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Bankers give thumbs up to FM

February 26, 2010 20:15 IST

Leading bankers on Friday welcomed the Union Budget 2010-11, in particular the measures on farm loan repayment, capital infusion into PSBs and interest rate subventions to needy sections, saying that these would make the system healthier.

The government on Friday extended the period for farm loan repayment till June 30, 2010, providing more time for banks to recover advances and thus reduce their bad loans.

It also announced an infusion of around Rs 16,500-crore (Rs 165 billion) into weak PSBs next fiscal. State Bank of India's chief financial officer, S S Ranjan, said that the budget was growth-oriented and has brought cheers for the banking industry, particularly by way of capital infusion into weak banks and extending the repayment period.

"Giving more time for farmers to repay loans is definitely good news for banks as this will provide more time for banks for recovery and thus help reduce chances of more defaults," Ranjan told PTI.

The government also raised the interest rate subvention of crop loans from one per cent to two per cent and decided to continue the rate subvention for certain exports categories for one more year.
"This is, in a way, a continuation of stimulus package to weaker sections. The measure will help to mitigate banks' cost of funds and significantly reduce the threat of more slippages in their portfolios," Citibank's Chief Financial Officer, Abhijit Sen, said.

ICICI Bank's Managing Director and CEO, Chanda Kochhar, said the budget "is oriented towards enhancing the growth fundamentals of economy" and was aimed at fiscal consolidation in the economy.

"The increase in the excise duty and removal of certain exemptions on the indirect tax front...are in line with the Government's articulation of focusing on fiscal consolidation," Kochhar said. ABN Amro's Country Head, Meera Sanyal, said that the proposed Rs 16,500 crore infusion into state-run banks reaffirms the fact that Government is taking the financial sector very seriously and wants to bolster it.

HSBC's India Chief Executive, Stuart A Davis, also welcomed the budget describing it as positive for the banking industry. "There is no negative sign for the banking community. The allocation of funds for PSU banks is positive for future growth and towards its customers," Davis said.

Finance Minister, Pranab Mukherjee also said that RBI would allow eligible private entities and non-banking companies to set up banks.

"Licensing NBFCs (to open banks) is a very interesting move--there is a need for one or two NBFCs like IDFC and IFCI in the infrastructure space, who could move towards banking to enjoy lower cost of funds," Yes Bank's Managing Director & CEO, Rana Kapoor, said.

Private-sector Dhanlaxmi Bank's Chief, Amitabh Chaturvedi, said the decision to recapitalise banks is positive for the industry as it will help smaller banks to maintain their capital adequacy ratio and give them solidity.

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