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Key points for the Banking Industry in the Indian Union Budget 2013-14

February 28, 2013‐ New Delhi, India

All-Women Bank of India

The First All-Women Bank of India will be coming up soon. Indian Union Finance Minister, Mr P Chidambaram, while presenting the Indian Union Budget 2013-14 before the Indian Parliament on February 28, 2013 has promised steps towards setting up the first All-Women Bank that is primarily aimed by and for the women. A Rs. 1,000 crore initial capital is allotted for the bank. The bank will seek the necessary regulatory approvals shortly and will be set up via public sector.

Re-capitalization of Banks

Re-capitalization of Banks has two fold importance. Firstly, PSU banks need additional capital for smooth functioning. On the other hand, adequate capital is necessary in order for PSUs not to slip any further by global rating agencies. The FM has promised Rs. 14,000 cr for the Public Sector Bank towards recap. There will be a capital infusion of Rs 12517 cr to PSU banks by March 2013.

Other points

  • Refinancing capacity of SIDBI raised to Rs. 10,000 crore.
  • Rs. 500 cr given to SIDBI to act guarantee to a factoring fund
  • To increase refinancing of SIDBI to help MSME
  • Seeks assistance of World Bank, Asian Development Bank to build roads in north east states connect to Myanmar
  • House loans upto Rs 25 lk will be allowed additional deduction of interest of 1 lk
  • Proposal to launch Inflation Indexed Bonds or Inflation Indexed National Security Certificates to protect savings from inflation.
  • IIFCL and ADB will offer credit enhancement to help infra companies tap bond mkt
  • 4% farm loan scheme extended to private sector banks
  • Bank Correspondents can sell Micro Finance Products
  • Banks allowed to sell insurance products and hence become insurance agents.
  • First home loan from a bank or housing finance corporation upto Rs. 25 lakh entitled to additional deduction of interest upto Rs. 1 lakh.

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