Banks are expecting the Union Budget 2025-26 to introduce tax incentives that will encourage deposit growth and strengthen credit distribution. The Indian Banks’ Association (IBA) has proposed tax benefits on savings accounts to attract more deposits, which is crucial as current account and savings account (CASA) deposits are declining. Experts also suggest tax breaks on wholesale loans to boost lending in the corporate sector.
Additionally, the banking sector seeks support in managing bad loans, including easing rules for asset reconstruction companies (ARCs) and raising foreign direct investment (FDI) limits in public sector banks. These measures could improve the sector’s financial health and enhance credit flow to industries.Cooperative bank consolidation and tax reforms for foreign banks are also under consideration to promote long-term stability.
Industry leaders believe these steps will attract investments and improve the banking system’s competitiveness.Concerns about rising bad loans, especially in the microfinance sector, have also surfaced. Banks like SBI are working to support microfinance institutions through co-lending and credit solutions. Addressing these issues in the budget could strengthen financial resilience and restore growth.
