Banks have urged Finance Ministry to reduce the lock-in period of tax saving fixed deposits, from the existing 5 years to 3 years, to attract more funds through this channel into the banking sector.
In the pre-budget meeting with the finance minister, bankers put forward the proposal seeking permission to issue tax- free instruments like tax free bonds to boost business.
On the matter, the Chairman of State Bank of India, Mr. Pratip Chaudhuri said, "Tax saving bonds are already there (with banks), tax saving deposits are already there. So there was a requirement that this lock-in period should be reduced from five years to three years on the tax saving deposits to bring it in line with tax saving ELSS (equity linked saving schemes)."
He further added, "Some of the banks...made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects."
Apart from him, other bank chiefs who were present at the meeting are Chairman of HDFC Ltd Deepak Parekh, ICICI Bank MD Chanda Kochhar, UCO Bank CMD Arun Kaul, Indian Overseas Bank CMD M Narendra, Axis Bank MD Shikha Sharma and Punjab National Bank CMD K R Kamath. The Deputy Governor of RBI, Mr. KC Chakrabarty was also present at the meeting.