RBI governor Raghuram Rajan speaks during a press conference announcing the RBI monetary policy at RBI Headquarters in Mumbai
Optimistic about the passage of long pending GST bill in the Parliament, RBI governor Raghuram Rajan has told American investors that continued focus on fiscal consolidation and inflation will mean they will reach their targeted goal.
In an interaction with American financial institutional investors in New York last week at an event organised by US India Business Council, Rajan said another priority of the RBI is to clean up banks and their non-performing assets.
Rajan said RBI’s continued focus on fiscal consolidation and inflation will mean that they will reach their targeted goals, according to a USIBC media statement. Another priority is to clean up banks and their non-performing assets, he said.
Intention is to give banks more powers to allow for greater recovery of money and give relevant stakeholders an active role in the resolution process, he observed. During the interaction, Rajan said he is optimistic about the passage of goods and services tax (GST) and the opportunities for compromise that will help realise the goals of the GST – a unified tax market, improvement in tax collection and broadening the tax base, USIBC said.
Under this major reform, central and state taxes will get subsumed into GST, which will reduce the multiplicity of taxes, and thus bring down the compliance cost. With GST, the burden of Central Sales Tax (CST) will also be phased out. Led by USIBC chairman and president and CEO of MasterCard, Ajay Banga, the discussion focused on issues such as inflation and fiscal deficit management, recent rate cuts and monetary policy, deepening capital markets, modernising India’s capital markets to mobilise investment in Indian infrastructure and world-class companies.
Industry’s desire for reforms also included further development of a corporate debt market, improved infrastructure trusts and debt fund structures, long-term rupee-denominated government securities, and an updated external commercial borrowing regime, USIBC said. USIBC applauded the Indian government for its recent reform introduced in private sector banking that permits the total foreign holding in private banks to have a composite cap of 74% and eliminates existing sub-limits for FDI and FII capital (which were at 49%).
Banks and investors will have greater flexibility to raise capital and to meet the stringent capital adequacy norms. This reform is a critical step in supporting credit growth in the financial markets and the Indian economy, USIBC said. USIBC president Mukesh Aghi said the Indian financial markets are an important driver for the country’s economic growth. “There needs to be a level playing field for global participants in India’s financial markets with clear, nationality-neutral regulations across all asset classes,” he said.