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PC rules out poll fetters on key steps

P. Chidambaram in New Delhi on Wednesday. Picture by Prem Singh

New Delhi, March 5: The government will take a call on cutting the import duty on gold after reviewing the full-year current account deficit figure and the RBI could issue a few bank licences before the end of the current financial year despite the model code of conduct taking effect today.

The Election Commission today announced the dates for the Lok Sabha polls, triggering the code of conduct that will restrict the government from announcing any major policy decisions.

However, finance minister P. Chidambaram today said normal government functioning would not come to a halt following the announcement of elections and the cabinet would continue to take decisions within the limitations imposed by the model code of conduct.

He said there were “misconceptions” about what a government could or could not do when the code of conduct was in force.

During his interaction with reporters after reviewing the performance of public sector banks, Chidambaram said the process started by the RBI on issuing new bank licences would not be affected by the code of conduct.

To a specific query, he said the Foreign Investment Promotion Board (FIPB), which approves overseas investment proposals, would keep taking decisions. “The FIPB will continue to meet and will continue to take decisions. These are normal business functions,” he added.

On reducing the import duty on gold, Chidambaram said, “We will revisit the import duty on gold only after the CAD figures become clear for the end of the year. Let’s see what the CAD figures are.”

Bank recapitalisation

Chidambaram today said the government was examining new suggestions to infuse funds into state-owned banks. The suggestions include insurance and pension funds buying a larger chunk of perpetual bonds issued by the PSU banks and allowing lenders to issue shares to employees.

“The government has provided Rs 11,200 crore for the next year. This is not adequate, but that’s the budget estimate. As we find more money, we should infuse more into the public sector banks,” he said.

Today’s meeting also discussed ways to raise equity capital of public banks to support their growth. “The government will provide additional capital to the banks. Banks must also rely on a part of their earnings, retain it and infuse it as fresh capital. Therefore, it is important to address the issue of the profitability of banks,” he said.

 
 
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