Budget 2021: Big reform push in banking, insurance

The Narendra Modi government plans to privatise state-run banks and a general insurer to raise funds for its ambitious infrastructure and healthcare spending plans, finance minister Nirmala Sitharaman said in the budget, clearly signalling a move away from state domination of financial services. Sitharaman also raised the foreign direct investment (FDI) limit in insurance to 74% from 49% in a bid to woo funding from overseas. And, in a move aimed at getting banks to step up credit, the government plans asset reconstruction and management companies to take over bad loans.

In another first, government-owned infrastructure builders such as the National Highways Authority of India (NHAI) and the Power Grid Corp. of India Ltd (PGCIL) will pool their assets in trusts and sell units to investors, raising money for future spending, Sitharaman said in her budget speech. The finance minister also raised revenue projections from privatisation more than fivefold next fiscal to Rs 1.75 lakh crore as the government looks to complete the sale of already shortlisted companies such as Bharat Petroleum Corp. and Container Corporation of India.

The government appears to have reversed plans to merge the three unlisted state-owned general insurers and instead wants to sell one of them. While New India Assurance is listed, United India, Oriental Insurance and the National Insurance Co. are fully owned by the state. The infrastructure investment trust (InvIT) plan will help the government pay for such long-gestation projects that are seen as critical to the economy. “Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction,” she said.

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