FM offers PSB reforms and end of retrospective taxation in the next budget


Finance Minister Arun Jaitely indicated that the next budget will address the most frustrating issue of distress of the banking system. At the same time, he clarified that government will keep the control of PSBs.

“The country has not reached a stage where the government can completely exit its holding in the 27 public sector banks.”

It is expected that government may adopt some strong reform measures including induction of private sector professionals at the managerial level, extension of the Indradhanush scheme for more banks and disinvestment of PSB shares by keeping 51% for government etc.

The PSB s need some urgent corrective measures as stressed assets and write off has reached a level of 17% for them. Rapidly deteriorating financial conditions of the PSBs need a rehabilitation exercise by the government where it has nearly 63% share holdings.

Retrospective taxation

Raising investor’s confidence is another agenda of the government and for this the Finance Minister hinted that he may put an end to the retrospective tax issue that was brought by the previous government.

“We have two tax disputes with large corporate. This we are working to settle amicably.” The Finance Minister was highlighting the long pending Vodafone tax dispute and the recently emerged Cairn energy tax issue.

The Vodafone tax dispute may be ended with withdrawal of the retrospective clause related to the amendment of section 9 of the income tax Act. Over the last   one year, the Finance Minister has expressed his uneasiness about the retrospective element in the amendment.