GST will create common marketplace: Raghuram Rajan

The RBI governor said the tax code would reduce barriers between states and increase the tax base

The implementation of the Goods and Services Tax (GST) will be good for the economy, said RBI governor Raghuram Rajan. He said that the GST will bring in two major advantages. Firstly GST could increase the tax base and secondly it will reduce the barriers between states.

Addressing students at Presidency University on Thursday, Rajan said that it will make the country a common market place. Incidentally, the Trinamool Congress-led West Bengal government is supporting the revised GST bill following the inclusion of a compensation clause.

Commenting on the alarming non-performing assets levels in the banking system, Rajan said that banks have devised a mechanism to avoid over-borrowings by large borrowers. The governor said RBI maintains a database shared among banks.

He said Indian banks have the right kind of leveraging, adding that "those who said that the banks have no capital requirements are not sensible."

Rajan added that cutting interest rates to rock bottom levels was not a good idea. Instead it is better to have growth in real activity rather than a financial market boom due to distortion in prices.

The RBI governor was in the city ahead of the board meeting of the central bank on Friday.