The overall budget presented by Finance Minister Nirmala Sitharaman today did not create much excitement, keeping the provision for infrastructure development at Rs 11.11 lakh crore, which was in the interim budget. Even today, the budget proposals have been codified by paying attention to the nine special areas that have been emphasized in the current budget. The budget has plans and proposals for agriculture and vocational training, small scale industries and increasing employment opportunities, focusing on the lower classes, women, youth and farmers. But the banking sector, which is the strength of the economy, does not have as much support as expected in the budget. Its reflection is seen in banking stocks.

Don’t need money to implement?

The banking sector is facing a situation where investment mobilization is not possible in proportion to the demand and growth of loans. Banks were expecting proposals to help overcome this situation, especially tax and other concessions on interest on deposits. It didn’t happen. As more private investment is expected in infrastructure development and other projects, the demand for bank loans will increase.

Moreover, according to the budget proposals, bank loans are required for new projects in the field of agriculture, employment, training and services. As per the budget proposal, Mudra loans have been increased from Rs 10 lakh to Rs 20 lakh. The plan also says that with the help of the government, the loan assistance will continue to be provided to the small businesses that are in difficulty.

It is also suggested that one crore families will be provided housing under PM Awas Yojana as part of urban development. The government will subsidize the interest in this scheme, which has an allocation of 10 lakh crores. Another suggestion is that rental houses will be set up for the accommodation of workers working in factories and other industries with various industries. In this way, the banks will have to try hard to find funds for the loans for the development activities targeted by the budget.

Need more bank loan

The direction of monetary policy remains unfavorable to interest rate cuts due to volatility in inflation. Even though the central bank has not changed the base rates, there is already a situation where the interest rates on bank loans are increasing. According to the Economic Survey, gross domestic growth could be as high as seven per cent this fiscal. The total expenditure of the government has been increased to Rs 48.21 lakh crore from Rs 47.7 lakh crore in the interim budget. All this will increase the demand for bank loans. This situation may affect the functioning of banks in two ways. First, if the deposit cannot be raised according to the loan requirement, the loan may not be granted. The second way is to accept deposits at higher rates. In that case, interest on loans will also rise. Either way, it will not help the budget boost growth.

The author is a banking expert