{"id":30145,"date":"2021-05-12T14:24:56","date_gmt":"2021-05-12T08:54:56","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=30145"},"modified":"2021-10-19T16:17:36","modified_gmt":"2021-10-19T10:47:36","slug":"underlining-importance-of-budget-2021-for-nbfcs-and-bank","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/","title":{"rendered":"Underlining Importance of Budget 2021 for NBFCs and Banks"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Union Budget 2021-22 has seemingly growth-oriented with a sharp rise in <strong>CapEx* <\/strong>allocation up to 26% YoY &amp; emphasizing manufacturing as a pivotal part of the economy while allowing for a higher fiscal deficit, considering the low-interest scenario. In this article, we will examine the Underlining Importance of Budget 2021 for NBFCs and Bank. <\/p>\n\n\n\n<p>Union Budget has pegged fiscal deficit at 9.5% for the financial year 2021-22 of the Gross Domestic Product (GDP) &amp; 6.8% for FY 21-22. The fiscal deficit target has been higher than the market expectation for either fiscal year. The anticipation for the financial year 20-21 was 7.5%, whereas, for FY21-22, it was around 5.0%-5.5%.\u00a0<\/p>\n\n\n\n<div class=\"shadow1\"><strong>Note:<\/strong> CapEx: CapEx (aka Capital Expenditure) are funds utilized by an organization procure, administer, and upgrade physical asset such as building, plant, and machineries. <\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Infrastructure_Measures_Proposed_in_the_Union_Budget_2021-22\" >Infrastructure Measures\nProposed in the Union Budget 2021-22<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Bringing_PSU_Banks_to_the_Center_Stage\" >Bringing PSU Banks to\nthe Center Stage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Augmentation_of_Farm_Income\" >Augmentation of Farm Income<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Commercial_Vehicles_Space_to_Witness_Momentum_in_the_Budget_21-22\" >Commercial Vehicles\nSpace to Witness Momentum in the Budget 21-22<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Budget_Developments_on_Direct_Taxes_for_Individuals\" >Budget Developments on\nDirect Taxes for Individuals<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Disinvestment_Agenda_Receives_A_Momentum_in_Budget_21-22\" >Disinvestment Agenda Receives A Momentum in Budget 21-22<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Unexpected_Surge_in_Fiscal_Deficit_Government_Borrowing\" >Unexpected Surge in Fiscal Deficit &amp; Government Borrowing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Infrastructure_Measures_Proposed_in_the_Union_Budget_2021-22\"><\/span>Infrastructure Measures\nProposed in the Union Budget 2021-22<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Union Budget 2021-22 seeks to address the following areas of infrastructure to ensure financial well-being of the nation:-<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Infrastructure-Measures-Proposed-in-the-Union-Budget-2021-22.png\" alt=\"Infrastructure Measures Proposed in the Union Budget 2021-22\" class=\"wp-image-30236\" width=\"530\" height=\"408\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Infrastructure-Measures-Proposed-in-the-Union-Budget-2021-22.png 997w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Infrastructure-Measures-Proposed-in-the-Union-Budget-2021-22-300x232.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Infrastructure-Measures-Proposed-in-the-Union-Budget-2021-22-768x593.png 768w\" sizes=\"(max-width: 530px) 100vw, 530px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Increased Gross\nBudgetary Support<\/h3>\n\n\n\n<p>As expected, the Government of\nIndia has increased its expenditure gross budgetary support (aka GBS)\nallocation by 26% YoY to INR 54 lakh crore to expand infrastructure spending\nfor economic revival. Moreover, INR 2 lakh crore towards additional CapEx,\nallocation of INR 20,000 crore toward establishing DFI to procure lending\nportfolio of worth 5 lakh crore over the span of the three years.<\/p>\n\n\n\n<p>This will help mobilize funding\nto meet NIP and create growth opportunities in vital sectors such as roads,\ndefense, infrastructure power, railways, etc.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased CapEx for\nRoads &amp; Highways<\/h3>\n\n\n\n<p>Roads &amp; Highways were the\ntwo most important segments of infrastructure. On the CapEx front, for roads\n&amp; highways, the revised estimate is pegged @ 12% at 92053 crores compared\nto budgeted estimates of 81975 crores.<\/p>\n\n\n\n<p>Even for FY22E, the Indian Government has set out the road CapEx at INR 108230 crore.\u00a0The decision will likely to benefits <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFCs<\/strong><\/a> and Banks on account of providing finances for commercial vehicles. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/fintech-startups-aiming-for-nbfc-license-despite-several-challenges\/\">Fintech Startups Aiming for NBFC License Despite Several Challenges<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Facilitation of Alternative\nFinancing Source<\/h3>\n\n\n\n<p>The Indian Government\nenvisaging facilitation of alternative financing source by funding five\noperation project worth around INR 5000 crore via NHAI inVIT<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bringing_PSU_Banks_to_the_Center_Stage\"><\/span>Bringing PSU Banks to\nthe Center Stage <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Establishing Asset\nReconstruction and Management Company (aka ARC) or bad bank to acquire\nprevailing stressed assets for resolving recovery issues still remains\noptimistic for the banking sector, particularly PSU banks. Moreover, INR 20,000\ncrores capital infusion to improve PSU banks&#8217; balance sheet &amp; trigger growth.<\/p>\n\n\n\n<p>After this, the Government of\nIndia announced a merger of 13 PSUs into five central banks, supporting the\nprivatization of state-run banks. Additionally, the Government also announced\ntwo Public Sector Banks&#8217; divestment to speed up expected banking sector\nreforms.<\/p>\n\n\n\n<p><strong>Impact on NBFCs and Bank:-<\/strong> Decision would definitely enable stressed NBFCs to cope up with surging collection issue.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Augmentation_of_Farm_Income\"><\/span>Augmentation of Farm Income\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Government has remained\nproactive to increase farm income with record-breaking procurement of farm\nproduce for domestic agriculturists and farmers for FY 21. Rice and wheat\nprocurement for FY 21 stood at INR 1.72 and 75,000 crores, respectively.<\/p>\n\n\n\n<p>For Micro-finance, it also\nprovided a doubling of fund under NABARD for FY 22 at INR 10,000 vs. INR 5,000\ncrores in FY21. Union Budget 2021-22 has provided a target for agriculture\ncredit at INR 16.5 lakh crore. It also provides detail about the inculcation of\nagricultural infrastructure &amp; development cess on certain products.<\/p>\n\n\n\n<p><strong>Impact on NBFCs and bank: <\/strong>The decision would provide major relief to the stressed microfinance institutions that largely depends on rural section of the nation to provide financial services.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Commercial_Vehicles_Space_to_Witness_Momentum_in_the_Budget_21-22\"><\/span>Commercial Vehicles\nSpace to Witness Momentum in the Budget 21-22<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For Automotive space, the Union\nBudget 2021 has announced a voluntary vehicular scrappage policy related to\ncommercial vehicles older than 15 years &amp; personal vehicles for older than\n20 years. Firms in a value chain such as tire chemical suppliers, OEMs, and\nforging stand to gain as an outcome. Other initiatives in infrastructure and\nagricultural space are favorable for various automotive OEMs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Budget_Developments_on_Direct_Taxes_for_Individuals\"><\/span>Budget Developments on\nDirect Taxes for Individuals<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>No considerable changes in IT rate for corporate or\nindividuals<\/li><li>Unit-Linked insurance products (aka ULIPs) with premiums\nhigher than INR 2.5 lakh\/annum will be subject to tax on maturity. It will\nensure the arrival of taxation on higher-level Unit-Linked insurance products\nat par with mutual funds.<\/li><li>Tax exemption on interest availed on employee&#8217;s contribution\ntowards various PFs has been limited to the yearly grant of INR 2.5 lakh.<\/li><li>Additional deduction of INR 1.5 lakh on housing loan&#8217;s\ninterest for affordable housing has been extended up to 31st March 2022. The\nscheme came into existence in the 2019 budget.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disinvestment_Agenda_Receives_A_Momentum_in_Budget_21-22\"><\/span>Disinvestment Agenda Receives A Momentum in Budget 21-22<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>In the Union Budget 21-22, the Finance Ministry unveiled the \u20b9 1.75 lakh crore for investment. It&#8217;s important to note that the already announced strategic stake sales would be completed in FY22E. Furthermore, the Niti Ayog has been assigned to work on a given list of PSUs for disinvestment.<\/li><li>Companies in which stake of the Government would be monetized next year have included a general insurer and two banks. The LIC India would also form a part of the disinvestment agenda for Financial Year 22.<\/li><li>The <strong><em>Government of India<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Government_of_India\"><strong><em>[1]<\/em><\/strong><\/a><\/sup> has unveiled an asset monetization plan for monetizing various operational assets such as, NHAI toll roads, power transmission projects, warehousing assets, oil &amp; gas pipelines, sports stadium, 2\/3 airport assets, etc.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Unexpected_Surge_in_Fiscal_Deficit_Government_Borrowing\"><\/span>Unexpected Surge in Fiscal Deficit &amp; Government Borrowing<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Owing to a higher deficit, the\nborrowing rate would be higher from the bond market. The finance minister has\nrolled out an additional INR 80000 crores of market borrowing in the existing\nFY; meanwhile, for the financial year 2021-22, an overall market borrowing is\npegged at INR 12 lakh crore. <\/p>\n\n\n\n<p>The bond market was\nanticipating the gross borrowing of around INR 10 00,000 crores for FY 21-21.\nAccordingly, the bond market has been disappointed with on announcement on the\ninclusion of Indian Sovereign bonds in worldwide bond indices, thereby ensuring\nsignificant inflows.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Financial Sector provides much-needed resilience to the nation&#8217;s economy. It has been one of the vital areas in the overall scheme of routing back demand and strengthening the NBFCs and Bank operating pan India. Faineance Ministry has announced INR 1 lakh crore fiscal aids during the prevailing financial year. <\/p>\n\n\n\n<p>This would act as an additional fiscal source for the Non-Banking Financial companies across India. So clearly, it would resolve the liquidity crisis for the NBFCs in the future. However, according to the FM, importance will be given to the fundamentally-sound NBFCs<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/filing-exemptions-related-to-nbfc-and-housing-finance-company\/\">Filing &amp; Exemptions Related to NBFC and Housing Finance<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Union Budget 2021-22 has seemingly growth-oriented with a sharp rise in CapEx* allocation up to 26% YoY &amp; emphasizing manufacturing as a pivotal part of the economy while allowing for a higher fiscal deficit, considering the low-interest scenario. In this article, we will examine the Underlining Importance of Budget 2021 for NBFCs and Bank. [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":30234,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[955],"acf":{"service_id":"8"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":3791,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30145"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=30145"}],"version-history":[{"count":45,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30145\/revisions"}],"predecessor-version":[{"id":36788,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30145\/revisions\/36788"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/30234"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=30145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=30145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=30145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}