Higher capex to speed up economic recovery: Bankers

The Union Budget 2021-22 has laid emphasis on speedy economic recovery in the post-Covid environment with various steps such as setting up an asset reconstruction company, and hike in FDI limit in the insurance sector which bode well for India's financial sector, banking honchos said on Monday.

For the banking sector, Finance Minister Nirmala Sitharaman said it was imperative to take measures to clean up banks' books in the wake of higher stressed assets and announced to set up an asset reconstruction company to transfer such liabilities.

The country's largest lender SBI said the Union Budget has unveiled a set of well-crafted and robust policies that encompasses the vision of an Aatmanirbhar Bharat.

''The Budget has rightly envisaged a substantial jump in capital expenditure that has a strong multiplier impact on the economy. The decision to open up the insurance sector, setting up a DFI and an ARC, privatizing a couple of public sector banks are all positive steps for the financial sector. ''Social sectors have received large attention in the budget with a thrust on developing a health and education infrastructure on a mission mode. This will augment human capital, an essential prerequisite for inclusive growth,'' SBI Chairman Dinesh Kumar Khara said.

The budget rightly strikes a reasonable balance between addressing the key pillars of health and well being, inclusive development, human capital, apart from laying the path for a robust economy by providing a major infrastructure boost, S S Mallikarjuna Rao, MD & CEO, Punjab National Bank said.

''The array of measures announced are in line with people as well as market expectations and will go a long way to bring the nation back on track by boosting spending on infrastructure and rural development while fighting the pandemic through health focused measures. As far as the financial sector is concerned, further recapitalization of Rs 20,000 crore for PSBs in the FY 2021-22 is a welcome step,'' Rao said.

Also, the creation of an ARC and Asset Management Company that will take over the stressed assets and sell to Alternative Investment Funds (AIFs), is also welcome as it will help improve the health of the banking sector through impact on price discovery and improving competition in the market, said the head of the Delhi-headquartered lender.

Bandhan Bank Managing Director and Chief Executive Officer Chandra Shekhar Ghosh said the government has prioritised spending on growth at this stage, in the hope that such growth would help manage the fiscal deficit subsequently.

''A substantial increase announced in the expenditure on healthcare and infrastructure will help boost economic growth, including the MSME sector and generate employment. Overall, it was a growth-centric Budget aimed at securing India’s long-term economic interest,'' Ghosh said.

The government has proposed a budget outlay of Rs 2,23,846 crore for health and wellbeing in 2021-2022, an increase of 137 per cent from the previous year, with Rs 35,000 crore earmarked for COVID-19 vaccine in the upcoming fiscal.

The Budget has proposed to set the ball rolling for a long term strong growth with focus on infrastructure and banking reforms, Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank said. Measures announced on Healthcare, boost for infrastructure, banking stress assets resolution will go long way in putting economy on right track against COVID driven disruptions, Sidharth Rath, MD & CEO, SBM Bank India said.

''Stake sale by government in public sector companies and financial institutions, including 2 PSBs and one insurance company, in the next fiscal year is a welcome move,'' Padmaja Chunduru, MD & CEO of Indian Bank said. For the banking sector, the FM announced an infusion of Rs 20,000 crore into PSU Banks, this will provide a very boost credit growth.

Hike in insurance sector FDI limit to 74 per cent will attract more foreign players and lead to increased investments. This will help increase insurance penetration in the country, she added.

''Union Budget announcements feature bold initiatives and a strong resolve to pump prime Indian economy. The most fearless and progressive announcement relates to consciously going for fiscal slippage and in that bid, fast forward the V-shaped recovery in a broad based manner. ''Re-visit of DFI framework, creation of ARC-AMC institution are few moves which provide feel good dimension to our real sector, including financial stability,'' said A K Das, Managing Director & CEO, Bank of India.

Abheek Barua, Chief Economist, HDFC Bank said it is a bold budget in many senses.

''The central intent has been to use expansionary fiscal policy to support growth sidestepping concerns over debt sustainability and sovereign rating. The fiscal deficit is pegged at 6.8 per cent of GDP in FY22 compared to a revised estimate of 9.5 per cent for FY21. The focus has been on increasing capital expenditure...In light of the COVID-19 health crisis, the budget’s focus on health and sanitisation with increased allocations and introduction of a new health scheme are also welcome steps.

''That said, the budget does not adequately address concerns over inequitable growth which has been a worry across the globe due to the pandemic. There has been no specific support for sectors stressed due to the pandemic like the hospitality sector,'' Barua said.

While the government did not increase any direct taxes, as some sections of the market feared, there has also not been any cushion provided for households – especially in the informal sector that has been hit the most by the pandemic, he said further.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Sri Lanka and Nepal), Standard Chartered Bank, said this is a growth and reform-oriented Budget – much needed for the extraordinary times.