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Finance minister Nirmala Sitharaman in the Union Budget for the fiscal year 2019- 2020 on Friday proposed various measures for the financial markets, such as recapitalisation of PSU banks and easing liquidity concerns of the non-banking financial companies. The government has also taken some measures to enhance participation in the capital markets. Here are the key announcements for the financial and capital market in the Budget 2019.
The government will inject Rs 70,000 crore into state-run lenders massive bank recapitalisation plan aimed at tackling a record bad debt troubles and revive credit growth.
The finance minister proposed to increase minimum public shareholding for listed companies to 35 percent from the current 25 percent. This means, the promoters can’t hold more than 65 percent from the current limit of 75 percent. However, this is just a proposal. Sitharaman said she had made the suggestion to SEBI, which would consider it in the coming days.
The government will provide short-term partial credit guarantee for the purchase of high-rated pooled assets of NBFCs for a total amount of Rs 1 lakh crore. This guarantee will be provided via public sector banks for the first loss of upto 10 percent.
Investments by FIIs and FPIs in debt securities will be allowed to be transferred and sold to domestic investors in a timely manner, and also proposed FPI investment in debt securities issued by NBFCs.
The Narendra Modi government will raise part of its gross borrowing in external markets via foreign currency borrowings to tide over liquidity crunch in domestic market.
Sitharaman proposed to extend the buyback tax at 20 percent to listed companies as well. The step is taken to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buyback of shares by listed companies.
KYC norms for FPIs would be rationalised and simplified to be made more investment-friendly, without compromising on the integrity of cross-border capital flows.
Finance Minister Nirmala Sitharaman says that in the last 4 years, a one million crore NPA resolution has been done. On the other hand, banks have recovered about Rs 4 lakh crore through IBC Mechanism. Explain that the debts of the government banks have increased due to the last few years, which has forced them to face the deficit of the capital. This has also affected its ability to lend.
With the introduction of money in banks, it will be easier to provide loans for big projects. It is expected to increase the loan growth of banks in the coming days. Banks now have less capital, which has a negative impact on their ability to repay loans. In such a situation, the ability to give loans up to 70 thousand crores will be improved. There will be help in dealing with the lack of capitol.
In the past, the Finance Minister had informed that about 3.19 lakh crores have been deposited in the government banks under the Bank ReCAPTILIZATION PLAN in NDA Government.
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