Top Rural Sectors Affected By Demonetisation
Rural sectors such as vegetable growers, brick kiln labourers, transport industry and plantations need special attention even though there is a perception about a positive impact of demonetisation, representatives of the banking industry told Finance Minister Arun Jaitley.
Mr. Jaitley hinted at some more "out of the box" steps that the government would take to ease the adverse impact of demonetisation.
The bankers, during a pre-Budget consultative meeting with Mr. Jaitley, suggested special efforts for digitisation of primary agriculture cooperative societies, regional rural banks and co-operative banks to promote digital transactions and e-payments.
"The Union Finance Minister Arun Jaitley said that the current Financial Year 2016-17 is not a conventional year as many major reformative decisions have been taken during the year," according to an official statement. "He said that there is need for out-of-box thinking as series of steps are required about what the Government can do and what the banks can do. The Finance Minister further said that the banking sector is the backbone of our economy. He said that he doesn't see any serious challenges as far as structural changes are concerned."
The bankers said that liquidity in banks has improved post demonetisation, but this could impact saving deposit rates.
This makes senior citizens more vulnerable as their income is adversely affected, the bankers said, suggesting that some sort of exemption need to given to them under the Income Tax Act.
The bankers also told the finance minister that there is a need for the recapitalisation of banks in the current financial year as well as in the next financial year, adding that there is a need for full tax exemption for NPA provisioning by the banks.
After demonetisation, the Budget should focus on boosting consumption to create demand, the bankers said, adding that one way to achieve this was by encouraging low-cost housing by relaxing the rules.
At the moment, "the digital acceptance infrastructure is loss-making," the bankers informed Mr. Jaitley, suggesting that there need to be incentives for this in the Budget.
The government representatives apart from Mr. Jaitley included Minister of State for Finance and Corporate Affairs Arjun Ram Meghwal, Finance Secretary Ashok Lavasa, Economic Affairs Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia, Financial Services Secretary Anjuli Chib Duggal, DIPAM Secretary Neeraj Kumar Gupta, Chief Economic Adviser Arvind Subramanian, among others.
The banking sector was represented by RBI Deputy Governors S.S. Mundra and Nachiket M. Mor, State Bank of India Chairperson Arundhati Bhattacharya, NABARD Chairman Harsh Kumar Bhanwala, Indian Banker's Association Chairman Rajeev Rishi, Chairman, Indian Banker's Association among others.