Raghuram Rajan era begins at Mint St
Mumbai: Dr Raghuram Rajan swept into office as the 23rd governor of the Reserve Bank of India with a spectacular bunch of high profile, but down-to-earth changes that would be undertaken in the next three months and a promise for further reforms after that.
In the next three months his road map visualises revolutionising retail credit, make mobile payments a game changer both in the financial sector as well as for mobile companies, free banks and markets from superficial controls, deepen the G-sec markets and enable households to obtain direct benefits from the government without costly intervening intermediaries when sending money to their loved ones.
He described his “short-term time table” for the Reserve Bank at his first press conference in Mumbai on Wednesday, as involving “considerable change and change is risky. But as India develops, not changing is even riskier. We have to keep what is good about our system of which there is a tremendous amount even while acting differently where warranted.”
On the much awaited issue of growth he said as the central bank in a developing country “we have additional tools to generate growth—we can accelerate finance development and inclusion.” He recognised that access to finance is still hard for the poor and rural and small and medium industries that have been important engines of growth even as large company growth has slowed. He has announced schemes for them that a committee headed by him had proposed way back in 2008 in his report on ‘Financial Sector Reforms.’
His road map of reforms would be implemented within three months and will bring a change that involves every section of the economy .
As a measure of his intention to walk the talk or as he called it “a symbolic down payment” Dr Rajan said they would enhance the limit of the cancelled forward exchange contracts that exporters are permitted to rebook from 25 per cent to 50 per cent and a similar facility will be offered to importers to the extent of 25 per cent. Further to develop the G-Sec markets RBI will introduce cash settled 10-year interest rate future contracts and will also examine the introduction of interest rate futures on overnight interest rates.
Another very revolutionary step proposed is internationalisation of the rupee and attracting capital flows. He said as India’s trade expands “We will push for more settlement in rupees. This will also mean that we will have to open up our financial markets more.”
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