Proposal on debt MFs: Yields will determine shift to banks, says SBI chief
The proposal, if approved by the Parliament, will be applicable to investments made on or after April 1, 2023.
Finance Bill 2023 has proposed major changes to debt mutual funds, which relates to exclusion of long-term capital gains and indexation benefits. The proposal, if approved by the Parliament, will be applicable to investments made on or after April 1, 2023.
In a recent interview with CNBC-TV18, while discussing the impact of taxation on debt mutual funds and the potential shift this could bring to the banking industry, Dinesh Khara, Chairman of the State Bank of India (SBI) stated that the yields from debt funds would be the determining factor in whether a significant shift would occur from banks.
“Much of it will depend upon what is the kind of potential yield from such kind of funds,” he said.
“They will have to look at the net yield post tax both in terms of the debt MFs as well as bank deposits as well,” he added.
Also Read | Finance Bill proposals likely to hit mutual fund industry, investors may migrate to fixed deposits: Experts
This shift could have a significant impact on the banking industry, particularly in terms of deposits. Khara noted that it would be essential to keep an eye on how deposits move in response to the changes in taxation on debt mutual funds.
“We will have to wait and watch how it makes the difference as far as deposit climate is concerned for the banking system,” he said.
Also Read | Debt funds held over 3 years to no longer enjoy indexation benefit, long-term capital gains set to go
While the impact of the changes remains to be seen, Khara's comments highlight the need for banks to remain competitive in a constantly evolving financial landscape. With customers having a range of investment options available to them, banks will need to offer attractive rates and products to ensure they remain the go-to option for customers.
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