Ending months of suspense, Reserve Bank of India (RBI) Governor Raghuram Govind Rajan formally told his colleagues on Saturday that he is not keen on a second term at the helm of the country's central bank and will return to academia when his tenure ends in September.
Ending months of suspense, Reserve Bank of India (RBI) Governor Raghuram Govind Rajan formally told his colleagues on Saturday that he is not keen on a second term at the helm of the country’s central bank and will return to academia when his tenure ends in September.
Soon after, Finance Minister Arun Jaitley, while appreciating Rajan’s role, said a successor will be named soon.
Rajan’s decision was conveyed in an 888-word letter by him to the RBI staff, a copy of which was obtained by IANS — one in which he has listed what the central bank has managed to achieve in the past three years and what remains to be done, although that process has also been initiated.
Reflecting on his term as the 23rd governor of the central bank since September 2013 — which has seen praise and also a fair share of criticism — Rajan said the agenda pursued by his team was to help nurse India back on the path of recovery first, and then growth, and keep prices in check. Here are top 5 achievements Raghuram Rajan lists in his letter:
1) I took office at a time when currency was plunging daily, inflation was high, and growth was weak. India was then deemed one of the “Fragile Five”. In my first statement I laid out an agenda for action that I had discussed with you, including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our foreign exchange reserves, transparent licensing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map and resolve the extent of system-wide distress. By implementing these measures, I said we would “build a bridge to the future, over the stormy waves produced by global financial markets”.
Today, I feel proud that we at the Reserve Bank have delivered on all these proposals.
Also Read: Read Raghuram Rajan’s letter to RBI staff
Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five.
2) We have done far more than was laid out in that initial statement, including helping the government reform the process of appointing Public Sector Bank management through the creation of the Bank Board Bureau (based on the recommendation of the RBI-appointed Nayak Committee), creating a whole set of new structures to allow banks to recover payments from failing projects, and forcing timely bank recognition of their unacknowledged bad debts and provisioning under the Asset Quality Review (AQR).
3) We have worked on an enabling framework for National Payments Corporation of India to roll out the Universal Payment Interface, which will soon revolutionize mobile to mobile payments in the country.
4) While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.
While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country when needed.
5) Colleagues, we have worked with the government over the last three years to create a platform of macroeconomic and institutional stability. I am sure the work we have done will enable us to ride out imminent sources of market volatility like the threat of Brexit. We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Morale at the Bank is high because of your accomplishments. I am sure the reforms the government is undertaking, together with what will be done by you and other regulators, will build on this platform and reflect in greater job growth and prosperity for our people in the years to come.