In the fifth consecutive Budget speech on February 1, 2023, the Finance Minister of India, Nirmala Sitharaman, proclaimed several initiatives targeting the financial sector, which was one of the seven Budget priorities referred to as the Saptarishi. The following are the crucial points from the Budget speech that have an impact on the banking sector:
• Credit Guarantee for MSMEs:
A revised credit guarantee scheme, to be implemented from April 1, 2023, with a contribution of INR 9,000 crore to the corpus, will allow for additional collateral-free guaranteed credit worth INR 2 lakh crore, thereby reducing the cost of credit by approximately 1%.
• National Financial Information Registry:
A national financial information registry, serving as the central repository of financial and auxiliary information, will be established to advance financial inclusion, efficient flow of credit, and financial stability. The registry will be governed by a new legislative framework devised in consultation with the Reserve Bank of India (RBI).
• Financial Sector Regulations:
The financial sector regulators will be instructed to undertake a comprehensive review of existing regulations to simplify, ease, and reduce the cost of compliance. The review process will consider public and regulated entity suggestions and specify time limits for decision-making under various regulations.
• GIFT IFSC:
The following measures will be taken to boost business activities in the GIFT IFSC:
a) Powers under the SEZ Act will be delegated to the International Financial Services Centers Authority (IFSCA) to eliminate dual regulation.
b) A single-window IT system for registration and approval will be established for IFSCA, SEZ authorities, Goods and Services Tax Network (GSTN), RBI, Securities and Exchange Board of India (SEBI), and Insurance Regulatory and Development Authority of India (IRDAI).
c) IFSC Banking Units of foreign banks will be allowed to engage in acquisition financing.
d) A subsidiary of the Export-Import Bank of India will be established for trade re-financing.
e) The IFSCA Act will be amended to include statutory provisions for arbitration, ancillary services, and avoiding dual regulation under the SEZ Act.
f) Offshore derivative instruments will be recognized as valid contracts.
• Data Embassy:
The government will facilitate the establishment of data embassies in the GIFT IFSC for countries seeking digital continuity solutions.
• Improving Governance and Investor Protection in Banking Sector:
Proposed amendments to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act aim to enhance bank governance and investor protection.
• Capacity Building in Securities Market:
The Securities and Exchange Board of India (SEBI) will be empowered to develop, regulate, maintain, and enforce norms and standards for education in the National Institute of Securities Markets, and will also be authorized to recognize degrees, diplomas, and certificates awarded.
• Central Data Processing Centre:
A Central Processing Centre will be established to provide faster response to companies, with centralized handling of various forms filed with field offices under the Companies Act.
• Reclaiming of shares and dividends:
An integrated IT portal will be established to make it easier for investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority.
• Digital Payments:
The acceptance of digital payments continues to grow, with a 76% increase in transactions and 91% in value in 2022. The government will continue to support this digital public infrastructure in 2023-2024.
• Azadi Ka Amrit Mahotsav Mahila Samman Bachat Patra:
A new small savings scheme, the Mahila Samman Savings Certificate, will be available for two years until March 2025. The scheme offers a deposit facility of up to Rs 2 lakh in the name of women or girls with a fixed interest rate of 7.5% and a partial withdrawal option.
In conclusion, the 2023-2024 Budget has brought about significant changes and developments in the banking sector in India, aimed at promoting financial inclusion, stability, and growth. These announcements are set to improve the banking sector’s capabilities and increase its competitiveness in long run.
