FM defends RBI decision to refer issue to poll panel

Says curbs on gold imports may be further relaxed in light of fall in current account deficit

Finance Minister P Chidambaram on Monday defended the Reserve Bank of India (RBI)'s plan to grant new bank licences and said the Election Commission (EC)'s nod was sought out of “abundant caution”, though it wasn't needed, in his view.

“(RBI) Governor Raghuram Rajan made it clear... they referred to EC only out of abundant caution. This process had started almost two and a half year ago. This is the process where the government has no role at all,” Chidambaram said at a press conference after releasing the year-end report on the economy. He added the process of granting new bank licences should continue uninterrupted.

RBI had sought the EC's nod as the model code of conduct came into force with the announcement of general elections on March 5. Last week, Election Commissioner H S Brahma had said the request would most likely be taken up by the EC on March 31, that is Monday.

But sources said the matter is still under consideration of the EC, which met on Monday, and a decision will be taken shortly.

The finance minister said the government might further ease restrictions on import of gold as the current account deficit (CAD) is expected to be contained at $35 billion this year, down from  $88 billion in 2012-13.

“Some relaxations were made a few days ago, when more banks were allowed to import gold. We could consider some more relaxations in consultation with RBI after tomorrow’s monetary policy,” Chidambaram said.     

Gold and silver imports declined sharply by 71.4 per cent to $1.63 billion in February this year.

Stressing that the economy today was far more stable and stronger than it was 20 months ago with both fiscal deficit and CAD under control and foreign exchange reserves crossing $300 billion, he said the talks of a downgrade had taken a back seat.

Asked whether the UPA’s handling of the coal and 2G scams helped the “mega” image of Bharatiya Janata Party Party (BJP)'s prime ministerial candidate Narendra Modi, the finance minister admitted “if possible” the government could have communicated better the policy in allocation of coal blocks and telecom airwaves.

He also defended the government’s decision to increase the gas price. “I think there is no case to revisit the Cabinet decision. The decision is a right decision. It has taken into account all pros and cons, including reservations expressed by different ministries,” Chidambaram said.

Asked about the reluctance of the Swiss government to share data of Indians' money stashed away in HSBC, Geneva, Chidambaram said he had done everything possible to get information from the country and would again raise the issue with his Swiss counterpart on the sidelines of the Fund-Bank meet in Washington on April 10-11.

“I have pressed so hard that the Swiss finance minister is deeply embarrassed even to meet me in international forum because I have told her it is a very serious issue in India and she must share information with us… On every forum we will raise the issue that Switzerland is non-compliant with the G-20 resolution that the era of bank secrecy is over,” he noted.

On March 13, Chidambaram had written to his Swiss counterpart Eveline Widmer-Schlumpf raising concerns about the Alpine nation not sharing information on alleged unaccounted money stashed by Indian citizens in banks there.

The finance minister asked if the Swiss can give information to the US based on stolen data, then why not to India?

“They take refuge under one excuse. What excuse it is? That (information sought is based) stolen data. I said what is stolen data? I did not steal any data. This is data which was there with the French government.      

“Well, we can't share stolen data unless our Parliament passes a law. Then I asked her how did you share information with the US? The US had greater clout than India, you share information with the US, you won't share with us?” he said.

“I have done more than anyone else to push press the other government's to share information. Mr Mukherjee (his predecessor) did his best,” Chidambaram said.