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    budget special    introduction | budget basics | budget glossary |budget highlights                                                                             Economic survey 2008 |Union Budget 2008 | Railway Budget 2008


Full Text of Indian Union Budget 2008-09 (home page) .... Click here
Highlights of Indian Union Budget 2008-09 .... Click here


Indian Budget 2008-09- Full Text-Feb 29, 2008


V.FINANCIAL SECTOR

91. Government's policy of a careful and calibrated opening of the financial sector has proved successful. We shall continue to take measured steps.

92. The final report of the Committee on Financial Inclusion has been received. To begin with, I propose to accept two recommendations:

to advise commercial banks, including RRBs, to add at least 250 rural household accounts every year at each of their rural and semi-urban branches; and

to allow individuals such as retired bank officers, ex-servicemen etc to be appointed as business facilitator or business correspondent or credit counsellor.

93. Banks will be encouraged to embrace the concept of Total Financial Inclusion. Government will request all scheduled commercial banks to follow the example set by some public sector banks and meet the entire credit requirements of SHG members, namely, (a) income generation activities, (b) social needs like housing, education, marriage etc and (c) debt swapping.

NABARD, SIDBI and NHB

94. Financial inclusion can be taken forward by expanding the reach of NABARD, SIDBI and NHB. Hence, in order to increase the resource base of these three banks, I propose to tap into the resources of scheduled commercial banks to the extent that they fall short of their obligation to lend to the priority sector. Accordingly, it is proposed to create the following funds:

(i) a fund of Rs.5,000 crore in NABARD to enhance its refinance operations to short term cooperative credit institutions;

(ii) two funds of Rs.2,000 crore each in SIDBI - one for risk capital financing and the other for enhancing refinance capability to the MSME sector; and

(iii) a fund of Rs.1,200 crore in NHB to enhance its refinance operations in the rural housing sector.

Each of these funds will be governed by the general guidelines that are now applicable to RIDF with some modifications.

95. Last year, I enhanced the limit of the loan that could be extended under the Differential Rate of Interest (DRI) scheme to the weaker sections of the community engaged in gainful occupations. However, I did not enhance the eligibility criteria which still stand at levels fixed in 1986. This needs to be corrected. Hence, I propose to fix the borrower's eligibility criteria as annual family income of Rs.18,000 in rural areas and Rs.24,000 in urban areas.

Capital Markets

96. In my Budget Speech of 2006, I had informed the House that, on the basis of the R.H. Patil Committee Report, we shall take steps to create an exchange-traded market for corporate bonds. Both Bombay Stock Exchange and National Stock Exchange have created platforms for trading in corporate bonds.

97. I intend to move forward by taking some more measures to expand the market for corporate bonds. Hence, I propose to:

take measures to develop the bond, currency and derivatives markets that will include launching exchange-traded currency and interest rate futures and developing a transparent credit derivatives market with appropriate safeguards;

enhance the tradability of domestic convertible bonds by putting in place a mechanism that will enable investors to separate the embedded equity option from the convertible bond and trade it separately; and

encourage the development of a market-based system for classifying financial instruments based on their complexity and implicit risks.

98. The fear of the Permanent Account Number (PAN) has virtually disappeared. PAN is now the sole identification number for all participants in the securities market. I propose to extend the requirement of PAN to all transactions in the financial market subject, however, to suitable threshold exemption limits.

99. Our stock exchanges provide national electronic trading platforms for securities transactions. Yet, we do not have a seamless national market for securities because of differences among States on the scope and applicability of rates of stamp duty. Hence, I propose to request the Empowered Committee of State Finance Ministers to work with the Central Government to create a truly pan Indian market for securities that will expand the market base and enhance the revenues of the State Governments.

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