With banks sitting on higher liquidity, measures in this Budget were aimed at moving them out of their ‘risk aversion’ phase and deploying credit to the sectors in need. In second half of calendar year 2021 industrial credit picked up, though in low single digits, after years of negative growth. The Centre’s concentrated efforts on public and private capex is expected to help spur industrial credit growth further.

As cash-strapped MSMEs continued to be focus point of the Centre, banks should now heave a huge sigh of relief. With the new variant of the Coronavirus doing rounds, banks were again fearing hiccups in collections on account of the sporadic lockdowns. The financial stability report laid out by the RBI, too, indicated the likelihood of heightened stress from the SME segment. This is now abated with continuing fiscal stimulus easing the finances of the MSMEs.

Besides, the Emergency credit line Guarantee Scheme (ECLGS), which in its earlier two versions helped the SMEs that were reeling from the ill-effects of the pandemic, is further extended until end of March 2023. That apart, the higher allocation of ₹50,000 crore, earmarked under the scheme towards SMEs in the hospitality sector, is a move in the right direction. TransUnion CIBIL’s recent report on ECLGS disbursals made till FY2021 reveals that Tourism, Hotels, and Restaurants sector only availed 3.7 per cent of loans disbursed.

These measures, while on one hand help bolster the credit growth of banks to industries, also help keep a check on the bank delinquencies, on the other hand.

Besides, the FM announced that necessary amendments would be made in the Insolvency and Bankruptcy Code to facilitate cross border insolvency resolution. That said, Indian banks have limited overseas exposure. For instance, the share of overseas loans is just 5 per cent of the total loans of ICICI Bank and 7 per cent in the case of Axis Bank. However, the banks have seen stress in their overseas portfolios in the past and are in the process of streamlining their exposure to this segment.

Digital push

The Budget also laid its thrust on enhancing the infrastructure for digital payments by continuing its budgetary allocations. While the announcement of banks setting up 75 digital banking units awaits more clarity, it lays down the Centre’s intent to continue its push on digital payments, loud and clear on this front. This is a positive for the payment providers that have recently debuted the secondary markets. Further hinting on its thrust on digital payments, the Finance Minister also announced the launch of a Central Bank Digital Currency. If ventured into, the digital currency could also help bolster the ease and use of digital forms of payments. How this pans out will be interesting to watch.