Budget 2019 will be Finance Minister Arun Jaitley’s sixth budget in a row. The FM had announced multiple measures in his Budget 2018 speech, which benefitted the BFSI i.e. Banking, Financial Services and Insurance Sector directly as well as indirectly. The government’s setting up MSP for agricultural produce (Kharif crops) and 10% increase in agricultural credit, improved asset quality of banks, which otherwise have been choked with NPAs. Furthermore, the Regional Rural Banks aka RRBs were proposed to raise market capital to ensure credit flow for the rural areas. In the past year, the BJP sanctioned 204,000 Point of Sale (PoS) terminals from the Financial Inclusion Fund by National Bank for Agriculture & Rural Development (NABARD).

During Budget 2018, the FM also proposed easing credit supply to MSMEs by supporting credit growth to Public Sector Banks and Non Banking Financial Companies (NBFCs). The Credit Guarantee Fund Scheme for Micro and Small Enterprises and Micro Units Development and Refinance Agency (MUDRA) aided the MSMEs further.

For the common man, Budget 2018 increased the interest income exemption limit for senior citizens, while proposing insurance and pension benefits to Jan Dhan account holders. The move was aimed at spurring bank deposits.

India boasts of being the fourth largest retail credit market in the emerging countries. The country’s digital lending reached US$ 75 billion in FY18. The centre has facilitated a plethora of mergers in the banking sector over the last year. The banking sector has championed IMPS and other mobile and internet banking technologies in the past few years. The Modi Government aims to infuse US$ 5.99 billion in the Public Sector Banks by March 2019.

In the Financial Services sector, Investments by Foreign Portfolio Investors (FPIs) reached US$ 899.12 million) till November 2018.

The Financial Inclusion Lab currently indorsed by IIM-Ahmedabad's Bharat Inclusion Initiative (BII) with JP Morgan, Michael and Susan Dell Foundation, and the Bill and Melinda Gates Foundation has 11 Fintech innovators with an investment of US$ 9.5 million.

The Securities and Exchange Board of India (SEBI) has also proposed direct overseas listing of Indian companies abroad.

On the home front, the government has launched its India Post Payments Bank (IPPB) campaign to boost rural penetration of the Financial Services.

The government’s push for a cashless economy tremendously helped the country’s mobile wallet industry, which is estimated to grow at a 150% CAGR by 2022 with increased mobile transactions in the past 2 years and the trend is here to stay.

Talking about Mutual Funds, the Assets Under Management (AUM) reported a market size of US$ 342.01 billion between April-November 2018, while Mutual fund (MF) equity portfolios were estimated at 74.6 million by June 2018.

The Insurance Sector in India has a poor penetration, however, the BJP government has pushed for insuring the uninsured. Till October 2018, the premiums collected  from new life insurance increased 3.66% year-on-year US$ 15.46 billion, while the gross direct premiums of non-life insurers reported US$ 13.71 billion with 12.4% year-on-year growth rate.

For Budget 2019, while the biggest demand from FM Arun Jaitley is to double the tax exemption limit, the BFSI sector will get a major boost if a separate exemption on Life Insurance or Term Insurance plans is declared. Currently, the premium paid against Life Insurance can be claimed as part of deductions under Section 80C with a cap of Rs.1.5 lac along with other investment instruments.

On the other hand, TDS on bank interest needs to be revised as the norms were last set in the year 1997, which was more than two decades ago. Besides, tax on Fixed Deposits should be brought at par with debt Mutual Funds to make FDs more tax-efficient.

Demand for home loans can be further spurred by chalking out more subsidies on the lines of the government’s current subsidy for MIGs. Similarly, income tax exemption on interest on home loan should be further hiked to attract the salaried class.

For the MSMEs, in Budget 2019 the government must resolve their non-performing assets and stressed accounts. Tax exemptions and more credit via MUDRA would benefit both the banking sector as well as the micro, small and medium enterprises.

The government must also provide a blue print for addressing the non-performing assets (NPAs) of the banking sector.