Page 58 - Banking Finance August 2024

BUDGET QUOTE

Nishant Sinsinwar, Founder of Homiie Studio & Projects Makers

The Union Budget will indeed be a promise as far as the real estate sector is concerned—infrastruc-
ture, affordable housing, and urban development. These initiatives are going to pave the way for in-
novation and growth in interior design and its execution. We are upbeat with digitization on the anvil
and sustainability in consonance with our sustained commitments to green and efficient solutions. This
budget supports SMEs, empowering local suppliers and subcontractors, and builds on our mission to
connect clients with reliable local partners. As a whole, this budget sets the stage for changing the
landscape of real estate. We are ideally placed to take advantage of these opportunities by driving
Nishant
Sinsinwar growth and excellence in the industry.

Soumya Sarkar, C0-Founder, Wealth Redefine (AMFI registered MFD)

We appreciate the government's commitment to fiscal consolidation with a fiscal deficit target of 4.9%
of GDP. The increased allocation for infrastructure and rural development, coupled with employment
and skilling initiatives, will drive economic growth and create new opportunities. The abolition of the
Angel Tax for startups is a significant boost for the entrepreneurial ecosystem. At Wealth Redefine,
we believe these measures will positively impact the investment climate.
However, the proposed tax hike on short-term and long-term capital gains may adversely affect the
market. While the simplification of capital gains taxation is a positive step, the higher tax rates could Soumya Sarkar
dampen investor sentiment.

Fraud allegations must never be levelled lightly
The Reserve Bank of India's (RBI) latest revision of its Master Circular on Fraud Risk Management in banks and other
regulated entities has not come a day too soon. Given the rising incidence of financial frauds, it is imperative that
lenders adopt a fool proof process that does not leave any scope for dishonest borrowers to escape on flimsy technical
grounds. At the same time, it is important that borrowers who have defaulted for genuine business reasons and with-
out fraudulent intent are not penalized or made to suffer the opprobrium justifiably reserved for fraudsters.
According to RBI's latest Annual Report, the number of frauds at banks rose 166% year-on year in 2023-24, with frauds
in loan portfolios accounting for an overwhelming share (84%) in terms of value. The regulator's revised circular at-
tempts to strike a balance between defaulting borrowers and banks. It prescribes a much needed uniform framework
to be followed by all regulated entities before a loan account is classified as a 'fraud' account. Crucially, it mandates
that banks must give defaulters enough time to respond before marking their accounts as fraudulent. At a minimum,
a "detailed Show Cause Notice" must be issued to "Persons, Entities and its Promoters/Whole-time and Executive Di-
rectors against whom [an] allegation of fraud is being examined." This must include complete details of transactions,
actions or events on the basis of which the declaration and reporting of a fraud is under consideration. Further, a
"reasonable time of not less than 21 days" shall be provided to the concerned party to respond to the charges. This
revision of instructions follows a recent Supreme Court ruling which said the principles of natural justice demand that
the borrower be given a chance and time to respond to a charge of fraud.
In reality, as any practising banker knows, defaulters are given more than sufficient time to regularize their account or
plead their case. This is hardly surprising. The principal objective of any bank is ensure that the money it lends a bor-
rower is repaid. After all, banking is a business of intermediation-of taking money from depositors and on-lending it to
borrowers. If loan recipients do not repay, and in time, the bank will not be able to repay its depositors. So banks do
their utmost to ensure the timely repayment of their loans. Indeed, the criticism often levelled against banks, espe-
cially public sector lenders, is that they don't do enough, are often much too slow to respond to warning signals, and
tend to give their borrowers a long rope before classifying loans first as 'special mention' accounts and then as non-
performing assets (NPA). (Source: Mint)

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