Bankers, insurers demand tax sops as Sinha voices concern

Finance Minister Yashwant Sinha on Wednesday asked banks and financial institutions to pull up their socks in the face of declining profits and low loan sanctions even as banks demanded tax sops while insurers sought exemptions for setting up of a national catastrophic reserve fund.

Capital market intermediaries asked the government to divest stake in PSUs through the IPO-route while allowing corporates to pick up stake in banks to shore up their capital.

"The decline in the sanctions and disbursements of FIs is a cause of serious concern particularly in the context of great needs for funds in infrastructure development," Sinha told bankers in the pre-Budget meeting.

He also expressed concern over the decline in profits of some banks and was against 'excessive bailout'.

Bankers on their part made several suggestions including review of the 5.0 per cent ceiling in regard to provisioning for NPAs.

Many private players asked the government to allow private participation in the proposed asset reconstruction company.

The financial sector intermediaries also sought 'focused approach' to solve NPAs in sectors like steel and petrochem.

Banks like the State Bank of India favoured introduction of "floating rate of interest" to protect themselves from inflation.

To promote development of debt market, bankers also said that futures market should be encouraged and be treated as any normal business activity.

Repo should not be treated as sell and repurchase in all cases and should be treated as lending and borrowing if undertaken through clearing corporation.

They were also against 100 per cent foreign direct investment in any sector as the companies do not have to pay any dividend to the parent company for some time.

Insurers asked the government to raise the threshhold limit of the tax deducted at source to Rs 25,000 for individuals while demanding review of the TDS for private players.

Considering the series of catastrophes in the country, general insurance companies wanted a 10 per cent surcharge on reinsurance premium while exempting the reserve to be used for building a national catastrophic reserve.

In a bid to boost the pension sector, the insurers also asked the government to give tax concessions to annuities rather than the commutation.

Financial companies also demanded 'market driven interest' structures on contractual savings.

Mutual funds like DSP Merrill Lynch asked the government to allow 20 per cent of provident fund and pension to be invested in equity funds.

PTI

YOU MAY ALSO WANT TO READ:
Run-Up To The Budget
Money