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Raghuram Rajan's Parting Words On His Tenure: 'I've Enjoyed Every Minute Of It'

His final policy review leaves the glass half full...

09/08/2016 2:38 PM IST | Updated 09/08/2016 4:48 PM IST
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Danish Siddiqui / Reuters
Reserve Bank of India (RBI) Governor Raghuram Rajan listens to questions during a news conference at the RBI headquarters in Mumbai, India, August 9, 2016. REUTERS/Danish Siddiqui

In the press interaction following his final policy review, outgoing Reserve Bank Governor Raghuram Rajan said he plans to make full use of the remainder of his tenure, and ended on a positive note about his term calling his role as RBI governor "a fantastic experience."

"The important thing is that at the end of day, you made a useful contribution. From that perspective, this has been a fantastic job," said Rajan. "Every day when my fellow colleagues at the RBI and I sit down, we manage to move the needle forward a little bit. There are very few places where you can have that sense of satisfaction."

While he didn't disclose where he plans to head next after his tenure ends in the coming weeks, he said he could go to his previous employment in academia that also included considerable involvement with Indian educational institutions, particularly the Indian School of Business.

He also reminded his critics and supporters that the full extent of his policies can only be seen in the next five to six years.

"Snap judgments by critics and supporters is not what matters...what matters is the strong growth for the country...and our movement in the middle income," he said. "In our view the measures taken by RBI were and are justified given the conditions we have had. Let's see over the next five to six years how this plays out then we will reach a judgment whether this was good or bad."

Asked about what he thought of his critics, he said criticism was part of the job.

"Critics are there all the time. There are also people who send me message in the plane...anonymous notes saying, 'thank you for what you are doing'."

In addition to explaining the rationale behind his latest policy rates decision, he also talked about the ongoing concerns about GST, the setting up of the monetary policy committee, a panel that will decide interest rates, as well the ongoing bank clean-up exercise. Here are the highlights of his comments:

On Monetary Policy Committee:

Rajan expressed hope that the next monetary policy decision will be taken by the Monetary Policy Committee, a panel that is being set up by RBI and the government. The MPC is a "fundamental institutional reform" that will modernize the monetary policy framework, and build a platform for strong and sustainable growth, he said.

He noted MPC's benefits will extend beyond low inflation, but also to "a currency that doesn't constantly depreciate, and higher real returns for savers, and lower and nominal interest rate premium paid by borrowers."

On GST-led inflation:

Rajan said it was "premature" to predict the inflationary impact of GST as the final GST rate is still unknown. He noted that in Malaysia, the inflationary impact was short-lived.

"Some prices may come down and some prices may rise," he said, adding the prices adjustment will likely be a one-time occurrence than an ongoing price rise.

Rajan said that even with the pay increases from the Seventh Pay Commission, it was difficult to predict any long term impact on inflation.

On NPAs:

Rajan said that broadly speaking, RBI was comfortable with the ongoing bank cleanup process that began last year.

"Banks have taken a lot of steps...Some banks have taken more steps...but the culture of recovery and clean-up seems to be well embedded," said Rajan, adding that some of the stressed assets will be put back on track, and may even find buyers and investors.

On banking fraud:

He also announced a public awareness and consumer protection campaign regarding Know Your Customer norms and banking scams.

Cautioning against fraudulent 'prize-winning' spam e-mails that claim to come from RBI, he said the central bank does not give money to its citizens even though it prints currency notes.

If you get an email from me or any future governor promising to transfer a large sum of say ₹50 lakh to you if only you send a small transaction fee of ₹20,000 to a specific bank account, delete the email."

Read his final policy review statement here. Watch the full press conference here.

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