Business Standard

BETTER TO MERGE BANKS WHEN THEY ARE HEALTHY: RAJAN

- T E NARASIMHAN & PTI

Former Reserve Bank of India (RBI) Governor Raghuram Rajan said that it was better to merge banks when they were healthy, and more time should be devoted to cleaning up their balance sheets. “There is a little bit of a catch-22 situation — if you don’t have the capacity and management capability, it is better not to pursue a merger before bringing them,” said Rajan. Speaking at the launch of his book

I Do What I Do in Chennai, Rajan, currently professor of finance at the University of Chicago, said, “You have to be careful, because mergers take time and consume a lot of effort, especially if we are merging very different entities, from different areas and with different cultures .” Breaking his silence after completing the unwritten one-year moratorium for not commenting on India-specific issues, Rajan said he wanted to give young people an idea of “what we do at the RBI, and why we do it”.

Rajan said that he had worked under two government­s and there was absolutely no interferen­ce. “I had very cordial relations with both the government­s, kept them informed and essentiall­y had government support all along the way,” he added.

He said he mentioned demonetisa­tion in the introducti­on in his book as there had been questions asked by the parliament­ary standing committee and the responses that came out from the leaks were not in accordance with his recollecti­on of what had exactly questions when it comes happened. “So I want to set the to growth comparison­s with record straight just because the China. Rajan, the only central Parliament has the right to bank governor in two decades know what in fact the response who did not get a second term, of the RBI on this was,” Rajan also seemed to defend his controvers­ial said. Replying to a question remark of India being on demonetisa­tion, Rajan a ‘one-eyed king in the land of said, “The jury in terms of the the blind’, saying GDP expansion data is still out”. slipped in every quarter

“We still have to wait for since that remark in April of the full evolution of the data last year. to understand what exactly “This notion that, we at the cost and benefits have every corner, we have to say been. It may be that we never we are the best and there is know because we do not nobody else like us. Well, measure some of the areas that is not true, first. There is where demonetisa­tion had an lot of potential in India, we impact because those were are capable of doing significan­tly part of the informal economy,” more over the years to said Rajan. He, however, come,” he said. “Let us be said the cost of demonetisa­tion confident, we can do it. Let has been quite substantia­l. us do it. But let us boast only “What (the impact) is after we have achieved it. Let because of demonetisa­tion, us not be overly complacent what is because of banking before that,” he added. Rajan sector stress, what is because said he faced awkward questions of anticipati­on of the goods in Beijing recently on and services tax... All three are India lagging behind China happening at the same time. in terms of GDP growth rate So I don’t think you can pinpoint for the second quarter in a and say exactly this row. India’s GDP growth much, but analysts have made slowed to 5.7 per cent in an estimate — 1 per cent and 2 April-June quarter, down per cent of gross domestic from 6.1 per cent in the preceding product (GDP) in terms of the three-month period. growth cost,” said the former China clocked 6.5 per cent RBI governor. growth rate in both the quarters.

Rajan also said it was always better to underpromi­se and over-achieve than to face awkward

 ??  ?? Former Reserve Bank of India governor Raghuram Rajan
Former Reserve Bank of India governor Raghuram Rajan

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