Raghuram Rajan’s first day in office as the 23rd governor of the Reserve Bank of India (RBI) was a busy one all right. The former chief economic advisor and world renowned economist came in with a long list of ‘to-dos’ and set about it in right earnest.
From new bank licences to priority-sector lending, from monetary policy framework to financial inclusion, Rajan touched upon just about everything that comes under the ambit of the RBI.
“At a time when financial markets are volatile, and there is some domestic political uncertainty because of impending elections, the RBI should be a beacon of stability as to its objectives,” the new governor said, committing the RBI to “transparency and predictability” in such times.
It doesn’t mean the RBI will never surprise the markets with its actions, he said – living it up on his very first day.
A central bank should never say “never,” said Rajan.
At the same time, he assured that the public would have a clear framework as to where the central bank was heading and why.
The financial markets gave a thumbs-up to the change of guard at the RBI. The Sensex closed 332.89 points, 1.83%, up at 18567.55, while the Nifty gained 106.65 points, or 2%, to close at 5448.10.
“When you put all of this together, this is a big initial package. We intend to do more,” said Rajan.
On the impending issue of new banking licences, he said the RBI may give out new licences around January 2014, when deputy governor Anand Sinha, who spearheaded the formulation of related guidelines, retires.
“We will not stop with these licences,” said Rajan and added that the RBI will explore the possibility of differentiated licences for small banks and wholesale banks, “on-tap” licensing as against the current practice of “block licensing” and converting large urban cooperative banks into commercial banks.
In a subtle but clear message to foreign banks operating in India, Rajan asked them to move to a wholly owned subsidiary structure, where they could enjoy near national treatment. “We would like them to participate more in our growth, but in exchange we would like more regulatory and supervisory control over local operations so that we are not blindsided by international developments.”
Referring to the downgrade warnings from international rating agencies, Rajan said there was indeed a need to be careful of government finances, though he wouldn’t read too much into those statements.
“I would not use the word crisis and India in the same breath other than this sentence,” he said.
Concluding his first speech as the governor, he said some of his actions would not be popular and attract votes or Facebook likes. “But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism.”
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}