Interim Budget 2019: Measures that could boost MSME banking space

Interest subvention for customers with good track record in the MSME space tops the charts of expectations by brokerages from the interim Budget for the banking space.

They believe that such a move will boost loan growth in this space. Along with it, any tax benefits on general deposits, at par with other market instruments could also bring back investments into the banking space.

Here is a gist of what are the expectations of different brokerages from the Budget.

Brokerage: Prabhudas Lilladher

The brokerage house believes that any interest subvention for customers with non-defaulting track records under low-ticket MSME loans will help boost lending under this space.

Further, it said that an increase in taxation and TDS limit on deposits from Rs 10,000 and bring income tax on long term deposits at par with other financial instruments which will improve deposits in banking system.

- Step up upfront capital infusion plans in PSBs for efficient planning on capital adequacy and growth

- Incentives to vendors/merchants on digital transactions to further push digitalization

Brokerage: Religare Broking

Increase in capital infusion for PSU banks Will help improve capital ratios and build their provision coverage ratios, analysts at the firm wrote in their report.

- Disciplined fiscal deficit trajectory: Control on fiscal deficit would ease the pressure on bond market

- All banking stocks to benefit from stable yields and will raise rate cut possibility

Brokerage: Reliance Securities

Encourage the flow of credit to MSMEs with higher incentives, including interest subvention for lower ticket MSME loans

Measures to improve deposits in the banking system by way of taxation

Introducing a nationwide scheme for direct support to farmers, in line Telangana's Rythu Bandhu scheme, to support small and marginal farmers.

Digitization initiatives and incentives to push digitization across a broader platform.

Higher refinance support from NHB to HFCs/banks.