|
Banking
and Finance
Highlights
- Service
Tax levied on select businesses carried out by banks and
financial institutions.
-
Administered interest rates cut by 150 basis points.
-
Abolition of Banking Services Recruitment Boards.
-
Screen based trading in government securities to be implemented.
-
Government to introduce legislation on Securitisation.
BUDGET
IMPACT
Barring
lending, most other major revenue streams of banks will
now be subject to a service tax. Activities like leasing,
credit cards, asset management, securities and exchange
broking and provision and transfer of financial information
will now attract a service tax of 5 per cent.
Hence
banks that derive a substantial proportion of their revenues
from the above activities (mostly fee-based activities)
will be impacted the most.
The
reduction in the administered interest rates is a significant
move in the direction of lower interest rates and will help
in reducing the interest burden of the government.
The
150 basis point cut in administered rates will enable banks
to reduce their deposit rates as well, which in some time
should lead to a fall in lending rates.
Rs.800
crore worth of NPAs have been recovered in FY 2001.
Net
NPAs of the banking system have dropped by nearly 50 per
cent.
Seven
more Debt Recovery Tribunals are to be set up in 2001-02.
22 Debt Recovery Tribunals and five appellate tribunals
have been established so far.
The
abolition of the banking recruitment boards (latest by 31
July 2001) will give state-run banks autonomy in their recruitment
and HR policies.
In order
to develop the debt market, screen-based trading of government
securities will be implemented.
Real
Time Gross Settlement (RTGS) will be put up by next year.
Government
will introduce comprehensive legislation on Securitisation
as part of its moves to deepen the capital markets.
Banks
will benefit from the abolition of the surcharge on corporate
tax and the reduction of the dividend tax.
While
all banks will gain from the abolition of the surcharge
on corporate tax and the reduction of the dividend tax,
HDFC Bank will be the biggest gainer because it will save
over Rs.9 crore (close to 5 per cent of its FY 2000 PAT).
|
Interest rate trends
|
| (per
cent per annum) |
| |
As on
|
| Interest
rate |
12-11-99 |
7-4-00 |
26-1-01 |
| Bank
rate |
8.00 |
7.00 |
8.00 |
| MTLR |
13.50 |
13.50 |
13.00 |
| PLR |
12.00
to 12.50 |
11.25
to 12.50 |
12.00
to 12.50 |
| Deposit
Rate |
8.00
to 10.50 |
8.00
to 10.50 |
8.50
to 10.50 |
| Call
money (low/high) |
7.80
to 8.90 |
0.20
to 7.00 |
7.80
to 11.30 |
| CDs |
8.25
to 11.90 |
6.50
to 14.00 |
7.78
to 10.50 |
| CPs |
9.40
to 12.50 |
9.58
to 12.25 |
10.00
to 11.98 |
| 91-day
T Bills |
9.33 |
8.00 |
8.87 |
| 364-day
T Bills |
10.19 |
9.29 |
9.42 |
| MTLR
: Medium Term Lending Rate (IDBI's rate) |
|
