“Financial stability sometimes means regulators, including the central bank, have to go against popular sentiment. The role of regulators is not to boost the Sensex but to ensure that the underlying fundamentals of the economy and its financial system are sound enough for sustainable growth.
“Any positive consequences to the Sensex are welcome but are only a collateral benefit, not the objective,” Rajan said while addressing a Ficci function.
Comprising shares of 30 bluechip companies, S&P BSE Sensex is a benchmark of Indian stock market.
He said that in addition to inflation, a central bank has to pay attention to financial stability.
“This is a secondary objective, but it may become central if the economy enters a low-inflation credit and asset price boom,” he added.
The RBI Governor’s statement assumes significance as industry has criticised the RBI for not reducing interest rates even when both the wholesale and retail inflation are at a multi-year low.
Finance Minister Arun Jaitley too on several occasions had nudged the RBI to cut rates and the issue also figured during a debate in the Lok Sabha earlier this week.
Rajan, who has kept interest rates unchanged since January, had yesterday emphasised that interest rate cut by itself would not lift the economy.
“It is not the only thing which is holding back economic growth. But it would have some impact,” Rajan said.