PreBudget wishlistMy wishes are listed below, which I wish that FM includes in the budget when he rises to present the BUDGET 2009.
19 Jun 2009
One of the most pleasurable parts of my job is to prepare the wish list for a forthcoming budget. If your wish list includes popular items like increasing the income tax exemption limit, the chances of it being accepted are bright. On the other hand if your wish list is on a slightly off beat track, you can only hope against hope that somebody in the finance ministry will pick it up from the heaps of wish lists that they routinely receive and actually act on yours. If that happens, then apart from being good for the country, it would also be very satisfying, professionally!
My wishes are listed below, which I wish that FM includes in the budget when he rises to present the BUDGET 2009.
Our consumer finance industry, already serving the upper and middle classes in a big way, still has to make an impact on the upwardly aspiring lower middle classes. These are neither served by the Micro finance organizations (catering to underprivileged section) nor the institutionalized lenders such as banks and NBFCs. In fact, the attempt to provide small ticket unsecured loans primarily targeted at them failed as the lenders withdrew from the market due to soaring NPAs. On the other hand our car and housing industry are clear proof of how easier access to credit can drive tremendous growth.
Clearly a comprehensive law is needed that covers retail lending and provides for:
Voluntary Registration of all lenders who wish to be covered by the Act.
Regulations on the maximum rates of interest that can be charged for various kinds of products
Regulations on disclosure practices that ensure that consumers are aware of what they are taking on
Regulations on how floating rates are calculated
Regulations to ensure that the consumer can shift his loan to another lender with pre-fixed pre-payment penalties and minimal operational hassles
In return the registered lenders should get a fast track recovery mechanism that should bypass the normal court procedures and enable them to recover their money in days with nominal costs rather than years (if not decades) as is the norm at present. There are several models that can be used for speeding up the collection process including a basic assumption that amounts claimed by the registered lenders cannot be contested by the borrower except if he alleges that the lender has committed fraud or made a mistake/error.
Such a law if enacted would boost consumer confidence in the fairness of the consumer lending industry as well as enable the industry to serve a larger section of the society than is the case at present.
Education Refinance Fund: Going ahead on the promise made good 3-4 years ago to set up the education re-finance fund. This will make education loans a viable business proposition and spur the higher and vocational education sector, which is one of the most effective and long-term poverty alleviation tools. It also fits in beautifully with the UPA government's recent emphasis on the education sector.
Subsidized Home loans: Especially for the first time buyers of low value flats costing up to Rs. 10 lacs and within specified sizes. This scheme should clearly be targeted at those who are currently staying in slums in inhuman conditions. The scheme needs to be run through commercial banks and specialized lenders. Given the current environment it is possible that the developers might see a big business opportunity in the area and we may finally see some action on the truly affordable homes meant for the lower middle classes who are the backbone of any economy.
Subsidized Health Care Policy: The government should negotiate with the non-life companies for a universal micro health care policy (say for an amount of Rs. 25,000) and then subsidize it (it should not be completely free) and distribute it widely through post offices and NGOs. There needs to be innovation on the premium payment options since a lump sum yearly payment is unlikely to work for the targeted population. Several pilot experiments on such policies have already been successful at the state level and it is about time that this is universalized across the country. Additional covers can also be negotiated by the government on behalf of the citizens who can buy them (and fully pay for them) on a voluntary basis over and above the base policy. The overall limits should be such that it is only the absolutely poor and the lower middle class that will opt for such covers. As this will give the consumers choices other than the poorly run government hospitals the health care industry will be spread more widely.
Now if only wishes were horses