Banking & Financial services

There are hopes of an increase in limit for tax deduction on interest on home loans from Rs 150,000 to Rs 250,000, which could spur demand for home loans to the benefit of banks and housing finance companies.

While SBI has set the consolidation run amongst public sector banks, any initiatives in this regard should improve market sentiments towards public sector banks. There are expectations of bold steps like lowering small-saving rates, which could indirectly lead to lower cost of funds for banks.

Measures like hiking FII holding limits in PSU banks, removal of voting rights cap (10 per cent currently) for FIIs in banks and increase in FDI limit in insurance sector to 49 per cent would make it easier for financial institutions and banks to raise capital for their expansions.

On securities transaction tax, experts believe that steps to phase it out or even reduce it would help improve trading volumes, which will benefit broking firms. Any move allowing higher deduction on interest earned from lending to infrastructure projects will lower the effective tax rate for lenders.