Leading PSBs as well as NBFCs gave a number of suggestions for infrastructure financing

Finance Minister Nirmala Sitharaman's pre-Budget consultations with financial and capital market stakeholders on Thursday discussed creation of a dedicated liquidity window for non-banking finance companies (NBFCs) sector, review of interest rates on small savings schemes and banks' non-performing assets (NPAs or bad loans), among other issues, an official said.

A Finance Ministry statement also said that capital infusion in public sector banks (PSBs) and a separate bond exchange were among the other issues discussed.

Leading PSBs as well as NBFCs gave a number of suggestions for infrastructure financing, tax benefits for encouraging MSME (micro, small and medium enterprises) investments, increasing liquidity in the system, tackling NBFCs' credit issues and deepening the bond market.

"Lot of suggestions have come regarding infrastructure financing, reviving the economy and what tax benefits can be given for encouraging investments in MSMEs. Lot of representation was also there from NBFCs," State Bank of India (SBI) chairman Rajnish Kumar told reporters after the meeting.

Grateful for every thought/idea that's being shared by scholars, economists and enthusiasts through print, electronic, and on social media. I read many of them; also, my team carefully collates them for me. Value every bit. Thanks. Please keep them coming. #Budget2019 — Nirmala Sitharaman (@nsitharaman) June 6, 2019

Punjab National Bank (PNB) CEO Sunil Mehta said: "I think liquidity is not a major challenge right now. NPAs are not an issue of the Budget".

IDBI Managing Director Rakesh Sharma said: "We suggested some tax alignments between section 43B and rule 3EA of the Income Tax act. As per RBI rules, we can only book the interest income within 90 days, but as per rule 3EA, six months accrued interest is also accounted...so there should be some alignment on that."

"We discussed how to enhance the corporate bond market. At present, retail investors invest through mutual funds. If some tax benefits can be extended to retail investors also just like it has extended to mutual funds, they would benefit and corporate bond market can be extended.

"There are issues regarding solvency and liquidity. In case of only liquidity issues, some market window could be opened to make funds available..it has to be seen on a case by case basis. Solvency related issues have to be handled separately," he added.

"On the NBFC Sector, the stakeholders said there is a need to distinguish between solvency, governance. The liquidity issues were also discussed along with creation of dedicated liquidity window for NBFC sector, review of interest rates on Small Savings Schemes, review of banking NPAs provisions through setting-up a Committee came up during the three hour deliberations," the statement said.

"Incentivising agricultural marketing, setting-up of Debt Exchange Traded Fund, domestic capability building in audit and credit rating, making available trade licence online for MSME sector too was detailed in the exchanges," it said.

Major stakeholders of financial sector and capital markets participated in the meeting including Reserve Bank of India (RBI) Deputy Governor NS Vishwanathan, the statement added.