Budget 2017 wish list: Banks eye extension to AQR deadline, capital infusion
To fight stressed assets, the Budget may announce higher capital infusion. Also there are chances that cleaning up exercise could be extended by a quarter.
By Amit Mudgill, ETMarkets.com | Updated:
NEW DELHI: Banking sector is one sector which has been reeling under pressure from a decade low credit offtake and rising non-performing assets (NPAs). Add to concerns is the recent cash ban, which hurt the banking activity in the quarter gone by.
To fight stressed assets, the Budget on Wednesday may announce higher capital infusion for FY2017-18. Also there are chances that because asset quality review (AQR) and demonetisation have contributed to higher bad loan provisioning in December quarter, the deadline for the cleaning up exercise could be extended by a quarter.
Strengthening of bankruptcy code, steps to ease pressure on corporate balance sheets, a roadmap for disinvestment in PSU banks, further push to Banking Board Bureau and higher tax concessions for loan loss provisions, among others, are a few other things on investors’ radar in this Budget.
"The government could front-load and increase the amount considered for PSU bank recapitalisation. This would enable PSU banks to write off bad assets and comply with Basel III requirements," said Morgan Stanley in a note.
In FY17, the government had approved capital infusion of Rs 25,000 crore.
Metals sector accounts for large part of bank's stress and increased spending on infrastructure and focus on capex revival would be positive for the banking sector.
Angel Broking in a note said, "Slippages continue to be high in the commodity sector due to underutilisation of the industry. Clearance for infra is still sluggish, resulting in cost overruns."
Bankruptcy code can be strengthened by further simplifying the liquidation process of the defaulting companies. In addition, Banking Board Bureau make PSU banks more accountable and further guidelines on the consolidation of banking sector. There may be fresh provisions for Banking Board Bureau, implemented from April 1, 2016, to attract fresh talent from the industry.
There could be some announcement on asset quality review (AQR) in the wake of demonetisation because on banking stress.
"In past 5 years, credit to commercial sector and lending to the government by banks - both are slowing at the same time - were very unusual, historically speaking. Typically, they move in opposite direction," said Edelweiss Securities in a note, adding that, "Persistently, high NPAs have eroded PSU banks' capital and hence their lending ability.Th government has been injecting capital, but more needs to be done."
Anand Rathi Share and Stock Brokers sees any hike in personal income tax slabs should be positive for banks as it would increase disposable incomes, encourage consumption and, thus, boost overall credit growth for the sector.
"Additional tax breaks for construction of affordable / low-cost housing units should further boost demand," the brokerage said.
To fight stressed assets, the Budget on Wednesday may announce higher capital infusion for FY2017-18. Also there are chances that because asset quality review (AQR) and demonetisation have contributed to higher bad loan provisioning in December quarter, the deadline for the cleaning up exercise could be extended by a quarter.
Strengthening of bankruptcy code, steps to ease pressure on corporate balance sheets, a roadmap for disinvestment in PSU banks, further push to Banking Board Bureau and higher tax concessions for loan loss provisions, among others, are a few other things on investors’ radar in this Budget.
"The government could front-load and increase the amount considered for PSU bank recapitalisation. This would enable PSU banks to write off bad assets and comply with Basel III requirements," said Morgan Stanley in a note.
In FY17, the government had approved capital infusion of Rs 25,000 crore.
Metals sector accounts for large part of bank's stress and increased spending on infrastructure and focus on capex revival would be positive for the banking sector.
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Angel Broking in a note said, "Slippages continue to be high in the commodity sector due to underutilisation of the industry. Clearance for infra is still sluggish, resulting in cost overruns."
Bankruptcy code can be strengthened by further simplifying the liquidation process of the defaulting companies. In addition, Banking Board Bureau make PSU banks more accountable and further guidelines on the consolidation of banking sector. There may be fresh provisions for Banking Board Bureau, implemented from April 1, 2016, to attract fresh talent from the industry.
There could be some announcement on asset quality review (AQR) in the wake of demonetisation because on banking stress.
"In past 5 years, credit to commercial sector and lending to the government by banks - both are slowing at the same time - were very unusual, historically speaking. Typically, they move in opposite direction," said Edelweiss Securities in a note, adding that, "Persistently, high NPAs have eroded PSU banks' capital and hence their lending ability.Th government has been injecting capital, but more needs to be done."
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Anand Rathi Share and Stock Brokers sees any hike in personal income tax slabs should be positive for banks as it would increase disposable incomes, encourage consumption and, thus, boost overall credit growth for the sector.
"Additional tax breaks for construction of affordable / low-cost housing units should further boost demand," the brokerage said.
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The first budget of Independent India was presented by the first finance minister R K Shanmukham Chetty. This was from the seven-and-a-half period from August 15, 1947 to March 31, 1948. The budget estimate for total revenues was a mere Rs 171.15 crore. A fiscal deficit was a paltry Rs 204.59 cr.
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