Raghuram Rajan took charge as the 23rd governor of the Reserve Bank of India (RBI) on Wednesday, listing out many short-term measures to reverse the economy’s slide and to stabilise the country’s monetary system.
Rajan takes charge at a time when the Indian economy is facing an all-round slowdown, with GDP growth in the April-June quarter slumping to 4.4% and the rupee tumbling 20% against the dollar to Rs. 67.
In his first speech as RBI governor, Rajan promised some bold reforms and quick action.
Here are some excerpts from his speech:
Hinting at a possible shift in approach from D Subbarao, his predecessor, Rajan (50), said “the main mandate of the central bank is to maintain stability and to sustain confidence in the value of the rupee… but we have two other important mandates — inclusive growth and development, as well as financial stability.”
Subbarao had focused aggressively on containing inflation and this has contributed significantly to the slowdown. “The country could not have asked for a more capable person to lead the Reserve Bank in these most difficult times,” Subbarao said.
Rajan will announce this first monetary policy on September 20 instead of September 17 as earlier scheduled.
Addressing the media, he said: “Any entrant to the central bank governorship probably starts at the height of their popularity. Some of the actions I take will not be popular. The governorship of the central bank is not meant to win one votes or Facebook ‘likes’.”
Rajan announced the issue of inflation-indexed savings certificates linked to the Consumer Price Index (CPI) to retail investors by end of November.
This will protect investments from inflation by giving them returns that will higher than the prevailing inflation rate.
CPI-based inflation has been hovering around the 10% mark.
"Households have expressed a desire to be protected against CPI inflation,” said Rajan. Recognising the substantial potential in the mobile banking sector, he said, “We will set up a technical committee to examine the feasibility of using encrypted SMS-based funds transfer using an application that can run on any type of handset,” he added.
He also plans to link the credit history of borrowers to their Aadhaar numbers. This will help banks to track the credit history of individuals and find out if he/she has defaulted on the loan repayments in the past.
Rajan announced the formation of an expert committee headed by former RBI governor Bimal Jalan to screen applications for new bank licences. The new licences will be issued in January.
Further, the incoming RBI governor set up several committees for revising and strengthening the monetary policy framework, ensure financial stability and inclusion and to address the issue of non-performing assets in the banking sector.