Green financing, digital currency may get a boost in the interim budget

While the government, they said, is unlikely to announce anything major, given this is only an interim budget, it is expected to carry forward some of the initiatives taken during the last few years and take certain incremental measures.

 

“I expect some initiatives to be announced on how sustainable finance could support organizations from transitioning away from the traditional carbon-intensive sectors to cleaner and greener technologies," said Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat.

Iyer said that as part of the green push, the government could look at providing some refinance support, especially with respect to climate financing in the 1 February budget.

 

Iyer also expects the government to announce proposals around India’s digital public infrastructure such as digital payments, and incentivize banks to promote the central bank digital currency (CBDC).

On 1 December 2022, the Reserve Bank of India launched a pilot for retail digital rupee with four banks in four cities, a month after testing the wholesale CBDC.

 

That apart, he said the government could suggest building more risk buffers by non-bank financiers as part of the financial stability push.

“I expect some directional inputs from the budget which could indicate that RBI will look at mandating higher capital buffers for NBFCs from a financial stability standpoint," he said.

 

Bankers see the government building upon the previous budgets and focusing on maintaining the momentum to reach the target of a $5-trillion gross domestic product.

They believe there could be some measures aimed at strengthening domestic manufacturing, furthering rural development, developing infrastructure, including social infrastructure and attracting foreign investment, all of which could help improve lending in India.

“Considering the critical role played by banks in economic growth, the budget may focus on further streamlining the Insolvency and Bankruptcy Code (IBC) norms as well as re-examining the NARCL and IDRCL structures and for facilitating seamless credit flow in the economy," said Suresh Khatanhar, deputy managing director of IDBI Bank.

The National Asset Reconstruction Company Ltd (NARCL) and India Debt Resolution Company Ltd (IDRCL) are the two key constituents of India’s so-called bad bank.

An email sent to a spokesperson of banking industry lobby Indian Banks’ Association asking what it expects from the interim budget remained unanswered. Phone calls to its chief executive Sunil Mehta and its chairman and chief executive of Punjab National Bank A.K. Goel were not answered as well.

Meanwhile, non-banking financial companies (NBFCs) believe the government could make certain announcements pertaining to micro, small, and medium enterprises, that would also benefit the sector.

“We feel the interim budget, while persisting with the given thrust on infrastructure spending and privatization, should prioritize fiscal stability, MSME empowerment, and a simplified GST regime to foster a conducive business environment for NBFCs to provide crucial funding to small businesses," said Umesh Revankar, executive vice-chairman of Shriram Finance. He is also chairman of the Finance Industry Development Council that represents NBFCs.