Home Budget 2021 Post Budget Reaction: Finance & Banking Sector

Post Budget Reaction: Finance & Banking Sector

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Budget 2021

The Finance Minister Nirmala Sitharaman presented the Union Budget 2021 on Monday where she made a lot of announcements for various sectors. This was the first budget after the pandemic where everyone had some expectations from the finance minister. Here are the reactions from the Industry experts of the Finance & Banking Sector.

Suraj Malik, Partner, BDO India (M&A)- 

“Budget 2021 constructively impact the lives of common man with targeted proposals for extending social security benefits to gig economy, tax concessions on affordable housing and rental housing, simplified compliance regime for start-ups and exemption to senior citizens from tax filings.  Stability in tax regime, simplification in compliance procedures along with consolidation of laws will provide a strong foundation to the six pillars for achieving economic growth”.

Mr. Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder, FACE

The Government’s decision to boost entrepreneurship and digital payments in India is a testament to its commitment to realize its vision of an economically self-reliant nation.

The COVID-19 pandemic has given a fillip to the adoption of digital payments as more and more consumers realized the benefits and convenience they have to offer. I welcome the Rs 1,500 crore scheme announced by the Hon’ble Finance Minister in the Union Budget 2021 to promote digital payments as it will help create a robust and dynamic payments ecosystem in India’s emerging digital economy.
 
The extension of tax holiday by one more year to March 2022, along with capital gains exemption, will boost startups by helping them tide over the economic crisis unleashed by the COVID-19 pandemic. Furthermore, the proposals to incentivize OPC incorporation along with measures like the removal of the restrictions on paid-up capital and turnover or reducing residency limit is in sync with the government vision of encouraging and catalyzing entrepreneurship in India.

Prateek Mehta, Co-Founder and CBO, Scripbox

The Budget is a promising and positive one in the current context, though the fine print has yet to be evaluated. There is a clear intent of push for public health and a desire to incentivise job creation as seen through initiatives. This will have a positive impact on the economic activity and has already been received positively by the markets. The government has taken some key steps to encourage and incentivise individual investors to participate in the markets. The decision about the arrival of advance tax liability only after declaration of dividends is a very welcome move for investors. No filing requirements for Senior citizens is an encouraging sign of where things can go for citizens with simple income streams.

ARCs for stressed debt assets will also help financial institutions improve their balance sheets. This will improve the health of the financial sector. The proposed investor charter that cuts across regulators can simplify on-boarding and improve access while protecting the interests of the investors.
 
Raising the FDI cap in insurance to 74% is a very positive move. We do need FDI in this critical sector to improve penetration and product innovation. The FM has also proposed extension of tax holiday for startups by one more year, which is much needed for the growth and recovery of startups, in the wake of COVID recovery.  This will help the startups in getting back  their confidence. There is a lot to take home from this budget as it lays down the ground for future value creation in the economy. It was a tough but a well managed balancing act.

Deena Jacob, Co-founder, CFO & Head (Revenue and Growth), Open

“Focus on capex spends and measures to boost health infra is a welcome move in the current environment, both for recovery and for the much-needed health sector. The Finance Minister’s measures for the MSME sector, which includes an allocation of INR 15,700 crores to ease their burdens caused by the pandemic is a great move which implemented in collaboration with multiple channels to reach out to the right target would be a good measure for overall recovery. We are pleased to see the efforts outlined to ease compliance requirements for the start-up community as well as the introduction of incentives such as tax holidays and an extension in capital gains exemption by a year. Delighted to see the digital push with the INR 1500 crore scheme to spur digital payments and the steps such as the increase in tax audit exemptions for companies doing business via digital modes to reiterate the strong intend for digitisation”

Shachindra Nath, Executive Chairman & Managing Director, U GRO Capital

Broadly evaluating, the Union Budget 2021 is a significant attempt by the government, to accept a higher fiscal deficit and enhance expenditure towards economic revival. It is appreciative of the government to put a special emphasis towards providing relief to the tax payers and reducing the burden posed by COVID-19. One of the key highlights of the budget is setting-up of the development finance institution (DFI) towards infrastructure financing and institutional framework to purchase corporate bond, which would solve the issue of liquidity for the infrastructure sector and corporate bond market. Also, with the path-breaking initiative of instituting Asset Reconstruction Company (ARC) and asset management company (AMC) for NPA consolidation, banks have been allowed to streamline their focus on the much needed growth.

The government has reduced the threshold for NBFCs to initiate recovery under the SARFAESI Act, 2002. This is an effective step towards ushering credit discipline and in the long-term will increase the penetration of credit to small businesses. The government has also doubled its allocation towards MSMEs, which would greatly support their revival and the eventual growth. Holistically, the Union Budget 2021 is an encouraging event, yet we optimistically look forward to a distinctive support for NBFCs, with a framework to provide them sufficient liquidity, while also furthering the credit guarantee scheme support to the MSMEs.

 Mr. Sujit Bangar, Founder TaxBuddy.com

Best thing FM has done is ‘Not to increase any tax burden’. Equally to individuals and corporates. On contrary, the good move has been of reducing compliance burden from tax and company act perspective.
All type of tax payers from senior citizens, salaries individuals, SMEs and corporates are beneficiaries. In the absence of any tax rate hike, for raising resources, government is relying on divestment and asset monetisation of PSUs and related assets.  This is welcome and innovative move.


FM should have done something for increasing disposable cash in hands of individual. This was needed to give filip to consumption. Consumption as part of GDP is more than 60% for Indian Economy. Sometimes not doing any harm is better than doing major good.

Shri CH S. S. Mallikarjuna Rao, MD & CEO, Punjab National Bank

We welcome the measures announced by Hon’ble Finance Minister in Union Budget 2021-22. The budget rightly strikes a reasonable balance between addressing the key pillars of Health & Well-being, Inclusive Development, Human Capital, Innovation and R&D, apart from laying the path for a robust economy by providing a major infrastructure boost. The array of measures announced are in line with people as well as market expectations and will go a long way to bring the nation back on track by boosting spending on infrastructure and rural development while fighting the pandemic through health focused measures.

As far as the financial sector is concerned, further recapitalization of Rs 20,000 crore for PSBs in the FY 2021-22 is a welcome step. The other measures which are expected to strengthen the sector are as under:

Various measures have been announced on the infrastructure front, which are expected to take the economy into a new trajectory of growth. In addition to over a 34% increase in capital expenditure, new highway projects have also been announced.
Setting up of a professionally managed Development Financial Institution will catalyze infrastructure funding.
Creation of an ARC and Asset Management Company that will take over the stressed assets and sell to Alternative Investment Funds (AIFs),  is also welcome as it will help improve the health of the banking sector through impact on price discovery and improving competition in the market.
The NCLT system will be strengthened and e-Courts will be adopted and alternate mechanism of debt resolution will be set up.
The massive program for monetization of completed/ running projects will help in creating required resources through the instruments like INVITs.
Other important announcements of bringing in the IPO of LIC, hiking the FDI limit in insurance increase to 74% from 49%, strategically divest 2 Public Sector Banks and 1 general insurance company, are steps in the right direction.
The voluntary scrapping policy proposed for discarding old commercial vehicles will boost the automobile industry. The gross borrowing programme is also helpful to maintain the fiscal health of the economy, while providing necessary funding towards growth and development of the infrastructure.

Mr Arjun Ananth, CEO, Medall Diagnostics

“At a time when the world is still grappling with the COVID-19 pandemic, I welcome the Hon’ble Finance Minister Nirmala Sitharaman’s thrust on health and well-being announcing an outlay of ₹2, 83,846 lakh crores for the health and wellness sector. The Government’s “Pradhan Mantri Aatmanirbhar Swasthya Bharat Yojna” with a commitment to spend ₹64,180 crores over six years, in addition to the National Health Mission, will develop the capacities of the primary, secondary and tertiary healthcare system as well as existing national institutions. Vaccination drive will require a single-minded focus to get the economy back on its rails and improve consumer confidence.

The proposal to set up 17,000 rural and 11,000 urban health and wellness centres and integrated public health labs in each district of the 3,382 block public health units in 11 states will increase the research and development in the healthcare sectors. The focus on healthcare by the Hon’ble Finance Minister Nirmala Sitharaman is pragmatic, positive and committed to the healthcare sector which a boost needed post the unprecedented pandemic last year. This focus will also create a good platform for tier 2 and 3 cities to get access for better diagnostics services. The proposals would make quality healthcare accessible and affordable, besides standardizing healthcare infrastructure across the country”. 

Mr. Ram Iyer, Founder and CEO, Vayana Network

“This is a great budget with a lot of growth boosting measures. In the backdrop of the pandemic and resultant fiscal situation, the government has done a great balancing act.

There are a number of steps announced to boost capex and infra; and manufacturing which will create huge trickle down benefits for the economy at large. To achieve this within tight fiscal deficit targets and without impacting the tax rates will be a herculean achievement. The key positives for businesses include –

1. Creation of a huge DFI to fund India’s infra ambitions over the next 3-5 years

2. Vehicle scrapping policy will give a boost to the Auto sector in coming years

3. Launch of multiple infra and capex projects will give boost to manufacturing, steel and cement sectors

4. Further allocations for PLI in manufacturing is a great step to place India firmly in the global Supply Chain ecosystem in core sectors like Electronics

5. Smaller businesses will see more ease of doing businesses due to relaxation of audit & GST nor

6. Divestments of some PSUs and higher FDI limits in insurance will lead to entry of global players with deeper commitment to India and also boost innovation. “

Mr. Ankit Sehra, Founder & Tax Expert, Ankit Sehra & Associates 

“The Union Budget FY 21-22 has brought a ray of hope for the taxpayers as the government is adapting  digital/ faceless assessments, which is also need of the hour. The traditional models of Raids & Inspector Raj are diminishing day by day, which in turn is taking India towards ease of doing business model. The timeline of reopening the case has been reduced upto 3 years as compared to the past scenario of 6 years. Now an income tax officer can re-open an assessment case upto 3 years and if the concealment of income is upto Rs. 50 lakhs or more in a year then only officer can re-open a case again with the special approval from Principal Chief Commissioner (the highest authority of Income Tax Department).

To further reduce the litigation, the Government constituting a Dispute Resolution Committee for small taxpayers who are having income upto Rs. 50 lakhs. Tax officers are instructed to resolve the disputes immediately through faceless recognition models only. And for the huge matters, the Government is establishing a National Faceless Income Tax Appellate Tribunal Centre where all communication will be in electronic format only and video conferencing will be arranged in case there is a requirement of personal hearing.”

Rajeev R Shah Managing Director & CEO at RBSA Advisors

“In a COVID-hit economy, the Budget 2021 attempts to have a forward-looking approach keeping long term agenda (till FY25/26) in perspective. Keeping thrust on Capital-Spending, including a push to Infra, health and education, coupled with an emphatic programme of disinvestment (including the marquee LIC IPO) and borrowings, without any tinkering with income taxes, will help boost consumption while supporting our country roll-back to the pre-COVID growth trajectory. Select new proposal on enhancement of FDI limits in Insurance (49% to 74%), Easening of One-Person Companies, continuation of Affordable Housing & Start-Up related tax benefits and breather to NRIs on double taxation will not only boost businesses/investors confidence, but also save on compliance costs.”

Mr. Nandivardhan Jain, Founder & CEO of Noesis Capital Advisors

Union budget 2021-22 primarily focused on uplifting the economy by incentivizing the MSME and agriculture sector. Instead of providing tax relief to the consumers, the budget focused on increasing the income at the base level to improve the consumption power for the population of the country. MSMEs is the second-largest employment generator in India after agriculture and employs around 120 million persons in India and accounts for 40% of the total exports in India and 45% of the output of the manufacturing sector in value terms. However, the hospitality sector after facing the turmoil last year due to the on-going pandemic was looking up to the union budget in search of a relief package after no support was provided during the relief packages which accounted for nearly 13% of the GDP.

The Indian hospitality sector which accounts for 9.3% of the GDP and generates 1 in 10 new jobs in the country is looking for long-term sustainable solutions from the government which the government didn’t consider in the current budget. However, we expect the government to come up with a plan focused on the hospitality sector before the next budget to promote development which will project India as a tourism hub on the world map in the long-term.

Mr. Rajesh Bhatia, Global & Group CFO, UFlex 

“The budget presented by the Finance Minister today is a balanced Budget with focus on infrastructure development, privatisation and disinvestment (huge divestment target of INR 1.75 lac crore), major push in Central Govt capex and credit expansion.

The move from Government to dedicate over INR 1.4 lac crore over the next five years towards ‘Urban Swachh Bharat Mission 2.0’ shows their resolve to manage the challenges of plastic waste in the country, with a firm approach.

Our joint project with CIPET for Municipal Solid Waste (MSW) Sorting and Segregation in Bangalore and Varanasi to separate the recoverable from the garbage and recycle the plastic waste constituents is a technology that complements the efforts of our government to manage plastic waste.  As pioneers in creating plastic waste management solutions, along with manufacturing of the packaging for essentials, we would be glad to extend further support to the government in dealing with waste management and making India a cleaner country.”

CA Bhanupriya Sehrawat (Bhanupriya and Co.)

“This is not like 1991 budget, but we cannot deny that government has taken some brave steps like disinvestment of PSUs whether its financial institutions or airlines company. Resulting, now taxpayers will not have to pour their money in those loss suffering units. Government has made announcements regarding boosting the infrastructure, which will help in job generation and help to grow the smaller businesses; specifically in the tier 2 and 3 cities, which will automatically help the economic growth.  There is an aspect which remained untouched i.e personal taxation/ income tax. We have numerous tax slabs which are not tax friendly at all. It should have been reduced along with relaxing the tax slabs range in this budget. This is the time when government needs to push more liquidity in the economy which is only possible if the people have more money to spend.”

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