Financial Daily from THE HINDU group of publications
Friday, Feb 17, 2006
Financial Daily from THE HINDU group of publications Friday, Feb 17, 2006 |
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Money & Banking
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Public Sector Banks Industry & Economy - Budget Markets - Foreign Institutional Investors Budget wish-list: PSBs seek higher FII investment limit Our Bureau
Mumbai , Feb. 16 BANKERS have asked for higher FII investment limit in public sector banks. At present foreign institutional investors can hold only up to 20 per cent stake in state-run banks. In banks such as Bank of Baroda and Punjab National Bank, the FII investment has already touched 20 per cent while in the case of Canara Bank and Union Bank of India, it is close to the prescribed limit. The higher FII limit would not only help PSU banks to shore up their capital base but also provide them a level playing field. In some private banks, FIIs hold about 65 per cent stake, said a PSU bank official. Bankers also are also seeking tax concessions on interest on long-term fixed deposits and on provisioning made against bad loans. Currently, the interest earned on bank deposits is taxable if the amount is more than Rs 5,000 per year. According to bank officials, this has taken away the sheen from fixed deposits as a savings instruments. Giving tax concession on the interest income from deposits of three to five years will not only make them more attractive to small investors, but will also help banks raise funds. This is one demand that may be addressed in the coming Budget, said an official from Indian Bank Association. Another demand from the banking community is tax breaks on the provisioning they have to make for bad loans, said a bank official. Currently banks have to make provision for 100 per cent of their non-performing assets, but get tax breaks only based on a certain formula. The IBA has demanded that these norms be simplified. The official said, "As we have to provide for losses, we should get tax reduction on it."
More Stories on : Public Sector Banks | Budget | Foreign Institutional Investors
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