In Short:
India’s banking sector is looking forward to the upcoming Union Budget for FY25. Key expectations include strategic divestment, targeting specific sectors for investment, bridging the gap between deposit and credit growth, tax relief for depositors, fiscal discipline, technology investment, job creation, and support for affordable housing and agriculture. The focus is on balancing fiscal discipline with inclusive growth and incentivizing savings, investments, and exports.
Banking Sector Expectations from Union Budget FY25
Ahead of the Union Budget for FY25, to be presented by Finance Minister Nirmala Sitharaman on July 23, India’s banking sector representatives are buzzing with anticipation. Recent growth and consolidation have given them hope and optimism for the future.
Key Demands and Expectations
One key demand is strategic divestment. With public sector bank (PSU) valuations at an all-time high, there’s a strong consensus that privatising certain institutions could attract investment and strengthen the financial system. The banking sector wants the government to focus on stimulating credit growth in underperforming areas like industry and provide incentives for infrastructure and housing project lending.
Bridging the gap between deposit and credit growth is another priority. Banks are advocating for tax relief for depositors, specifically tax breaks on interest earned from deposits, to encourage more consumer savings and give a boost to the financial system.
Expert Expectations
Rajeev Yadav, Deputy CEO, AU Small Finance Bank
Rajeev Yadav believes that the revised Union Budget for FY25 will continue the policy focus on prudent fiscal management. He expects this approach to support macro-stability and help India achieve its goal of becoming a developed nation by 2047.
Yadav underscores five key priority areas:
- Reaffirming commitment to fiscal discipline
- Accelerating deposit mobilisation
- Increasing technology investment in banking
- Prioritizing job creation
- Supporting demand-side economic activity
Prashant Kumar, MD & CEO, YES BANK
Prashant Kumar sees the Union Budget 2024 as crucial for shaping India’s economic future. He expects the government to focus on sustainable growth, financial sector reforms, infrastructure investment, and inclusive development to achieve ‘Viksit Bharat’ by 2047.
Kumar highlights the importance of maintaining fiscal discipline while also emphasizing the need for economic growth, social sector outlays, and inclusive development. YES BANK is ready to support digital infrastructure enhancement and financial inclusion initiatives.
Divyesh Dalal, Managing Director & Head – DBS Bank India
Divyesh Dalal views the upcoming Union Budget as an opportunity to boost India’s MSME sector. He advocates for Production-Linked Incentives, export promotion, digital adoption, tax simplification, and skill development to enhance MSME competitiveness. Dalal hopes for measures to strengthen enterprise resilience and cybersecurity, considering emerging risks.
Ramesh Punugu, Global Head of Buy Side Research at Acuity
Ramesh Punugu highlights the growth and resilience of India’s banking sector, especially after the mega-public sector bank mergers in 2020. He expects no budgetary allocation for bank recapitalization and stresses the importance of divestment to align with SEBI’s directive.
Punugu also notes the need for improved incentive schemes for PLI sectors, higher government focus on infrastructure and SMEs, and expanding eligibility for housing under PMAY. He suggests tax relief for consumers to support deposit growth and consumption.
