Scotching murmurs of differences between the government and the RBI over regulation of money market, finance minister Arun Jaitley on Sunday said there is no ‘disconnect’ between the two and hoped banks would follow the central bank in reducing interest rates.
“There is no question of any disconnect,” Jaitley said after a custom annual appearance before the bank’s board to explain steps proposed in last month’s budget. SEBI Chairman U K Sinha said that the board cleared SEBI (International Financial Services Centers) Guidelines to facilitate and regulate the financial services relating to securities market in a kind of Financial Special Economic Zone. This new set up will allow international and domestic stock exchanges to start a subsidiary here. Foreign companies will also be allowed to raise money in dollar here. In his budget speech, Jaitley had said: “While India produces some of the finest financial minds, including in international finance, they have few avenues in India to fully exhibit and exploit their strength to the country’s advantage. GIFT in Gujarat was envisaged as an International Finance Centre that would actually become as good an International Finance Centre as Singapore or Dubai, which, incidentally, are largely manned by Indians. The proposal has languished for years. I am glad to announce that the first phase of GIFT will soon become a reality.
When asked whether banks would be pressurized to pass on rate cuts to consumers, Jaitley said the government wasn’t putting pressure, but hopes and it is hopeful that they would do it in line with the RBI policies. From the year through March 2017 onward, the central bank will target inflation of 4 percent, plus or minus 2 percentage points.