JOIN US From rate cuts to extending financial inclusion in the country by issuing new bank licences and introducing small finance banks and payments banks and steps to reduce non performing assets of banks, RBI Governor Raghuram Rajan’s term has seen it all.
But as his 3-year term ends today (September 4), the controversies with regards to his re-appointment overshadowed all his achievements.
“Governor Rajan during his tenure has literally championed both conventional and unconventional modes of communication and not allowed the market to run ahead, instead open mouthed the market. Such communication by Rajan had the desired impact on movements in the exchange rate and in the term structure of interest rates being entirely consistent with the RBI's monetary policy stance,” states State Bank of India’s chief economic advisor Soumya Kanti Ghosh.
Rajan has ensured through his judicious communication that inflation targeting is now well-entrenched in the psyche of each and every stakeholder in the financial sector space, Ghosh adds. Rajan’s tenure saw five rate cuts and three rates resulting in two net rate cuts.
Average Consumer Price Index for Industrial Workers (CPI-IW) inflation during his tenure stood at 6.6%. Stressed assets (gross non performing assets plus restructured standard assets) for the banking system as a whole, which stood at 11.5% as at the end of September 2013, moved up sharply to 14.5% as at the end of December 2015.
In addition to that, the Asset Quality Review (AQR) conducted by RBI and its aftermath, has resulted in enormous losses. The rising NPAs have put pressure on capital adequacy, according to SBI Research. Rajan also issued two banking licences to Bandhan and IDFC, 11 payments banks and 10 small finance banks. Fitch Ratings believes that Urijit Patel is likely to continue on the same path where Rajan left off.