The budget announcements provide impetus to the financial sector from both near-term and long-term perspective.
Near term, on credit growth, we see measures which are expected to provide a troika of tailwinds for banks and NBFCs alike — first, growth in capex outlay by 33% to Rs10 lakh crore should be supportive for corporate credit growth; second, reduction in personal income tax should leave more money in the hands of consumers and should fuel retail credit growth; and third, the revamped credit guarantee scheme should see improved credit flow to the MSME sector, potentially to the extent of Rs 2 lakh crore.
Additionally, from an operational streamlining perspective, the simplification of KYC process using Digilocker will help lenders, especially the Fintech NBFCs, by assisting in smoother and frictionless disbursements, especially in the unsecured personal loans segment.
Long term, a clear focus has been articulated on enhancing bank governance and investor protection with an announcement of amendments to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act, which should structurally strengthen the sector and bolster stakeholder confidence.
Further there is a move towards democratisation of information, with the government planning to set up a National Financial Information Registry to serve as a central repository of financial and ancillary information. This should support quicker and more streamlined credit appraisals and monitoring for lenders.
(Krishnan Sitaraman, Senior Director & Deputy Chief Ratings Officer, CRISIL)