Budget did bring some hope for the banking and NBFC sector.
India’s first female Finance Minister presented her maiden Budget on July 5, 2019. In around two hours of budget speech Finance Minister Niramala Sitharaman has touched upon almost every sector. And after the presentation of budget speech, full of couplets and stories she put an end to all the speculations and expectations floating all around.
As the NBFCs and banking sectors are reeling under huge distress so the long waited expectation to revive these two sectors and pull them out of stress was expected to happen during the budget speech. And this budget did bring some hope for the banking and NBFC sector.
In the budget, Sitharaman said that the financially sound NBFCs should continue to receive funds. In order to revive the NBFC sector that is confronting problems on multiple front, Sitharaman mentioned that the government will provide one-time 6-month partial guarantee of Rs 1 lakh crore to state-run banks for purchasing consolidated pooled assets of financially-sound NBFCs. This will cover their first loss of up to 10%.
She further made a point that the RBI’s authority over the NBFC sector should be increased and strengthened. She also stated that housing finance companies will be brought under the purview of the RBI.
Just like NBFC sector, the banking sector was also expecting some revival plan put forward by the government in this budget. However, the government fulfilled the expectations of the banking sector by promising to infuse Rs.70000 crore for bank recapitalisation in order to boost credit.
Explaining about the efficacy of Insolvency and Bankrupty Code Sitharaman said, “there has been a record recovery of over 4 lakh crore of bad loans through IBC in the last 4 years, and that provision coverage has been the highest in the last 7 years.”
In the period between FY15 and FY19, the government infused over Rs 2.5 lakh crore in public sector banks by way of direct equity through budgetary resources but largely by issuing recapitalisation (recap) bonds.
Just after Niramala Sitharaman announced the infusion of 70000 crore in PSBs the share of PSBs jump by 5 per cent.