The banking sector is looking forward to resolution of policy bottlenecks that are holding up nearly Rs 15.6 lakh crore worth of projects. A considerable chunk of bank finance is also stuck in these projects. With a chunk of the project cost being bank finance, banks have a lot at stake in lifting these hurdles. They are also looking at special incentives to encourage household savers to shift back to financial assets from physical assets like gold.
Arundhati Bhattacharya, chairman and managing director of State Bank of India (SBI), told dna, "We expect the budget to alleviate the policy logjams surrounding the infrastructure projects that are stuck with bank finance without any progress. Once there is a clarity in the policy related to land and environment, many of these projects can go onstream."
According to RBI's estimates, "By the end of January 2014, the Cabinet Committee on Investment (CCI) and the Project Monitoring Group (PMG) had together undertaken resolution of impediments for 296 projects with an estimated project cost of Rs 6.6 lakh crore. As at end-March 2014 around 284 projects worth Rs 15.6 lakh crore are under the consideration of PMG for which issues are yet to be resolved."
Official data indicates that there has been a slight decline in the total number of delayed central sector infra projects. However, 15-20% of these projects, mostly in roads, power and petroleum, have reported additional delays, for which the dates of completion have been extended.
There has been an increase in the number of projects without date of commissioning, mostly in roads reflecting the growing uncertainty about their completion. This suggests that it may take some more time before these clearances result in investment cycle turnaround, said bankers.
Ashwin Parekh, managing partner, Ashwin Parekh Advisory Services LLB, said, "The budget should have a clear direction towards encouraging financial savings rather than physical savings like gold so that the household savings can move to the banking system, bank deposits being the most popular financial savings."
There should also be clear indication of various poverty alleviation programmes and the subsidy programmes to be driven through the banking channels so that the business of banks is enhanced, he said, adding that recapitalisation of banks is another important need but it should keep it outside the budget.
Bhattacharya said, "Recapitalisation is something that banks are looking forward to as there is a need for economic growth, Basel III roadmap and operational needs. We also expect the government to have some incentives to encourage savings so that household savings can be channelised to the banking sector."