t he Indian economy is reverting towards normalisation and the budget has provided adequate support to sustain the momentum. This, in turn, has enabled a clear roadmap for a manageable fiscal deficit with timelines for reduction, which is positive for a stable and benign interest rate scenario in near to medium-term. From the banking sector perspective, the initiatives in the budget will be quite significant in its impact on wide ranging areas. In the order of merit, initiative relating to inclusive banking, stimulus to infrastructure financing and the policy initiation for bringing more participants in private sector banking including NBFCs are noteworthy.

On inclusive banking area, the emphasis of bringing banking facilities to all villages having population in excess of 2,000 by March 2012 is in tune with the recommendation of the high-level committee on lead bank scheme. This will witness brisk response from the banking system for covering the identified unbanked villages. For Union Bank alone, it amounts to covering over 30,000 villages across the country. The technology-led inclusive banking initiatives and the branchless banking model will be rolled out on an aggressive mode by the banking system.

The provision of Rs 25,000 crore in the take-out financing for infrastructure projects over the next three years is a much-awaited support to the banking system to take up infrastructure financing on an accelerated pace and overcoming the asset liability mismatch. The overall increase in the allocation for infrastructure development by 46 per cent in itself will benefit banking system to step up its lending to core sectors such as cement, steel and related areas, paving the way for robust credit growth. The tax exemption by an additional Rs 20,000 for infrastructure-related bonds will bring in household savings to support infrastructure funding requirement, which is a welcome benefit.

The announcement relating to additional banking licence for private sector players including NBFCs, meeting certain norms, can lead to a renewed thrust in the competitive banking scenario. It may be recalled that when the first initiative for opening up the banking sector to private banks came in 1993, it redefined the market place through effective use of technology, innovations in branch banking and service delivery. For the next 10 years, the private sector banks opened up new markets and needs for products and services and grew their market share through this process. This time around, the signal for bringing in more private players is coming at a time when inclusive banking thrust is gaining momentum. This is a clear indication to revolutionise the banking for the unreached. It will be a challenge to PSU banks which will have to accelerate their initiatives in a number of areas where they have made a good beginning like in the case of usage of biometric smart cards, branchless banking models and leveraging on core banking technology including their sponsored RRBs.

The additional budgetary allocation for NREGA scheme and emphasis on other social empowerment programme will place greater responsibility on the PSU banks to provide technology-based facility for quicker and transparent fund flow to large number of beneficiaries in the hinterland. This area will witness active usage of delivery channels.