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Informist, Thursday, Jan. 2, 2025

--Sources: Pension sector urges govt to allow employees choose EPF or NPS 

--Sources: Insurance sector seeks composite licensing in FY26 Budget 

--Fin Industry Development Council: Moot dedicated fund for NBFC refinancing 

--CONTEXT: Sitharaman held pre-Budget meet with fincl mkt experts Thursday 

NEW DELHI – The Finance Industry Development Council asked the government to announce a dedicated fund for the refinancing of non-banking finance companies in the Budget for 2025-26 (Apr-Mar), Director Raman Aggarwal said after a meeting with Finance Minister Nirmala Sitharaman. The meeting was part of the series of customary pre-Budget consultations that Sitharaman holds with sector experts, economists, and industry bodies before the Budget.   

"Large NBFCs are now borrowing largely from overseas, and many small and mid-sized NBFCs, who are dependent on bank borrowing, are now borrowing from large NBFCs, which is increasing their cost of borrowing," Aggarwal said. "So there is a very strong case here for direct refinance window provided to NBFCs."

As per the data released by the Reserve Bank of India on External Commercial Borrowings, NBFCs have raised $16 billion from overseas between January and October, with $5.5 billion in October alone. "This is a significant increase as compared to previous years. This is primarily due to the reduction in bank borrowings," the Finance Industry Development Council mentioned in a press note.

The government should set up a dedicated fund with a certain allocation that NBFCs can avail for lending to specific sectors like the micro, small and medium enterprises, small borrowers, Aggarwal said. The fund could be managed by the Small Industries Development Bank of India or the National Bank for Agriculture and Rural Development, Addarwal added.  

Sitharaman met experts from the financial sector and capital markets on Thursday. Finance Secretary Tuhin Kanta Pandey and Economic Affairs Secretary Ajay Seth were also present at the meeting. 

On tax front, Aggarwal suggested the government exempt the tax deducted at source on a non-individual's borrowing from an NBFC. "It is becoming an operational nightmare, there is no benefit to the government, there is no benefit to the borrower or to the lender. It is causing an operational nightmare and NBFCs are the only class of financial institutions who are not exempted," Aggarwal said.  

Some experts asked the government to allow insurance companies to have a composite licence, according to a person that participated in the meeting. In November, the Insurance and Regulatory Development Authority of India also made this suggestion to the government, Chairman Debasish Panda had said. A composite licence would allow an insurance company to provide multiple types of products, such as life, general, or health, under one roof.

Few other experts urged the government to allow people to pick between either the Employees' Provident Fund and the National Pension System, another person who participated in the meeting said on the condition of anonymity. Currently, all private sector employees are enroled into the EPF by default and can add NPS to their retirement plan.  End 

Reported by Priyasmita Dutta and Sagar Sen

Written by Krity Ambey

Edited by Deepshikha Bhardwaj

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