RBI governor Shaktikanta Das says central bank to discuss issuance of sovereign bonds with govt

The Reserve Bank Governor Shaktikanta Das on Monday said the central bank will discuss the issuance of overseas sovereign bonds with the government.

In her maiden budget, Finance Minister Nirmala Sitharaman proposed to raise a part of the government's gross borrowings from abroad. The move, designed to free up additional liquidity in the domestic market, is expected to strengthen the Indian rupee, consequently hurting the country's exports. Sithraman met with the RBI's central board on Monday to highlight the key points of the Budget, including the fiscal consolidation roadmap. After the customary post-Budget meeting with Finance Minister Nirmala Sitharaman, Governor Das said the system has sufficient liquidity and the Budget for 2019-20 has made provision for shadow banking (NBFC) sector. "We are monitoring NBFCs and their operations at regular intervals," he told reporters in New Delhi.

Das said the Budget provision of Rs 70,000 crore towards bank capitalisation is a very positive development that will help lenders not just comply with the regulatory requirement but also step up banking.

 RBI governor Shaktikanta Das says central bank to discuss issuance of sovereign bonds with govt

File image of Shaktikanta Das. PIB

On interest rate transmission, he said it used to take up to six months for an interest rate cut to be transmitted to consumers but things have improved, and now it is taking a shorter time, he said.

Of the 50 basis points cut in interest rate announced by the RBI prior to the June monetary policy, about 21 basis points had been transmitted, he said, hoping better transmission of interest rate cuts in coming weeks and months.

In the Budget announcement, Sitharaman had promised to keep the fiscal deficit at 3.3 percent of GDP, lower than the 3.4 percent projected in the interim Budget presented by Piyush Goyal. She has also promised that the fiscal deficit will come down to 3 percent in 2020-21 and will remain at that level in 2021-22 as well. When asked about it, Reserve Bank of India governor Shaktikanta Das said, if the fiscal deficit is maintained and improved to 3.3 percent of the GDP, it limits the crowding out effect, he said.

Fuel price hike

On Saturday, petrol prices were hiked by Rs 2.40 per litre and diesel by Rs 2.36 on Saturday after Sitharaman raised taxes on fuels to part-fund her Budget for 2019.

Sitharaman had on Friday raised excise duty and road and infrastructure cess on petrol and diesel by Rs 2 per litre each to raise Rs 24,000-28,000 crore on an annual basis. Post-considering local sales tax or value-added tax (VAT), which is charged after adding central excise duty on base price, the increase in pump rates was higher.

Before the tax increase, petrol attracted total excise duty of Rs 17.98 per litre (Rs 2.98 basic excise duty, Rs 7 special additional excise duty and Rs 8 road and infrastructure cess). Now, this tax has gone up to Rs 19.98 a litre. On diesel, a total of Rs 13.83 per litre excise duty was charged (Rs 4.83 basic excise duty, Rs 1 special additional excise duty and Rs 8 road and infrastructure cess). Now, Rs 15.83 per litre is charged as excise duty.

Refraining from answering the Budget 2019 proposal to raise the surcharge for the super-rich, Finance Minister Nirmala Sitharaman after a post-Budget meeting with the Reserve bank of India board, told the media that she would prefer to respond in Parliament.

Surcharge on super-rich

In her maiden Budget for 2019-20 presented last week, Sitharaman proposed to increase surcharge from 15 percent to 25 percent on taxable income between Rs 2-5 crore and from 15 percent to 37 percent for income above Rs 5 crore.

Following the increase in surcharge, the effective income tax rate for individuals with taxable income of Rs 2-5 crore will go up from 35.88 percent to 39 percent and for those above Rs 5 crore it would go up to 42.7 percent.

--With PTI inputs

Updated Date: Jul 08, 2019 17:38:33 IST