RBI praises Bengal’s efforts to mobilise higher revenue

Reserve Bank of India has expressed satisfaction over West Bengal’s ability to grow its own revenue.

“Revenue augmenting capacity has improved in West Bengal. The state may cut down borrowing to reduce fiscal stress,” RBI Deputy Governor HR Khan said on Friday.

RBI Governor Raghuram Rajan said he met state finance cum industry minister Amit Mitra over a dinner and discussed the state’s financial health and the challenges it is facing.

According to Amit Mitra, the state raised Rs 82,946 crore in the first four years of Trinamool Congress rule, out of which Rs 76,346 crore was spent towards interest and principal repayment.

Bengal’s fiscal deficit as percent of gross state domestic product was 3% for FY15 with revenue deficit at 1.3%, which were improvements compared to preceding fiscal.

Raghuram Rajan had stated on Friday that large promoters have the strength to "impede any action" taken by banks to recover stressed assets, while emphasising that bank’s need to quicken the pace of recovery process and not postpone it.

"In some cases, banks have been late in taking action. There are also many impediments as well and large promoters are strong enough to impede any action," Rajan said.

Rising Non-performing assets (NPAs) or bad loans, especially in case of public sector banks, have been a cause of concern for RBI as well as the government.

Regarding change in the guidelines for calculation of base rate, Rajan said RBI had discussed with the banks and their views had been taken into account. The Reserve Bank on Friday had also said that it is open to buying bonds from the open market and will maintain adequate liquidity in the system as it has all the instruments at its disposal.

"Our intention is to supply plenty of liquidity in the system," Raghuram Rajan said in Kolkata after the central bank's board meeting on Friday. Asked if the RBI will conduct open market operations (OMO) to shore up liquidity, Rajan said the bank will maintain all, short-term, medium-term and long-term liquidity.