Think out-of-box: Arun Jaitley asks banks which seeks higher capital

As PSBs sought higher capital support from the govt & tax incentives for senior citizens parking money in fixed deposits

Finance Minister Arun Jaitley on Tuesday nudged banks to think "out-of-box" while doing business and dealing with challenges, even as state-owned banks sought higher capital support from the government and tax incentives for senior citizens parking money in fixed deposits.

In their customary pre-budget meeting with Jaitley, bankers sought full tax exemption for NPA provisioning in view their profitability and demanded a Central Registry for GST registration for banks having branches across the country.

"The current financial year is not a conventional year as many major reformative decisions have been taken during the year. There is a need for out of box thinking as series of steps are required about what the government can do and what the banks can do," Jaitley said during the meeting.

Stating that the banking sector is the backbone of our economy, Jaitley said," He does not see any serious challenges as far as structural changes are concerned."

PSU banks on their part suggested that there is a need for recapitalisation of banks in the current financial year as well as in the next financial year 2017-18.

"Post-demonetisation, liquidity in banks has improved. This may impact saving deposit rates. This makes senior citizens more vulnerable as their income is adversely affected. So, some sort of exemption needs to be given to them under the Income Tax Act so that they have a decent income through their deposits," the banks demanded.

Pitching for incentives for digital transaction infrastructure, bankers suggested that there is a need for exempting Banking Correspondents transactions from service tax.

It was informed that the overall mood about demonetisation in rural areas, including among farmers, is largely positive.

However, four sectors need special attention. These includes vegetable growers who depend on cash for their day to day dealings and cannot hold their crop for long as it is perishable, transport industry in rural India, and plantations in South.

It was suggested that there is an urgent need for special efforts for digitisation of Primary Agriculture Cooperative Societies, Regional Rural Banks and Cooperative Banks to promote digital transactions and e-payments.

Emphasising that dairy sector has huge potential for employment generation, creation a new Dairy Infrastructure Development Fund for the purpose was suggested.