Finance Minister Arun Jaitley on Saturday said that the government would come out with the framework of the electoral bonds scheme after discussions with the Reserve Bank of India (RBI). “I have explained (to the RBI Board) what the government has in mind with regard to the electoral bonds. Now, the whole scheme when we announce will be after discussing with the RBI as to which is the designated bank, what is the duration of the bond, at what period of time, for how long it should be open before every election,” he said, after addressing the RBI Board in a customary post-Budget meeting.
The Budget 2017-18 announced to launch electoral bonds to clean up funding process of political parties. These bonds are likely to be bearer bonds issued by banks to customers through cheques and electronic payments. To a query on whether he was disappointed with the RBI not cutting policy rates in a review earlier this week, Jaitley said: “All finance ministers have a perpetual desire (for lower rate) but at the end of the day, we all respect the decision that the RBI takes,” he said.
RBI Governor Urjit Patel on his part argued that banks still have headroom to lower their lending rates even as the central bank kept rates unchanged. He said banks have benefitted from influx of low-cost deposits due to demonetisation and its previous repo rate cuts.
“…the weighted average lending rate reduction has been considerably less, given that we feel that there is some scope for further reduction in lending rates and if you see that for sectors such as housing, personal etc, the reduction has been much more than for other sectors by the same bank,” he said.
Contrary to market expectations earlier this week, the RBI retained the repo rate, the rate at which it lends to the system, at 6.25 per cent while changing its policy stance from accommodative to neutral. The central bank had reduced its repo rate by a total 1.75 percentage points since January 2015. With regard to inflation, Patel said there is no change in stance as far as retail inflation targeting is concerned.
Speaking on high non performing assets in the banking sector, the Governor said these loans were given mainly to “long gestation” projects, even as the finance minister said that the banks were working to resolve the pending cases which are mostly legacy issues for the present government.
“…this proportionate amount (of NPAs) is a legacy issue, although the recognistion, reporting of these have taken place only recently,” Patel said. Asked when will the RBI release data on old notes of Rs 500 and Rs 1,000 deposited with the banks, Patel said: “Given that the window is open until March 31 and then at a lower level until June 30 we need to be careful and try as hard as possible that this is a number that is not a mere estimate but a verifiable number both physically and in accounting stance,” he said.
The RBI has given Indians who were abroad during November 9 to December 30, a 3-month grace period till March 31 to deposit the old notes, while for the non-resident Indians (NRIs), it is 6 months till June 30.