Finance Minister Nirmala Sitharaman on February 1 will present the Union Budget for the fiscal year 2023-24. This budget is the Modi government’s final full budget prior to the 2024 Lok Sabha elections.
Like the previous two Union Budgets, this will also be delivered in paperless form whose preparation commenced on October 10, 2022.
Read here: Budget 2023: Economic Survey to be tabled tomorrow. What is it and where to watch Live?
In the last 20 years, only two out of four full-year budgets presented before general elections had a significantly higher chunk on rural spending, compared to defence and infrastructure. Since India’s economy is recovering from the impact of the pandemic and a potential global recession is way ahead, this budget will be closely monitored for growth measures. One such sector is banking.
Budget 2019-20
In her first Union Budget as Finance minister, Nirmala Sitharaman announced to re-capitalise Public Sector Banks (PSBs) of ₹70,000 crore to boost credit which was part of previously announced ₹3 lakh crore capital infusion. The government infused ₹64,612 crore in PSBs against a planned ₹70,000 crore, reported Moneycontrol.
The minister also targeted at infusing around ₹1 lakh crore into Non-Banking Financial Companies (NBFC) through state-run banks.
A major initiative in the budget was taking over the regulation of the housing finance sector from the National Housing Bank (NHB) to the Reserve Bank of India (RBI) for efficient regulation.
Budget 2020-21
The Finance Minister in her second budget announced to sell the government’s holding in IDBI Bank to private buyers. The government also infused ₹5,500 crore as fresh capital via non-interest securities in PSBs.
The centre also announced amendments to the Banking Regulation Act for scheduled commercial banks. This was done to enhance the bank’s professionalism and improve governance through the RBI. The limit for NBFCs which are eligible for debt recovery were also slated to be reduced from a loan size of ₹1 crore to ₹50 lakh.
The government is expecting to complete the process of selling off its stake in IDBI Bank by the first quarter of fiscal year 2024, reported Moneycontrol.
Budget 2021-22
The budget of 2021-22 proposed setting up of an Asset Reconstruction Company (ARC) to address asset related issues, privatisation of two PSBs and an general insurance company, and infusion of ₹20,000 crore into PSBs.
Nirmala Sitharaman in her budget speech said, “An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.”
As per the RBI, the performance of the ARCs has been lacking in vitality, in terms of ensuring recovery and revival of businesses. The government infused ₹15,000 crore in PSBs in FY 2021-22, the report added.
Budget 2022-23
Sitharaman in her budget speech proposed to launch digital rupee and 75 Digital Banking Units (DBUs) in 75 districts across India.
“To enhance the digital banking initiatives, and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units in 75 districts of the country by Scheduled Commercial Banks,” Sitharaman said in Lok Sabha while presenting the budget in 2022.
The centre also introduced a digital rupee or a Central Bank Digital Currency (CBDC) which would be issued by the RBI using blockchains.
All the 1,50,000 post offices operational in India were proposed to be brought under the umbrella of digital banking to enhance financial inclusion, the report added.
PM Modi launched the 75 DBUs in October 2022. 48 among them were accounted for by the PSUs and private sector banks accounted for the rest.