Mumbai: Finance Minister Nirmala Sitharaman Tuesday said the Russia-Ukraine tension and a surge in crude oil prices pose risk to the financial stability of the country and the government is closely monitoring the situation.
The finance minister was on a two-day post-Budget outreach programme in the country’s financial capital, starting Monday. She chaired the 25th meeting of the Financial Stability and Development Council (FSDC) and also met heads of banks, NBFCs and financial institutions later.
“Even today in the FSDC (meeting) when we were looking at the challenges posed for financial stability, crude was one of the things. International worrisome situations, where we actually voiced that we want diplomatic solutions for the situation developing in Ukraine, all these are headwinds,” she told reporters.
The finance minister said the government is keeping a watch on crude prices and the geopolitical situation.
Crude oil prices soared by nearly 4 per cent to USD 99 a barrel Tuesday after Russia recognised two separatists states of eastern Ukraine.
When asked about the impact of the Russia-Ukraine crisis on India, she said, “At this moment, the impact on our trade is yet to be felt. We are careful that our exporters don’t suffer.”
The Finance Minister said there is no adversarial relationship between states and the Centre on GST compensation.
Sitharaman said the GST council has decided that the compensation cess collection will continue up to March 2026.
“It is extended to pay the money which has to be paid for the 2020 gap that arose in the compensation and also for paying the interest on the borrowed money,” the minister said.
Speaking on the inclusion of the country’s government bonds in the global bond index, Department of Economic Affairs Secretary Ajay Seth said, “All those conditions that are needed to include government bond, rupee bond in the global indices are all been met. Much later on, taxation issues have been brought in. All those conversations are still continuing.”
He also said the government is committed to fiscal deficit being kept within 6.9 per cent.
In the meeting held Tuesday, FSDC noted that the government and all regulators need to maintain constant vigil on the financial conditions and functioning of important financial institutions, especially considering that it could expose financial vulnerabilities in the medium and long-term, according to an official release.
The Council discussed measures required for further development of the financial sector and to achieve an inclusive economic growth with macroeconomic stability.
Those attended the FSDC meeting included MoS (Finance) Bhagwat Kishanrao Karad; RBI Governor Shaktikanta Das; Finance Secretary and Expenditure Secretary T V Somanathan; Economic Affairs Secretary Ajay Seth; Revenue Secretary Tarun Bajaj and Financial Services Secretary Sanjay Malhotra among others.
In the meeting with the banks, NBFCs and financial institutions, the finance minister exhorted all the banks to sign up to the account aggregator model which would facilitate seamless flow of credit for small borrowers and promote digital lending.
The meeting deliberated on the various budget announcements in the context of PM GatiShakti, defence, telecom, manufacturing & exports, Emergency Credit Line Guarantee Scheme (ECLGS) and tax concessions to new manufacturing units and start-ups, which offer new opportunities to the financial sector, a separate official release said.
In the meeting it was highlighted that banks, with a record profit of Rs 1.22 lakh crore in FY21 and Rs 0.79 lakh crore in HY22, declining gross NPA figures to 6.90% (as on September 21) and sufficient buffers with all time high CRAR of 16.5 per cent (as on September 2021) against the regulatory mandate of 11.5 per cent, banks are in a strong position to support future growth, enabling the country’s economy for a take-off.
PTI
