Finance Minister P Chidambaram, while presenting the Union Budget 2007-08 in Parliament on Wednesday, made a number of proposals for the financial sector.
However, the stock markets reacted very sharply to the proposals and plunged by over 560 points, with banking stocks losing heavily too.
The proposals that the FM made for the banking sector include:
Banking: Under Differential Rate of Interest scheme providing finance at a rate of 4% to weaker sections of the community engaged in gainful occupations, limit of loan to be raised from Rs 6,500 to Rs 15,000 and limit of housing loan to be raised from Rs 5,000 to Rs 20,000 per beneficiary.
Regional Rural Banks: To open at least one branch in 80 uncovered districts in 2007-08; Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation of Interest (SARFAESI) Act to be extended to loans advanced by RRBs; to be permitted to accept NRE/FCNR deposits; and those which have a negative net worth to be recapitalized.
Housing Loans: National Housing Bank to introduce 'reverse mortgage' under which a senior citizen who is owner of a house can avail of a monthly stream of income against mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan; regulations to be put in place to allow creation of mortgage guarantee companies.
Insurance: Exclusive health insurance scheme for senior citizens offered by National Insurance Company; other three public sector insurance companies to offer a similar product to senior citizens; Micro Financial Sector (Development and Regulation) Bill and a comprehensive Bill to amend insurance laws to be introduced in Budget Session.
Financial Inclusion: A Financial Inclusion Fund to be established with NABARD for meeting cost of developmental and promotional interventions; a Financial Inclusion Technology Fund to be also established to meet costs of technology adoption; each fund to have an overall corpus of Rs 500 crore, with initial funding to be contributed by Government, RBI and NABARD.