Mumbai: The Finance Commission met a large group of bankers and heads of financial institutions here on Thursday.
During their meeting with NK Singh, chairman of 15th Finance Commission, the bankers said that it is important to take a view on the total public sector borrowing requirements, as opposed to the narrowly defined union and state fiscal deficits, to improve fiscal transparency and to ensure that markets get clear signals of the fund requirements of the public sector.
In the context of making the borrowing costs of state governments aligned to their fiscal and governance fundamentals, the Automatic Debit Mechanism which is currently in vogue and the need for introducing rating of all public sector borrowers including states was discussed by the bankers, read an official statement.
A few of the bankers mentioned that the maturity profile of outstanding borrowings of the union and state governments indicated that there is likely to be a repayment pressure during the next four to five years.
The bankers also discussed their perspective in the areas of priority sector lending, loan waiver announced by the governments and its impact on credit culture, recapitalisation of banks, foreign portfolio investment in government securities, operationalisation of sinking fund by states and raising of market borrowing by local self-governments.
It was also mentioned, in the context of horizontal devolution of union taxes among states that fiscal discipline, transparency, governance improvements and revenue raising efforts to be factored in appropriately.
Talking about the meeting, Singh said, “The meetings have sharpened the Commission’s understanding on some of the key things that need to be kept in mind for continued macroeconomic stability. A careful examination was made into the issues of debt, particularly as stated in the RBI’s annual report on state debt figures.”
“The overall debt picture of the states and the way they have complied with the ingredients of the macroeconomic management Bill is being looked into closely. This is an area we have had a very useful discussion,” he added.
The bankers who attended the meeting were — PK Gupta, State Bank of India, P Sengupta, Bank of Baroda, Dina Bandhu Mohapatra, Bank of India, AS Rajeev, Bank of Maharashtra, Pallav Mohapatra, Central Bank of India, Manas Ranjan Biswal, Union Bank of India, Kaizad Bharucha, HDFC Bank Ltd, Srinivasan Vaidyanathan, HDFC Bank Ltd, Sandeep Batra, ICICI Bank Ltd, Arun Khurana, Indusind Bank, KVS Manian, Kotak Mahindra Bank. Ajay Mahajan, IDFC First Bank and Rakesh Sharma, IDBI Bank Limited.