Budget 2024 turns out to be a non-event for banking industry

As expected, the Union Budget 2024 turned out to be a non-event for India’s banking sector with no key announcements for the sector.  The Budget speech was silent on fresh capitalisation for state-run banks and also on the much-awaited privatisation plan.

Finance Minister Nirmala Sitharaman, however, outlined some schemes to make capital available for smaller companies and promote innovation. Among the announcements, a corpus of Rs 1 lakh crore will be established with 50-year interest-free loans to encourage the private sector to scale up innovation, according to the FM.

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Also, there is some good news for the tourism sector. Sitharaman announced that the Centre will provide long-term interest-free loans to promote iconic tourist centers.

Further, the FM asserted the Central Government’s commitment to pursue the path of fiscal consolidation and bring the fiscal deficit down over the next few years. This is significant for the Reserve Bank of India (RBI) fighting to balance the inflation-growth dynamics. The central bank has been seeking fiscal commitment from the Centre as a precondition to implementing an effective monetary policy.

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The bond market took relief from the lower gross borrowing and lower fiscal deficit numbers. Indian bond yields fell 8 basis points and Rupee largely traded stable.