Lenders welcome banking panel, extension of GIFT City tax sops

Lenders on Sunday welcomed the budget proposals such as a high-level committee to look into the banking sector in future and also the extension of the tax holiday for GIFT City operations. The Rs 10,000 crore SME Growth Fund were welcomed by Yes Banks managing director and chief executive Prashant Kumar, who lauded the budget for focusing on harnessing the demographic dividends and also the services sector.

Lenders on Sunday welcomed the budget proposals such as a high-level committee to look into the banking sector in future and also the extension of the tax holiday for GIFT City operations. State Bank of India's chairman C S Setty, who is also the chairman of industry body IBA, said the budget maintains policy continuity, tax predictability and attempts to balance between the rural and urban, as also legacy and sunrise sectors. ''Financing aspect of Viksit Bharat has been elaborately addressed with measures such as Committee on Banking, Infrastructure Risk Guarantee Fund, recycling of CPSE real estate assets and extension of tax holiday for GIFT City,'' Setty said. Union Finance Minister Nirmala Sitharaman announced the formation of a High-Level Committee which will undertake a comprehensive review of the sector and align it with India's next phase of growth. A detailed document also extended the tax holiday for GIFT City operations for 20 years from the present 10 years. However, there was no further commentary on the bank consolidation plan in the budget, while a higher-than-expected gross borrowing at over Rs 17 lakh crore led to fears of a crowding out and led to the BSE sectoral benchmark Bankex closing 2.73 per cent down at Sunday's specially conducted trade. Setty said the small businesses will benefit from the government proposals in the budget including setting up of a dedicated SME Growth fund and the mandate on Trade Receivables Exchange backed by credit guarantee support. State-run Bank of Baroda's chief general manager for MSME Lending, Madhur Kumar, said the budget signals a clear shift toward structural strengthening of MSME financing, with banks placed at the centre of execution. The proposal on trade receivables will improve cash-flow visibility, shorten working-capital cycles, and enable safer, receivable-backed lending rather than collateral-heavy approaches, Kumar added. The Rs 10,000 crore SME Growth Fund were welcomed by Yes Bank's managing director and chief executive Prashant Kumar, who lauded the budget for focusing on harnessing the demographic dividends and also the services sector. ''While the hopes of a bumper resource generation year were limited with the growth in FY27 pragmatically assumed at 10%, the FM achieved the objectives of reducing both the public debt and the fiscal deficits as % of GDP, thereby sticking to the roadmap of fiscal consolidation,'' he added. Foreign lender Standard Chartered Bank's chief executive for India and South Asia, P D Singh, said the budget balances the development expenditure needs of the country along with the commitment to stay on course on fiscal consolidation and capex thrust. ''The focus given on skills development and initiatives on industries like pharma and textiles should help in employment generation. At the same time, the additional push given to develop the corporate bond and municipal bond market should bolster the debt markets,'' he added. Among the non-banks, Tata Capital's managing director and chief executive Rajiv Sabharwal said the move to restructure two state-run non-banking finance companies will contribute to a more resilient financial architecture. Meanwhile, Sanjay Kaul, Managing Director and Group CEO of GIFT City, said, ''The Budget provides strong long-term tax certainty for entities operating from India's maiden International Financial Services Centre at GIFT City, significantly enhancing the country's offshore financial competitiveness''. The extension of the tax deduction window to 20 years out of 25 years from 10 years out of 15 years, coupled with a clearly defined 15 per cent tax rate thereafter, offers clarity and predictability that global financial institutions and investors look for when making long-term location and capital allocation decisions, he said. Raamdeo Agrawal, Chairman & Co-founder, Motilal Oswal Financial Services Ltd, said, ''The 100% tax holiday for data centres until 2047 is a '1,000-pound gorilla' move. This is similar to the 90s software boom all over again. We are already adopting AI; now we are building the 'AI Factory of the World,' firing up massive capex in power, cables, and infrastructure''. ''However, we must be realistic about the impact of STT on capital markets. The STT hike and the removal of dividend set-offs seem to be bringing a headwind to markets. They make many high-frequency and arbitrage trades unviable, which will squeeze market liquidity and leverage in the short term.

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