Budget and Economy:Mutual fund funding to NBFCs increases after RBI's risk

Stays above Rs 2 trillion mark for second consecutive month

The funding support from asset management companies to non-banking finance companies (NBFCs) has grown in the six months until May 2024 after the Reserve Bank of India (RBI) hiked the risk weights on bank loans to NBFCs in November 2023.

According to CareEdge Ratings data, the total debt funds deployed in NBFCs via commercial paper and corporate debt rose from Rs 1.6 trillion at the end of October 2023 to about Rs 2.1 trillion at the end of May 2024.

“The overall economic environment globally and in India is so uncertain to talk about interest rate cuts. Second thing is CPI headline inflation continues to be close to 5 per cent and according to surveys done it is expected to be close to 5 per cent [for June]; I think it is too early to talk about an interest rate cut,” he said in an interview with CNBC TV18. “I would rather not give any kind of forward guidance which may lead the market players, stakeholders and others to board the wrong train," he added.

 

Two of the six members of the RBI's monetary policy committee voted last month to cut the policy repo rate, arguing that an overly tight policy might hinder economic growth.

More tax benefits for health insurance under the new tax regime, relaxation in payment norms for MSMEs and incentives for the agri-tech sector are among the expectations of stakeholders from the first budget of the Modi 3.0 government.

Finance Minister Nirmala Sitharaman is scheduled to present the full Budget for fiscal 2024-25 on July 23, which will be the first major policy document of the new government.

Anup Rau, Managing Director and Chief Executive Officer of Future Generali India Insurance Company, said the deduction limit on health insurance premiums under Section 80D of the Income Tax Act has remained unchanged for the past nine years despite the fact that there has been a significant rise in healthcare costs across the country.

"It would be best if the limit for medical insurance is linked to inflation and gets revised automatically every year or once in a couple of years. Also, the benefits need to be extended to the New Tax regime since increasing health insurance penetration is critical. So, we hope the upcoming Budget to announce some hike in the deduction limit on health insurance premiums," Rau said.

Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, said reforms like offering health insurance to employees at negotiated rates, reducing GST on health insurance premiums, and offering tax benefits like increased Section 80D exemption limits would make health insurance more affordable and accessible, especially for the 'missing middle' segment of our population.