Move To Allow Banks To Float Core Bonds

The banking division of the finance ministry is seeking permission from the government to allow banks to issue infrastructure bonds to raise resources for funding projects in the infrastructure sector.

As part of the sops sought for banks in the forthcoming Budget, the division is also seeking an extension of benefits of the Section 72(A) of the Income Tax Act, 1961-currently available to manufacturing companies-to banks. The Section 72(A) allows carry forward of depreciation provisions to a new entity.

Bank chiefs said the extension of this benefit would help them at a time when a large number of bank mergers-even among public sector ones-were in the offing.

At present, only IDBI and ICICI Bank are permitted to issue infrastructure bonds.

Banks had earlier proposed that infrastructure lending should be treated as priority-sector lending.

Investments by individuals are eligible for tax benefits for investments up to Rs 1 lakh.