Budget 2019: Nirmala Sitharaman pre-Budget consultations feature NBFC liquidity, NPAs

Finance Minister Nirmala Sitharaman held pre-Budget consultations on Thursday with financial and capital market stakeholders. They discussed creation of a dedicated liquidity window for non-banking finance companies (NBFC) sectors, review of interest rates on Small Savings Scheme and banks' non-performing assets (NPAs or bad loans) apart from other issues, an official said.

A statement by Finance Ministry also said that capital infusion in PSBs and a separate bond exchange were among other issues discussed.

As per reports, leading PSBs and NBFCs gave a number of suggestions to increase liquidity, tackling NBFC credit issues, tax benefits for MSME investments and infrastructure financing. "Lot of suggestions have come regarding infrastructure financing, reviving the economy and what tax benefits can be given for encouraging investments in MSMES. Lot of representation was also there from NBFCs," said SBI Chairman Rajnish Kumar.

IDBI MD Rakesh Sharma said that they suggested some tax alignments between Section 43B and Rule 3EA of the Income Tax Act. "As per RBI rules, we can only book the interest income within 90 days, but as per rule 3EA, six months accrued interest is also accounted...so there should be some alignment on that," he said according to IANS. He also said that they discussed ways to enhance the corporate bond market.

Sharma also said that there are issues regarding solvency and liquidity. "In case of only liquidity issues, some market window could be opened to make funds available...it has to be seen on a case by case basis. Solvency related issues have to be handled separately," he added, as per the news agency.

"On the NBFC Sector, the stakeholders said there is a need to distinguish between solvency, governance. The liquidity issues were also discussed along with creation of dedicated liquidity window for NBFC sector, review of interest rates on Small Savings Schemes, review of banking NPAs provisions through setting-up a Committee came up during the three hour deliberations," mentioned the Finance Ministry statement.

Major stakeholders of financial sector and capital markets participated in the meeting including Reserve Bank of India (RBI) Deputy Governor NS Vishwanathan, the statement added.

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