As per a report appearing in Business Standard, Banks are making a strong pitch to the Govt. for permission to issue tax-free bonds to fund infrastructure projects. Banks are arguing that the bonds will help them raise long-term resources and reduce dependence on retail fixed deposits, whose maturity is getting shorter.
At present, infrastructure companies are allowed to float tax-free bonds. In the last Budget, the Government had allowed Indian Railways Finance Corporation and India Infrastructure Finance Company to raise funds through such bonds.
With a steady fall in deposit rates, most retail fixed deposits are coming in the one-year category and the credit demand was mainly witnessed in infrastructure and home loans, the tenures of which are 15-20 years. This has been resulting in mismatch in asset liability profile of the banks.
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