Rajan stumps all, not to seek RBI second innings
NEW GUARD India Inc saddened; govt says next RBI governor to be picked soon
MUMBAI: RBI governor Raghuram Rajan said on Saturday he won’t seek a second term after September, a surprise move by a “rock star” banker who has been a darling of foreign investors but criticised by opponents at home for keeping interest rates too high.
Rajan’s announcement that he will return to academia could undermine investor confidence in the economy, as industry backed him for a second threeyear stint over his efforts to tame inflation and stabilise the rupee. He was also in the middle of a clean-up of massive bad loans in state-run banks.
“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,” the 53-year-old wrote to the RBI staff in a 900word letter. “I will, of course, always be available to serve my country when needed.”
The RBI made Rajan’s letter public on its website and Twitter, citing the “significance of the matter”.
Hours later, finance minister Arun Jaitley said the government appreciated Rajan’s “good work” and respected his decision to step down. “A decision on his successor would be announced shortly,” he tweeted.
A Reuters report named State Bank of India chief Arundhati Bhattacharya, former deputy RBI governor Rakesh Mohan and former finance secretary Ashok Chawla, among others, as Rajan’s possible successor. HT could not independently verify the report.
Rajan’s announcement came after months of tension with the government, especially over the question of cutting interest rates. Rajan was accused of hurting economic growth by holding interest rates but his supporters pointed out that he regularly slashed rates without taking his eyes off inflation.
Cutting interest rates boosts growth because loans to industry become cheaper.
Rajan enjoys a mass appeal not normally associated with a banker, and has been dubbed “rock star Rajan” and India’s “James Bond” as much for his intellectual calibre as for his handsome looks.
“I am Raghuram Rajan and I do what I do,” he famously told reporters in December after nixing criticism by delivering a 0.5% rate cut, double the market expectation.
Top industry leaders said they were sad to see him go with many adding that Rajan deserved more dignity than he was given. “It’s a pity to lose him. I’m wondering what has precipitated this action by the governor,” said HDFC bank chairman Deepak Parekh.
“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. I will, of course, always be available to serve my country when needed.” - RAGHURAM RAJAN, RBI governor, wrote to the central bank’s staff in a 900-word letter