Tax sops sought to boost investments in corporate bonds, term plans

Financial sector, capital market players seek review of interest on small savings schemes

New Delhi, June 13- Report by Business Line

Financial sector and capital market players on Thursday pitched for higher tax incentives for retail investors who put money in instruments such as corporate bonds and term plans. They also urged the government to lower duty on small savings so that mobilisation through bank deposit does not get affected. These are part of suggestions given during the pre- Budget meeting the financial and capital market players had with Finance Minister Nirmala Sitharaman. Suggestions also included infusion of capital in niche/regional banks, enhanced role for the Financial Sector Development Council, review of banking NPA provisions by setting up a committee, enhancing financial literacy programmes and funding, besides others. The meeting was attended by RBI Deputy Governor NS Vishwanathan, SBI Chairman Rajnish Kumar, IRDAI Chairman SC Khuntia, PNB MD & CEO Sunil Mehta, LIC MD T Suseel Kumar, Bandhan Bank CMD Chandra Shekhar Ghosh, Edlewise CEO Rashesh Shah, Kotak Mahindra Bank MD & CEO Uday Kotak, Central Bank of India MD & CEO Pallav Mohapatra, Punjab & Sind Bank MD & CEO S Harisankar, IDFC Bank MD & CEO V Vaidyanathan, besides other stakeholders. After the meeting, SBI Chairman Rajnish Kumar said a lot of suggestions have come regarding infrastructure financing, reviving the economy and what tax benefits can be given for encouraging investments in MSME and exports. PNB MD Sunil Mehta said that liquidity is not a major challenge now. IDBI Bank MD Rakesh Sharma said the meeting discussed how to enhance the corporate bond market. “At present retail investors invest through mutual funds. If some tax benefits can be extended to retail investors, just like it has extended to mutual funds, they would benefit,” Sharma told reporters. Insurance regulator IRDAI Chief SC Khuntia said that he suggested additional tax incentives for term plans to encourage investments like in the case of National Pension Scheme (NPS). The participants also suggested review of interest rates on government’s small savings schemes, setting-up of Debt Exchange Traded Fund (ETF), domestic capability building in audit and credit rating, rationalisation of various taxes like Security Transaction Tax (STT) in capital market. They also urged to set up a separate bond exchange, allowing banks to invest in InvITs to access broader market and make corporate tax progressive to incentivise the MSME sector, among others. Discussions during the meeting also centred around issues relating to the capital markets, financial sector, nonbanking financial companies (NBFCs) and Alternative Investment Funds (AIFs). Governance and liquidity issues were mentioned along with creation of dedicated liquidity window for the NBFC sector.

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