11/12/2015 1:37 PM IST | Updated 15/07/2016 8:25 AM IST

Implementation Of GST Bill Will Improve Country's Economy, Says Raghuram Rajan

Reserve Bank of India (RBI) Governor Raghuram Rajan speaks during a press conference in Mumbai, India, Tuesday, June 2, 2015. India's central bank cut a key interest rate by a quarter percentage point Tuesday, the third such reduction this year in support of government efforts to boost growth. (AP Photo/Rafiw Maqbool)

NEW DELHI -- 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 Bengal government is supporting the revised GST bill following the inclusion of a compensation clause.

Commenting on the alarming non-performing asset level 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 apex bank on Friday.

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