Raghuram Rajan takes charge as new RBI Governor, unveils 'big package', vows more

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Raghuram Rajan and D Subbarao at RBI headquarters on the day the former took over as the cbank chief. IE photo Raghuram Rajan and D Subbarao at RBI headquarters on the day the former took over as the cbank chief. IE photo
SummaryRaghuram Rajan ditches much-maligned D Subbarao policy, set to align it with what UPA govt wants.

of my short-term time-table for the Reserve Bank. It involves considerable change, and change is risky. But as India develops, not changing is even riskier. We have to keep what is good about our system, of which there is a tremendous amount, even while acting differently where warranted."

He also announced a committee headed by RBI Deputy Governor Urjit Patel to strengthen monetary policy framework. The panel will submit its report in three months.

Rajan said that a committee under former Governor Bimal Jalan would screen bank license applicants after an initial compilation of applications by the RBI staff.

He said new bank licences will be announced "within, or soon after, the term of Deputy Governor Anand Sinha, who has been shepherding the process. His term expires in January 2014."

Financial sector expert Nachiket Mor will head a panel to suggest steps to promote financial inclusion. Another committee, to be headed by Deputy Governor K C Chakrabarty, will take a close look at rising NPAs and suggest steps to improve the recovery of bad debts.

"While the resumption of stalled projects and stronger growth will alleviate some of the banking system difficulties, we will encourage banks to clean up their balance sheets and commit to a capital-raising program where necessary. The bad loan problem is not alarming yet, but it will only fester and grow if left unaddressed," Rajan said.

Stressing that India is a fundamentally sound economy with a bright future, the new RBI chief said, "Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that."

HIGHLIGHTS

* New bank licences by January 2014 or soon after

* Bimal Jalan to head the external committee to screen banking licence applicants

* RBI wants more regulatory and supervisory control over the domestic operations of foreign banks

* Banks need not require RBI nod to open new branches

* Hints at reducing the SLR in a calibrated way

* Mid-quarter review of monetary policy postponed by 2 days to Sept 20 as more time required to consider all developments

* To steadily liberalise markets, and lift restrictions on investment and position taking, together with Sebi

* Says primary role of RBI as maintaining monetary stability but generating growth is also important

* Re-booking limit on cancelled forward exchange contracts for exporters will be enhanced to 50 per cent

* Importers will

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