What It Means

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Mum­bai | Kolkata: RBI Gover­nor Raghu­ram Ra­jan cut the pol­icy rate by 25 ba­sis points as ex­pected to a five-year low and, with in­fla­tion well un­der con­trol, made sev­eral tweaks to mone­tary pol­icy aimed at end­ing a liq­uid­ity drought and get­ting bank credit flow­ing again. Among the steps taken by the cen­tral bank that are ex­pected to have a widerang­ing im­pact in terms of re­duc­ing in­ter­est rates fur­ther, it moved to­ward aban­don­ing the pol­icy of keep­ing the bank­ing sys­tem in a cash deficit and eased cash re­serve ra­tio re­quire­ments in the mone­tary pol­icy an­nounced on Tues­day.

“Pol­icy ac­tion is sig­nif­i­cantly greater today than just an­other 25-ba­sis­points cut,” Ra­jan told re­porters.

In­fla­tion-aid­ing fac­tors such as ru­ral wages, food prices and im­ported in­fla­tion have been eas­ing

Un­der the remit­tance scheme, all res­i­dent in­di­vid­u­als are al­lowed to freely re­mit up to $2,50,000 per fi­nan­cial year for any per­mis­si­ble cur­rent or cap­i­tal ac­count trans­ac­tion or a com­bi­na­tion of both.

RBI is part of the multi-agency in­quiry or­dered by the gov­ern­ment into the hold­ings of In­di­ans named in the Panama Pa­pers. “We are part of the in­ves­tiga­tive team that is go­ing to look into these mat­ters,” he said.

The group also com­prises of­fi­cials from the Cen­tral Board of Di­rect Taxes (CBDT), its for­eign tax and tax re­search divi­sion and the Fi­nan­cial In­tel­li­gence Unit (FIU), which will mon­i­tor the flow of in­for­ma­tion in these cases. The Panama Pa­pers are a leak of over 11 mil­lion files from the data­base of Pana­ma­nian law firm Mos­sack Fon­seca that helped clients across the world set up off­shore com­pa­nies. The pa­pers re­veal de­tails of over 500 In­di­ans with links to such off­shore firms. The multi-agency probe is ex­pected to look into pos­si­ble tax eva­sion, money laun­der­ing and drug deals. RBI Deputy Gover­nor HR Khan said the in­ves­ti­ga­tion into the Panama Pa­pers would re­veal which trans­ac­tions were le­git­i­mate. “Un­der Fema (For­eign Ex­change Man­age­ment Act), a few things are per­mit­ted and a few are not. So, the in­ves­ti­ga­tion will re­veal what is le­git­i­mate,” he said.

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