-anarock-report/articleshow/97029912.cms">Over 5.4 lakh housing units to be completed across top 7 cities in 2023: Anarock report</a>

I belong to middle class, understand their pressures: Sitharaman before Budget

The 2019 budget to be announced on July 5, 2019 will be the first full budget of its second term in the country’s governance. Incidentally this budget will also be the first one to be presented by the new woman Finance Minister <keyword id="129243" type="PERSON" weightage="20" keywordseo="Nirmala-Sitharaman">Nirmala Sitharaman</keyword>. Strong expectations are on the rise that this budget will outline what Narendra Modi’s government has on its priorities. In the first place, the union budget that will be presented by the first full-time woman finance minister of India is expected to boost up spending and bring in some relief to the taxpayers. Some of the immediate challenges to be addressed by the NDA Government include a slowdown in the economy, shrinking tax collections, and a weak consumption. The economists are advising to introduce measures that will encourage growth without placing a strain on the spending. Here are a few things we can expect from the union <keyword id="6147670" type="UNKNOWN" weightage="20" keywordseo="budget-2019">budget 2019</keyword>. Corporate taxes could be lowered for MSME businesses. Measures could be in place to encourage consumption by the middle class through some tax exemptions. During the recent past, Indian has lost its place amidst the fastest growing economies of the world. The GDP of Indian slipped down to the lowest in the last 20 quarters touching 5.8 percent in the March quarter. Hence the budget could announce ways to boost up the economic growth. As per the expectations of a number of analysts, the income tax structure might not be tweaked as it must support the government’s effort to grow the number of tax payers. Some people anticipate that the inheritance tax abolished long back might appear now having severe implications for the super-rich. The government is expecting to generate Rs.90,000 crores from disinvestment which is about 5.88 percent that was received during the last year. Hence the budget 2019 might work with a tough disinvestment target in an economy that has slowed down. Measures could be in place to boost up exports and employment. Small businesses could expect some benefits like subversion of interest rate and lowering of tax rates up to a particular turnover. The government might continue sticking on to a modest increase in the defence budget due to the tight financial position. Hence the long pending modernization program for the military could be delayed for some more time. Talking to the press recently, the BJP party’s spokesperson for economic affairs Gopal Krishna Agarwal said, "The focus of the budget will be to boost domestic consumption, address the rural crisis and support small manufacturers." Analysts are of the opinion that those announcements that are aimed at remedying the crisis in the non-banking financial companies (NBFC) sector will be deemed very important now. During last year, the government took a total control over the Infrastructure Leasing and Financial Services since the sector’s raised concerns that the financial sector could be infected. Through some big ticket announcements featured in the latest interim budget like the Rs. 75,000-crore income guarantee scheme for the small farmers in the country and a complete tax rebate for the persons earning up to Rs. 5 lakh a year, the government had already raised strong expectations from these circles. In the interim Budget announcements in May, the government made a number of big ticket announcements to build public perception. Those measures included a Rs. 75,000-crore income guarantee scheme from small farmers and a full tax rebate to individuals earnings up to Rs. 5 lakh a year.

What to expect from Nirmala Sitharaman's Union budget 2019

<ul><li>By 2022, all villages will have water, electricity and clean cooking facilities. </li><li>Additional deduction of up to ₹1,50,000 for interest paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued up to ₹45 lakh. </li><li>Enhance surcharge on individuals having taxable income from ₹2 crore to ₹5 crore and ₹5 crore and above so that effective tax rates for these two categories will increase by around 3 % and 7 % respectively. </li></ul>The Finance Minister Nirmala Sitharaman unveiled her maiden Budget covering aspects of startups, education, home loans, disinvestment and many others. Here are key announcements made by her, from her Budget speech. The Indian economy will grow to become a $3 trillion dollar economyin the current year. In Purchasing Power Parity terms, we are in fact, the third largest economy already, only next to China and the USA. Rail &amp; Land Railways should take up Public Private Partnership in Railways to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services. Current (house) rental laws are archaic and do not address the relationship between the Lessor and the Lessee realistically and fairly. A Model Tenancy Law will also be finalized and circulated to the states. Large public infrastructure can be built on land parcels held by Central Ministries and Central Public Sector Enterprises all across the country. Through innovative instruments such as joint development and concession, public infrastructure and affordable housing will be taken up. Small businesses &amp; Artisans Government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself. Pension benefits to about three crore retail traders and small shopkeepers whose annual turnover is less than ₹1.5 crore, is extended. The Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) envisions setting up 100 new clusters during 2019-20 which will aid 50,000 artisans. The Scheme contemplates to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors. FDI &amp; Disinvestment The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders. 100% Foreign Direct Investment (FDI) will be permitted for insurance intermediaries. Local sourcing norms will be eased for FDI in single brand retail sector. I propose to increase the statutory limit for foreign portfolio investors (FPI) investment in a company from 24% to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs. The cumulative resources garnered through Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts (REITs) and toll operate transfers exceeded ₹24,000 crore. Government is setting an enhanced target of ₹1,05,000 crore of disinvestment receipts for the financial year 2019-20. It is right time to consider increasing minimum public shareholding in the listed companies. I have asked SEBI to consider raising the current threshold of 25% to 35%. I propose to initiate steps towards creating an electronic fund raising platform – a social stock exchange - under SEBI to list social enterprises. Rural Growth By 2022, I would like to assure the nation that every single rural family, except those who are unwilling to take the connection will have electricity and a clean cooking facility. In the second phase of Pradhan Mantri Awas Yojana –Gramin, 1.95 crore houses are proposed to be provided to the eligible beneficiaries. Pradhan Mantri Gram Sadak Yojana phase III will look to upgrade 1,25,000kms of roads over the next five years, with an estimated cost ofRs 80,250 crore. Water &amp; Sanitation Ensuring India’s water security and providing access to safe and adequate drinking water to all Indians is a priority of the Government. A new Mantralaya will look at the management of water resources. It will work to ensure Har Ghar Jal (piped water supply) to all rural households by 2024 under the Jal Jeevan Mission. More than 95% of cities also have been declared ODF. More than 45,000 public and community toilets across 1700 cities have been uploaded on Google maps, covering more than 53% of India’s urban population. Women &amp; Education An amount of₹400 crore has been provided under the head, “World Class Institutions”, for FY 2019-20, more than three times the revised estimates for the previous year. I propose to start a programme, ‘Study in India’, that will focus on bringing foreign students to study in our higher educational institutions For every verified women SHG self-help group member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to1 lakh under the MUDRA scheme. Banks &amp; NBFCs Public Sector Banks are now proposed to be further provided ₹70,000 crore capital to boost credit for a strong impetus to the economy. For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees one lakh crore during the current financial year, Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10%. Reserve Bank of India (RBI) is the regulator for NBFCs.However, RBI has limited regulatory authority over NBFCs.Appropriate proposals for strengthening the regulatory authority of RBI over NBFCs are being placed in the Finance Bill. I am proposing to return the regulation authority over the housing finance sector from NHB to RBI. To facilitate on-shoring of international insurance transactions and to enable opening of branches by foreign reinsurers in the International Financial Services Centre, it is proposed to reduce Net Owned Fund requirement from₹ 5,000 crore to₹1,000 crore. India’s sovereign external debt to GDP is among the lowest globally at less than 5%. The Government would start raising a part of its gross borrowing programme in external markets in external currencies. Lowering Tax We continue with phased reduction in corporate tax rates. Currently, the lower rate of 25% is only applicable to companies having annual turnover up to ₹250 crore. I propose to widen this to include all companies having annual turnover up to ₹400 crore. This will cover 99.3% of the companies. Our government will provide additional income tax deduction of ₹1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around ₹2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle. Interest paid on housing loans is allowed as a deduction to the extent of ₹2 lakh in respect of self-occupied property. I propose to allow an additional deduction of up to ₹1,50,000 for interest paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued up to₹45 lakh. This will translate into a benefit of around ₹7 lakh to the middle class home-buyers over their loan period of 15 years. Levying taxes I propose to levy tax deducted at source TDS of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank account. Business establishments with annual turnover more than ₹50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. I propose to enhance surcharge onindividualshaving taxable income from ₹2 crore to ₹5 crore and ₹5 crore and above so that effective tax rates for these two categories will increase by around 3 % and 7 % respectively. Duties Import of defence equipment that are not being manufactured in India are being exempted from basic customs duty. To encourage domestic publishing and printing industry, 5% custom duty is being imposed on imported books. I propose to increase Special Additional Excise duty and Road and Infrastructure Cess each by one Rupee a litre on petrol and diesel. It is also proposed to increase custom duty on gold and other precious metals from 10% to 12.5%. Nominal basic excise duty is being imposed on tobacco products and crude oil. Aadhar &amp; Startups I propose to consider issuing Aadhaar Card for Non-Resident Indians with Indian Passports after their arrival in India without waiting for 180 days. I propose to make PAN and Aadhaar interchangeable and allow those who do not have PAN to fileIncome Taxreturns by simply quoting their Aadhaar number andalso use it wherever they are required to quote PAN. To resolve the so-called ‘angel tax’ issue, the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect ofvaluations of share premiums. <table style="border-width: initial; border-style: none;"></colgroup></colgroup><tbody></tbody></table>

Union Budget 2019 Highlights: FM levies more tax on the Super-rich, while making home loans cheaper for the middle class

<ul><li>Prime Minister meets top party leaders. finance ministry bureaucrats. </li><li>Government plans to make India a $5-trillion economy by 2024. </li><li>FM Nirmala Sitharaman to meet PM on Thursday, to discuss GDP growth. </li></ul>Prime Minister Narendra Modi is busy brainstorming with senior party leaders and top bureaucrats, ahead of Union <keyword id="6147670" type="UNKNOWN" weightage="20" keywordseo="budget-2019">Budget 2019</keyword>. On Tuesday, PM held a meeting with top officials in finance and other key ministries, to finalise its priorities. The PM is set to interact with economists, bankers and sectoral experts through the week to gain insights on pressing issues in agriculture, reform and effective implementation of signature schemes and projects. A five-year plan for the government to make India a $5-trillion economy by 2024, was cleared in Tuesday’s meeting, as per <a href="https://www.business-standard.com/article/budget-2019/pm-narendra-modi-starts-pre-budget-meets-to-brainstorm-on-economy-119061900058_1.html">Business Standard</a>. The meeting was attended by all the five secretaries of the finance ministry besides top officials across ministries, along with government think tank NITI Aayog. Pet Projects The course of PM’s pet projects like doubling farmers’ income by 2022, PM-Kisan, Pradhan Mantri Awas Yojana, Piped Water For All, and Electricity For All were also discussed, as reported by <a href="https://www.livemint.com/budget/news/pm-modi-brainstorms-with-key-secretaries-to-finalize-100-day-agenda-1560869743468.html">The Quint</a>. Yet another meeting is to be held on Thursday. It will be attended by <a href="https://www.business-standard.com/topic/finance-minister">finance minister</a> Nirmala Sitharaman, finance secretary Subhash Chandra Garg, revenue secretary Ajay Bhushan Pandey, along with chief economic advisor Krishnamurthy Subramanian, along with others. The focal point of all the meetings is to draw a road map for reform across departments, including ease of doing business<a href="https://www.business-standard.com/topic/economic-growth">.</a> Stepping up government revenues while carrying out reform <a href="https://www.businessinsider.in/budget-2019-cues-how-indian-economy-can-grow-at-10/articleshow/69767988.cms">to push GDP growth</a>, which slipped to a five-year low of 6.8% in 2018-19, is also a key discussion point, sources <a href="https://www.livemint.com/budget/news/pm-modi-brainstorms-with-key-secretaries-to-finalize-100-day-agenda-1560869743468.html">told Quint</a>. The PM will also meet industry leaders including heads of state-owned banks on Friday. He will hold discussions with economists and policy experts on Saturday. See Also: <a href="https://www.businessinsider.in/union-budget-and-triple-talaq-are-among-key-bills-as-the-first-session-of-indias-new-parliament-rolls-on/articleshow/69821460.cms">Union Budget and Triple Talaq are among key bills as the first session of India's new Parliament rolls on</a> <a href="https://www.businessinsider.in/there-is-a-lot-of-bad-news-that-modi-has-to-budget-for-this-year/articleshow/69635372.cms">There is a lot of bad news that Modi has to budget for this year</a> <a href="https://www.businessinsider.in/modi-government-sets-up-two-cabinet-panels-to-check-falling-gdp-employment/articleshow/69670523.cms">Modi government sets up two cabinet panels to check falling GDP, employment</a>

Prime Minister Narendra Modi is asking everyone for budget ideas

<ul><li>Yesterday, India’s finance ministry approved a plan to pump ₹482.4 billion into 12 public sector (PSU) banks. </li><li>Rather than dipping into its own pockets, the government will raise funds for the initiative from the markets through “recapitalisation bonds”. </li><li>The move is linked to helping these state-owned banks, which comprise a lion’s share of the banking sector’s non-performing loans, avoid or exit the Reserve Bank of India’s <keyword id="6417074" type="ORGANIZATION" weightage="20" keywordseo="prompt-corrective-action">Prompt Corrective Action</keyword> (PCA) framework. </li></ul> The great bank <keyword id="6572576" type="UNKNOWN" weightage="20" keywordseo="recapitalisation">recapitalisation</keyword> continues. Yesterday, India’s finance ministry approved a plan to pump <a href="https://twitter.com/rajeevkumr/status/1098171729686511616">₹482.4 billion</a> into 12 public sector (PSU) banks. The Nifty PSU Bank index opened up over a percent in trade, defying an otherwise flat market. The move brings the government within a hair’s length of it’s ₹1.06 trillion recapitalisation target for the financial year - which exceeds budget estimates by ₹400 billion. The balance ₹50 billion will go to Bank of Baroda, which is the process of <a href="https://www.businessinsider.in/indias-central-government-approves-the-merger-of-three-state-owned-banks/articleshow/67358889.cms">a three-way merger</a> with two smaller banks. Rather than dipping into its own pockets, the government will raise funds for the initiative from the markets through “recapitalisation bonds”. This will likely be facilitated through a holding company so the debt doesn’t add to the government’s fiscal deficit. The capital is squarely linked to helping these state-owned banks, which comprise <a href="https://economictimes.indiatimes.com/markets/stocks/news/total-net-loss-of-public-sector-banks-topped-rs-87000-crore-in-fy18/articleshow/64527973.cms">a lion’s share of the banking sector’s non-performing loans</a>, avoid or exit the Reserve Bank of India’s Prompt Corrective Action (PCA) framework, which imposes lending limits and curbs on hiring and expansion. If they aren’t on this watchlist, they can lend freely to small businesses and stimulate economic activity in a crucial election year. Two struggling lenders - Allahabad Bank and Corporation Bank - will receive nearly ₹160 billion, or a third of the funds. This will help them exit the PCA framework, enabling them to restart lending operations. The lenders will join fellow state-owned banks Bank of Maharashtra, Oriental Bank of Commerce and Bank of India - all of which were taken off the PCA watchlist on January 31st at the behest of the government. This was largely done with the government’s <a href="https://www.thehindubusinessline.com/economy/budget/a-rocky-ride-for-banks-over-the-past-five-years/article26154513.ece">assurance</a> that it would pump in funds when required, like an ATM. Over 40% of the funding amount, or ₹197 billion, will go towards preventing four banks - <keyword id="62034" type="COMPANY" weightage="20" keywordseo="Punjab-National-Bank">Punjab National Bank</keyword>, Union Bank, Syndicate Bank and Andhra Bank - from entering the PCA framework by ensuring their capital buffers and risk ratios don’t fall below a minimum threshold and enable two lenders who just exited the PCA - Bank of India and Bank of Maharashtra - to stay out of it. Finally, four <keyword id="6355548" type="UNKNOWN" weightage="20" keywordseo="Public-sector-banks">public sector banks</keyword> on the watchlist - Central Bank, United Bank, UCO Bank and Indian Overseas Bank – have been given the remaining ₹125 billion to help them meet minimum regulatory norms. However, if the bad loans at these banks continue to mount, they will only require further rounds of recapitalisation, something that the finance ministry is aware of. In addition to the recapitalisation announcement, the finance ministry said that it expected <a href="https://www.moneycontrol.com/news/business/finmin-expects-npa-recovery-of-rs-1-80-lakh-crore-in-fy19-3565411.html">recoveries of ₹800 billion</a> for the country’s banks before the end of the current financial year in March. The ministry explained that some resolutions under the insolvency code were in their final stage, especially that of Essar Steel, which would result in a recovery of ₹520 billion. However, the prediction seems overly optimistic. For example, the resolution of Essar, the bidding for which commenced more than a year, ago <a href="https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/after-steel-war-at-ibc-ruias-and-mittals-may-make-peace/articleshow/68072243.cms">has been mired in judicial proceedings </a>as ArcelorMittal butts heads with the former owners of the steelmaker over the resolution plan. An agreement doesn’t look likely within the next 40 days. Furthermore, the banks are on the PCA watchlist for the reason that they can slowly be revived back to financial health. Taking them off the framework too early or capitalising them without the requisite governance changes only risks putting good money after bad and accelerating their short-term recovery at the cost of their long-term stability. Finally, the funding amount won’t be enough. In a report released at the end of January, the State Bank of India said that public sector banks would require a further <a href="https://www.businesstoday.in/top-story/public-sector-banks-would-need-additional-rs-50000-crore-recapitalisation-in-2019-20-report/story/314963.html">₹500 billion</a> worth of recapitalisation funds to meet credit growth targets. 
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 SEE ALSO: <a href="https://www.businessinsider.in/indias-finance-ministry-claims-that-state-owned-banks-will-recover-20-of-their-bad-loans-this-year/articleshow/65960981.cms">India’s finance ministry claims that state-owned banks will recover 20% of their bad loans this year</a> <a href="https://www.businessinsider.in/indias-central-government-approves-the-merger-of-three-state-owned-banks/articleshow/67358889.cms">India's central government approves the merger of three state-owned banks</a>

Indian markets cheer government’s cash support for its ailing banks

New Delhi, The <keyword id="6357801" type="COMPANY" weightage="20" keywordseo="union">Union</keyword> <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword>'s fiscal deficit soared to ₹10.75 lakh crore, or 135.1% of the 2020-21 Budget Estimates (BE), at the end of November 2020, mainly on account of low realisation of revenue due to disruption in business activities amid the coronavirus pandemic. The fiscal deficit at the end of November 2019 had stood at 114.8% of 2019-20 BE. In absolute terms, the fiscal deficit stood at ₹10,75,507 crore at the end of November 2020, according to the latest data released by the <keyword id="513373" type="COMPANY" weightage="20" keywordseo="Controller-General-of-Accounts">Controller General of Accounts</keyword> (CGA). The lockdown imposed to curb the spread of coronavirus had significantly impacted business activities and, in turn, contributed to sluggish revenue realisation. The fiscal defict, or gap between the expenditure and revenue, had breached the annual target in July this year. The government's total receipts stood at ₹8,30,851 crore (37% of BE 2020-21) till the end of November 2020. This included ₹6,88,430 crore tax revenue (net to centre), ₹1,24,280 crore of non-tax revenue and Rs 18,141 crore of non-debt capital receipts. Non-debt capital receipts consist of recovery of loans and disinvestment proceeds. The tax revenue collection was 42.1% of BE of 2020-21, compared with 45.5% of BE (2019-20) during the corresponding period a year ago. Non-tax revenue was 32.3% of BE. During the corresponding period of the last fiscal, it was 74.3% of BE 2019-20. During the corresponding period last fiscal, the total receipts were 48.6% of 2019-20 BE. According to the data, over ₹3.34 lakh crore were transferred to state governments as devolution of share of taxes by the <keyword id="6377129" type="COMPANY" weightage="20" keywordseo="government-of-india">Government of India</keyword> up to November 2020. The CGA data said the total expenditure incurred by the government stood at ₹19,06,358 crore or 63% of BE. Of the total expenditure, ₹16,65,200 crore was on revenue account and ₹2,41,158 crore on capital account. It further said that out of the total revenue expenditure, over ₹3.83 lakh crore was on account of interest payments and ₹2,02,119 crore towards major subsidies. For this financial year, the government had pegged the fiscal deficit at ₹7.96 lakh crore or 3.5% of the GDP in the <keyword id="6360189" type="COMPANY" weightage="20" keywordseo="union-budget">Union Budget</keyword>, which was presented by <keyword id="25455" type="COMPANY" weightage="20" keywordseo="finance">Finance</keyword> Minister <keyword id="129243" type="PERSON" weightage="20" keywordseo="Nirmala-Sitharaman">Nirmala Sitharaman</keyword> in February 2020. These figures, however, may have to be revised significantly in view of the economic disruptions created by the coronavirus pandemic. Fiscal deficit had soared to seven-year high of 4.6% of the gross domestic product in 2019-20, mainly due to poor revenue realisation. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/top-stocks-to-watch-tata-steel-vedanta-adani-green-tata-motors-maruti-mm-dhfl-v-mart-indian-bank-and-others/articleshow/80038635.cms">Top stocks to watch — Tata Steel, Vedanta, Adani Green, Tata Motors, Maruti, M&amp;M, DHFL, V-Mart, Indian Bank, and others</a> <a href="https://www.businessinsider.in/tech/mobile/news/checkout-the-list-of-upcoming-new-mobiles-in-january-2021-with-expected-price/articleshow/80039794.cms">Upcoming smartphones in India in January 2021</a> <a href="https://www.businessinsider.in/international/news/ten-of-the-most-outrageous-predictions-for-2021-according-to-saxo-bank/slidelist/80040045.cms">From Amazon buying Cyprus to Germany bailing out France — here are ten of the most ‘outrageous’ predictions for 2021</a>

India's fiscal deficit is more than double its FY21 target

<ul><li>Millions of Indians are looking for changes in <keyword id="120700" type="PERSON" weightage="20" keywordseo="Income-Tax-slabs">income tax slabs</keyword> hoping for more disposable income.</li><li>Finance Minister <keyword id="129243" type="PERSON" weightage="20" keywordseo="Nirmala-Sitharaman">Nirmala Sitharaman</keyword>'s <keyword id="117156" type="PERSON" weightage="20" keywordseo="Budget-speech">budget speech</keyword> will be a tightrope walk that will have to blend the hopes of an economy slipping into slumber with the reality of limited resources.</li><li>Disinvestment in Air India and <keyword id="7170483" type="UNKNOWN" weightage="20" keywordseo="5G-Spectrum-sale">5G spectrum sale</keyword> could be the big money spinners for the goverment allowing it to spend freely in reviving a distressed rural economy.</li></ul>Finance minister Nirmala Sitharaman will present her maiden Budget and millions of Indians will be keenly watching if she fulfills many of the promises made by the Prime Minister Narendra Modi during his poll campaign that ended in the historic mandate. Millions of middle class Indians are hoping for tax breaks or rebates that will leave more money at their disposal at month end. But, the budget speech will hold a lot more of significance than just a change in income tax slabs. The lady in charge Sitharaman is India's first full-time Finance Minister to deliver the budget speech at 11 am. The Modi government has kicked off the second term with the promise of making Indian economy worth $5 trillion by March 2025. The narrative set by the Prime Minister himself has been followed by many of his team members as well as the newly-appointed Chief Economic Advisor K Subramanian. Some of the issues that the government has not been able to overcome in the recent past are the lack of jobs, the escalating rural distress, bone-dry private investment, and falling consumption. It is widely expected that the government will try to revive the economy's animal spirits-- a term used to describe people's level of confidence in the economy-- which will be essential to the lift the growth in Gross Domestic Product (GDP) from the five year low it hit in the January-March 2019 quarter. The right signals <keyword id="6147670" type="UNKNOWN" weightage="20" keywordseo="budget-2019">Budget 2019</keyword> offers an opportunity for the government to inspire confidence among the country's private investors who have shied away from betting their money on the country's economic prospects. That has led to a rise in unemployment as millions of young Indians join the workforce every year and there just aren't enough jobs created. That in turn has affected consumption. The two biggest numbers that are key to deciding the market confidence are the fiscal deficit projection for 2019-20 and the government borrowing programme. Fiscal deficit is the difference between the amount of money the government makes and the amount spent. The government had said in February that in 2018-19, the deficit would be 3.4% of the GDP. The fiscal deficit target for 2019-20 will decide whether the government takes its targets seriously. The excess of expenditure over earnings, the deficit, is met by borrowing money from the market. "From an investor point of view we want RBI, which is adeauately capitalised, and we want an economy which is adequately liquid. Today, apart from liquidity it is also transmission of credit which is also important. Today we have a scenario where PSU banks are not lending because they are not adequately capitalised," Nilesh Shah of Kotak Asset Management told Business Insider. Bank recapitalisation And that is one of the most significant numbers to look forward to in Sitharaman's speech-- the amount of money that the government will invest in state-owned banks that have been squeezed by a pile of bad loans threatening to rise further. In the last financial year ending March, the government invested a total of ₹1 lakh crore, according to Financial Services Secretary Rajiv Kumar in February. Still, there still isn't enough money floating around in the economy. "As a matter of fact if you look at the 50 year chart, the money supply has grown in the last few years at the same rate as it used to grow in the 1960s when the economy used to grow at 3-4%," market veteran Vallabh Bhanshali, Chairman of the Enam Group, told Business Insider. Banks need money (and confidence) to lend more and they are looking towards the government for support. Demands galore Essentially, everyone from the individual taxpayer to different industry segments-- from farmers to industrialists, from manufacturers to retailers, from real estate developers to banks to home buyers, from car makers to car buyers--- needs some kind of government support. Where is the money going to come from? Disinvestment One way of making up for the shortfall is for the government to sell stake, or fully priavatise, in companies that it owns. All eyes are on the hoardes of sick government companies that are sitting on millions of assets that are under-utilised and therefore, the companies are turning in losses for years. The most high-profile of them is Air India. The government has already indicated that it is looking for a strategic private investor in the airline. Government-owned telecom operators BSNL and MTNL are two other companies that have run out of cash even to pay salaries. Spectrum sale The other big source of government revenue is the sale of spectrum, which yields a lot of money. The government would want the upcoming auction of 5G spectrum to be a big money spinner but the bidders, the telecom operators are buried in debt. While the government would want 5G to give impetus to its Digital India programme, the 5G spectrum has to be reasonably priced. The Budget on the whole will be a tightrope walk. SEE ALSO: <a href="https://www.businessinsider.in/defence-budget-2019-20indias-defence-budget-has-nearly-doubled-in-5-years/articleshow/70037360.cms" data-type="tilCustomLink" target="_blank">India’s defence budget has nearly doubled in 5 years but the money is not enough to upgrade the weapons</a> <a href="https://www.businessinsider.in/niti-aayog-wants-education-budget-to-increase-further/articleshow/69941463.cms" data-type="tilCustomLink" target="_blank">India’s education budget has improved over the years — but it’s still too low</a> <a href="https://www.businessinsider.in/health-budget-2019-india-might-increase-spending-on-healthcare-but-that-may-not-be-enough/articleshow/69956156.cms" data-type="tilCustomLink" target="_blank">India might increase spending on healthcare but that may not be enough</a>

Income tax, bank recap, Air India, and 5G spectrum sale are some things to watch out for in Finance Minister Nirmala Sitharaman's first budget speech

New Delhi, Feb 1 () The Union Cabinet headed by Prime Minister Narendra Modi on Saturday approved the Budget for the financial year beginning April 1, that may see measures to lift the economy from the worst economic slowdown in 11 years.
 Before coming to Parliament for presenting her second budget, Finance Minister Nirmala Sitharaman and her team met President Ram Nath Kovind.
 She was accompanied by Minister of State for Finance Anurag Thakur and top officials of her ministry including Finance Secretary Rajiv Kumar.
 "As per tradition, Finance Minister @nsitharaman calls on President Kovind at Rashtrapati Bhavan before presenting the Union Budget," tweeted the President of India's handle along with two photographs from the meeting.
 Like last year, Sitharaman opted for a traditional red-coloured 'bahi-khata' to carry budget documents.
 Dressed in a crisp yellow silk saree, she posed for cameramen at the Parliament House gate with the budget documents wrapped in a red silk cloth, adorned with a golden Indian emblem.
 Facing the worst economic slowdown in more than a decade, Sitharaman is expected to pull out all stops to spur consumer demand and investment, government sources and economists said.
 The real gross domestic product (GDP) growth is estimated to fall to an 11-year low of 5 per cent in FY20 from 6.1 per cent in FY19. Estimated nominal growth at 7.5 per cent in FY20 is the lowest since 1975-76 (FY76) as per the FY12-based GDP series.
 Index of Industrial Production (IIP) growth turned positive but remained low at 1.8 per cent in November 2019 after contracting by (-) 4 per cent in October 2019.
 Consumer Price Index (CPI) inflation increased to a 65-month high of 7.4 per cent in December 2019, its fifth sequential rise, mainly due to persistently rising vegetable prices.
 Also, growth in bank credit fell to a 25-month low of 8 per cent in November 2019. ANZ ANZ ANS
ANS

Cabinet approves Union Budget for 2020-21

<ul><li>India’s economy grew by 7.7% in the quarter that ended on March 2018, the highest rate in seven quarters. </li><li>However, a major reason for this growth is due to the fact that the quarter was measured against the same quarter in 2017, when growth fell to 6.1% because of demonetisation. </li><li>India’s overall growth rate for 2017-18 came in at 6.7%, just a shade above original estimates of 6.6%</li></ul> A day after Moody’s <a href="https://www.businessinsider.in/indias-gdp-growth-forecast-just-got-downgraded-by-moodys-heres-why-that-matters/articleshow/64397592.cms">downgraded its forecast</a> for India’s growth in the current fiscal year to 7.3% from 7.5%, India’s <keyword id="188322" type="ORGANIZATION" weightage="20" keywordseo="Ministry-of-Statistics">Ministry of Statistics</keyword> released its <a href="http://www.mospi.gov.in/sites/default/files/press_release/nad_PR_31may18.pdf">provisional growth estimates</a> for the last quarter of 2017-18. And the results - which were above expectations - caused market prognosticators to rejoice and stock-markets to surge. With a growth of 7.7% in the three months that ended 31 March, India recorded its highest growth rate in seven quarters and retained the title of the world’s fastest growing economy from China, which grew by 6.8% in the same period. This also marked a significant rebound from the first quarter of fiscal 2018, when the growth rate plummeted to 5.7%. The strong growth was largely a combination of three factors - a pickup in manufacturing, construction and agriculture. A welcome development, but hardly a game-changer After months of bad news, rising oil prices, outflows of foreign funds and depressed expectations of the economy, the figures were a welcome development. However, a major reason for this growth is due to way quarterly growth rates are calculated. Quarterly growth in any given year is measured against the gross production figures in the same quarter of the previous year. The last quarter of 2017-18 had the fortunate distinction of being measured against the first three months of 2017 - the quarter that followed the government’s demonetisation announcement. Growth in the last quarter of 2016-17 fell to 6.1% as consumption declined and businesses, especially SMEs, grappled with the effects of demonetisation. Additionally, the news has no bearing on India’s growth in the current fiscal year, which will likely take a hit as oil prices increase further, the current account deficit worsens and lending to businesses remain sluggish. Further still, India’s overall growth rate for 2017-18 came in at 6.7%, just a shade above original estimates of 6.6%. So, the strong growth in the last quarter didn’t change the big picture much. The overall growth rate was still the lowest annual growth in <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> seen in India since the current government came to power in 2014. Fiscal deficit in control India’s growth in the last quarter of 2017-18 was also lifted by a 14.7% rise in the central government’s expenditure, partly owing to higher spending on defence and public services. However, the government still managed to roughly satisfy its fiscal deficit target of 3.5% of GDP. The fiscal deficit, or the difference between government expenditure and revenues, came in at ₹5.92 trillion, just a inch over 3.5% of the GDP. It was helped in this regard by a dividend handout from the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) and the proceeds from its disinvestment programme. It also cut down its capital expenditure. The target<a href="https://www.livemint.com/Politics/yJhWieTtggf52ZwdEDHLLN/Fiscal-deficit-goal-revised-to-boost-spending.html"> was increased from 3.2% of GDP</a> earlier this year by Finance Minister Arun <keyword id="6390789" type="PERSON" weightage="20" keywordseo="jaitley">Jaitley</keyword> in his <keyword id="6360189" type="ORGANIZATION" weightage="20" keywordseo="union-budget">Union Budget</keyword> to account for a shortfall in tax receipts as a result of the implementation of the goods and services tax (GST) in July 2017. The government is, however, hoping to reduce its fiscal deficit to 3.3% of GDP in the current fiscal year. Rate hike? India’s year-end growth figures will likely give the RBI the confidence it needs to increase interest rates when its monetary policy committee meets next week. The rise in oil prices has led to an increase in inflation, while foreign funds have left the country in search of higher and safer returns elsewhere. A hike in interest rates will prevent a further increase in outflows and could even help stem the rupee’s depreciation. The RBI decided <a href="https://www.businessinsider.in/the-reserve-bank-of-india-left-rates-unchanged-because-like-us-its-uncertain-about-a-lot-of-things/articleshow/63644188.cms">to keep interest rates on hold </a>at its last meeting in April due to concerns over India’s growth and expectations that the inflation rate would decline. Now, with rebounding growth, improving demand and rising prices, it will strongly consider a rate hike. As things stand, however, India’s economy is still not in the clear. A number of serious headwinds loom in the short-term. It will be interesting to see what India’s growth rate in the first quarter of fiscal 2019 ends up being. Given that the growth rate in the first quarter of fiscal 2018 fell to a three-year low of 5.7%, however, the growth rate in the current quarter will likely exceed expectations.

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