NEW DELHI: Reserve Bank of India (RBI) governor Shaktikanta Das on Monday said that the central bank would hold talks with the government on the issue of floating overseas sovereign bonds.
The finance minister had announced in her maiden budget that India would resort to a sovereign float to raise funds as it did not wish to crowd out private sector borrowings by meeting all its borrowing needs from the local market.
Officials have said that up to USD 10 billion could be raised through sovereign bonds and these would carry far lower rates of interest than those paid in the domestic market.
The RBI issues bonds on behalf of the government as part of the resource mobilisation exercise to fund the gap between revenue and expenditure.
Expressing his satisfaction over the government’s move to slash fiscal deficit target, Das said it would help improve investment by the private sector as the crowding out impact will be less.
Das pointed out in an interaction with the media that India’s fiscal deficit record had improved. “The deficit has been improved from 3.4 to 3.3 per cent of the GDP. The RBI will be happy mainly because it limits the so-called crowding out effect (on private borrowing). So, that’s something positive, because it gives more space for meeting private sector borrowing,” he said.
Accompanied by Finance Minister Nirmala Sitharaman, the RBI governor was addressing the press after the customary post-Budget meeting between the finance minister and the central board of directors of the RBI. India’s sovereign external debt-to-GDP ratio level is among the lowest globally at less than 5 per cent.
Das also said that he would do his best to supervise and regulate NBFCs in a bid to boost investment and the economy.
“We are monitoring NBFCs based on their size of operations and on their past repayment behaviour. We are monitoring their operations very closely and at regular intervals,” he said.
To enhance liquidity access for the sector, the government has announced a one-time six-month partial guarantee of Rs 1 lakh crore to state-run banks for purchasing consolidated high-rated pooled assets of financially sound NBFCs. This will cover their first loss of up to ten per cent.
After delivering three back-to-back rate cuts, Das also said that the RBI expects a quicker transmission of interest rate cuts by banks to consumers.