NBFCs seek refinance window, tax tweaks in pre-Budget meeting with FM

Industry representatives push for a dedicated refinance line, SARFAESI changes and tax alignment to support funding and recovery

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Dedicated refinance window on the lines of NHB for the NBFC sector and aligning long-term capital gains tax with fixed deposits to encourage deposit mobilisation are some of asks presented before Finance Minister Nirmala Sitharaman on Wednesday during a pre-Budget meeting with the representatives of BFSI sector here.

There is a need to create a dedicated refinance window for NBFCs (non-banking financial companies) to ensure a smooth and sustainable flow of funds and resources raised through this mechanism may be exclusively used to finance MSMEs and priority sectors, Finance Industry Development Council CEO Raman Aggarwal said after the meeting.

With regard to recovery, he said, there was a suggestion for tweaking of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act so that NBFCs can benefit from this.

Currently, he said, the limit under SARFAESI Act is Rs 20 lakh which can be reduced so that smaller NBFC players can be covered under this debt recovery laws.

He said, FIDC made a case of bringing down the limit from present Rs 20 lakh to Rs 1 lakh so that smaller NBFCs can be benefited from this, sources said.

Aggarwal also said that the government can consider removing TDS on non-individual borrowers as there is no extra revenue generated from this provision. There was also a recommendation for notification for NBFCs for deduction in taxable income under section 80E on interest on Education loans.

According to sources, representatives from banks suggested aligning long-term capital gains tax with fixed deposits so that deposit mobilisation can be encouraged. Income tax is levied on return generated out of term deposit, which discourages people from putting their savings in fixed deposits.

This is the seventh in a series of pre-Budget consultations that the Ministry of Finance conducts annually before finalising the Budget 2026-27.

The meeting was also attended by Union Minister of State for Finance Pankaj Chaudhary, Secretary of the Department of Economic Affairs Anuradha Thakur, Chief Economic Adviser V Anantha Nageswaran and other senior officials from the Ministry of Finance.

Last week, the finance minister had met economists, leading representatives from the agriculture sector and MSME sector players as part of the first, second, and third rounds of discussions, respectively. On Tuesday, three pre-Budget consultations including with representatives of capital markets and startups were held.

Sitharaman, who would present her ninth consecutive Budget likely on February 1, will present the annual account in the backdrop of geopolitical uncertainties and the steep US tariff of 50 per cent imposed on shipments from India.

The Budget for the next financial year will have to address issues of boosting demand, job creation and putting the economy on a sustained 8 per cent-plus growth path. The government estimates the Indian economy to grow in the range of 6.3-6.8 per cent during the current fiscal year.