Concerned over rising bad loans, heads of banks and financial institutions today suggested creation of National Asset Management Company which could act as a nodal agency to deal with the problem.
"There were some suggestions on setting up of National Asset Management Company," Financial Services Secretary G S Sandhu said after the pre-budget meeting with heads of banks and financial institutions with the Finance Minister here.
It will take over large non-performing assets of banks and help in revive companies ridden with bad debts.
"Various suggestions have been given. We will examine those suggestions and then we will see what all to be included in the budget," he said.
The gross Non-Performing Assets of public sector banks rose to Rs 2.03 lakh crore at the end of September 2013, from Rs 1.55 lakh crore on 31 March, 2013. The NPAs or bad loans of the domestic banking system were 4.4 per cent of gross advances at the end of December 2013.
"There was discussion on NPA. There was also proposal for setting up of National Asset Management Company for improving the performance of DRTs (debt recovery tribunals) to collect loans," HSBC India country head Naina Lal Kidwai said after two and half hour long meeting.
Some suggestions were also made for strengthening of present SARFAESI Act (The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) to ensure fast recovery of bad loans, she said.
Public sector banks requested government for capital infusion and long-term instrument for financing infrastructure sector. Bankers also requested for issue of tax free bonds for development of infrastructure sector.
"There were suggestions on recapitalisation of banks, financing of infrastructure. All the public sector banks need capital. There were issues about infrastructure lending because that is the need of the day," Central Bank of India Chairman and Managing Director Rajiv Rishi said.
Banks and insurance companies also sought tax benefit for their products.
Kotak Mahindra Bank managing director Uday Kotak said the government should consider listing of insurance behemoth LIC over the next few years.
"Over the next few yeas the government should seriously consider listing of LIC. The kind of money government can raise by listing LIC is significant it can fund funding needs of public sector banks as well as fiscal deficit," he said. "I am not saying that this is an idea which necessarily needs to be in July Budget, but over the next few years. Listing of LIC may be a game changer in financial sector," Kotak added.
Besides, he also suggested changes in Rajiv Gandhi Equity Saving Scheme so that savers move away from gold and real estate to equity market. There is also need for giving boost to venture capital and alternate investment funds for meeting capital needs of SME, he added.
In order to increase savings, there were also suggestions for raising tax exemption limit from Rs 1 lakh to Rs 2 lakh and increase mediclaim tax exemption limit from Rs 15,000 to Rs 50,000 per year.
Besides, some recommendations were made for doubling TDS limit to Rs 20,000. If accepted then TDS would be deducted if interest accrued on fixed deposit crossed Rs 20,000.
Finance Industry Development Council, a representative body of all the Asset Financing NBFCs, sought tax parity between banks and NBFCs. Besides, coverage of Systemically Important NBFCs under
SARFAESI Act needs to be given priority, FIDC Director Raman Aggarwal said.