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Sustaining Growth
Indian Budget 2011-12
Shri Pranab Mukherjee, Minister of Finance- February 28, 2011
Financial Sector legislative Initiatives
34. The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. The UPA Government is committed to take this process further. Accordingly, I propose to move the following legislations in the financial sector:
(i) The Insurance Laws (Amendment) Bill, 2008;
(ii) The Life Insurance Corporation (Amendment) Bill, 2009;
(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;
(iv) Banking Laws Amendment Bill, 2011;
(v) Bill on Factoring and Assignment of Receivables;
(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and
(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
35. In my last Budget speech, I had announced that Reserve Bank of India would consider giving some additional banking licences to private sector players. Accordingly, RBI issued a discussion paper in August, 2010, inviting feedback from the public. RBI has proposed some amendments in the Banking Regulation Act. I propose to bring suitable legislative amendments in this regard in this session. RBI is planning to issue the guidelines for banking licences before the close of this financial year.
Public Sector Bank Recapitalisation
36. During the year 2010-11, the Government is providing a sum of `20,157 crore for infusion in the Public Sector Banks to maintain Tier I Capital to Risk Weighted Asset Ratio (CRAR) at 8 per cent and increase government equity in some banks to 58 per cent. I propose to provide a sum of `6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a minimum Tier I CRAR at 8 per cent.
Recapitalisation of Regional Rural Banks
37. As a part of financial strengthening of Regional Rural Banks, an amount of `350 crore was given to these banks during this year. I propose to provide `500 crore during 2011-12 to enable them maintain a CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
38. The Micro Finance Institutions (MFIs) have emerged as an important means of financial inclusion. Creation of a dedicated fund for providing equity to smaller MFIs would help them maintain growth and achieve scale and efficiency in operations. I propose to create in the course of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI. To empower women and promote their Self Help Groups (SHGs), I propose to create a “Women’s SHG’s Development Fund” with a corpus of `500 crore. The Committee set up by RBI to look into issues relating to micro finance sector in India has submitted its report. The Government is considering putting in place appropriate framework to protect the interests of small borrowers.
Rural Infrastructure Development Fund
39. The Rural Infrastructure Development Fund (RIDF) is an important instrument for routing bank funds for financing rural infrastructure. This is popular among State Governments. I propose to raise the corpus of RIDF XVII to `18,000 crore in 2011-12 from `16,000 crore in the current year. The additional allocation would be dedicated to creation of warehousing facilities.
Micro, Small and Medium Enterprises
40. Micro and Small enterprises play a crucial role in furthering the objective of equitable and inclusive growth. Last year, `4,000 crore was provided to SIDBI for refinancing incremental lending by banks to these enterprises. For the year 2011-12, I propose to provide `5,000 crore to SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets.
41. Handloom weavers have been facing economic stress. Consequently, many of them have not been able to repay debts to handloom weaver cooperative societies which have become financially unviable. I propose to provide `3,000 crore to NABARD, in phases for these cooperative societies. The initiative would benefit 15,000 cooperative societies and about 3 lakh handloom weavers. The details of the scheme would be worked out by the Ministry of Textiles in consultation with Planning Commission.
42. I am happy to report that the outstanding loans to minority communities which stood at 13 per cent of total priority sector lending at the end of last year have increased to 13.6 per cent in the current year. I have directed the Public Sector Banks to achieve the target of 15 per cent at the earliest.
Housing Sector Finance
43. To further stimulate growth in housing sector, I am liberalising the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loan upto `15 lakh where the cost of the house does not exceed `25 lakh from the present limit of `10 lakh and `20 lakh respectively.
44. On account of increase in prices of residential properties in urban areas, I propose to enhance the existing housing loan limit from `20 lakh to `25 lakh for dwelling units under priority sector lending.
45. To provide housing finance to targeted groups in rural areas at competitive rates, I propose to enhance the provision under Rural Housing Fund to `3,000 crore from the existing `2,000 crore.
46. Credit enablement of Economically Weaker Sections (EWS) and LIG households is a serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.
47. To prevent frauds in loan cases involving multiple lending from different banks on the same immovable property, the Government has facilitated setting up of Central Electronic Registry under the SARFAESI Act, 2002. This Registry will become operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
48. In pursuance of the announcement made in Budget 2010-11, the Government has set up a Financial Sector Legislative Reforms Commission under the Chair of Justice B. N. Srikrishna. It would rewrite and streamline the financial sector laws, rules and regulations and bring them in harmony with the requirements of a modern financial sector. The Commission will complete its work in 24 months.
49. The Companies Bill introduced in the Parliament in 2009 has been received from the Parliamentary Standing Committee. The proposed bill will be introduced in the Lok Sabha in the current session.
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