Raghuram Rajan unveils big initial package, promises more

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Mumbai: New RBI Governor Raghuram Rajan on Wednesday came out with a slew of measures, including more trade settlement in rupees to rescue the battered financial markets and hinted at a shift in focus from inflation control, doggedly pursued by his predecessor, to boosting growth.
Shortly after he took over as the 23rd Governor of the central bank, Rajan, 50, addressed the media with a prepared statement in which he laid out a detailed road map for his innings in the short term, which he called a 'big initial package'. He also rescheduled by a few days the date for his much- anticipated first monetary policy statement to September 20.
The new Governor set up a number of committees for revising and strengthening monetary policy framework, financial stability, financial inclusion, NPAs and an outside panel of experts headed by former Governor Bimal Jalan to screen applications for new bank licenses. Rajan said the new bank licences will be issued around January next year.
Raghuram Rajan takes over as RBI Governor
Apparently reflecting a shift in the approach from his predecessor D. Subbarao, who had serious differences with the government of late, Rajan said the primary role of the bank is monetary stability to sustain confidence in the value of the rupee. 
"Ultimately, this means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or demand pressures.
"...but we have two other important mandates; inclusive growth and development, as well as financial stability," he said.
Asked about Subbarao's focus on targeting inflation, Rajan said he would reserve his comments till September 20.

Reserve Bank of India’s (RBI) newly appointed governor Raghuram Rajan, left is greeted by outgoing governor Duvvuri Subbarao after taking charge, at the RBI headquarters in Mumbai on Wednesday - AP
Next: Highlights from the inaugural speech by Raghuram Rajan

Highlights from the inaugural speech by Raghuram Rajan
New bank licences by January 2014 or soon after
Bimal Jalan to head the external committee to screen banking licence applicants
RBI wants more regulatory and supervisory control over the domestic operations of foreign banks
Banks need not require RBI nod to open new branches
Hints at reducing the SLR in a calibrated way \
Mid-quarter review of monetary policy postponed by 2 days to Sept 20 as more time required to consider all developments
To steadily liberalise markets, and lift restrictions on investment and position taking, together with Sebi
Says primary role of RBI as maintaining monetary stability but generating growth is also important
Re-booking limit on cancelled forward exchange contracts for exporters will be enhanced to 50 per cent
Importers will also be allowed a similar facility to the extent of 25 per cent
To introduce cash settlement in 10-year interest rate future contracts to develop money and G-sec markets
To examine introduction of interest rate futures on overnight interest rates
Deputy governor Urijit Patel to head a panel to strengthen monetary policy framework; to submit report in three months
Committee under Nachiket Mor to assess approach to financial inclusion
There is a need to internationalise the rupee
To encourage banks to clean up their balance sheets, and commit to a capital raising programme wherever necessary
Need to accelerate the working of debt recovery tribunals and asset reconstruction companies
Need to improve the efficiency of the loan recovery system
Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise
Promoters do not have any right to use the banking system to recapitalise their failed ventures
Bad loan problem is not alarming yet
To push for more rupee settlements
To help banks bring in safe money to fund current account deficit
To offer a window to banks to swap fresh FCNR-B dollar funds at a fixed rate of 3.5 per cent
Current overseas borrowing limit of 50 per cent of the unimpaired Tier I capital to be raised to 100 per cent
Will issue inflation indexed savings certificates linked to the CPI new index to retail investors by end-November
Aim to make payments anywhere anytime a reality
To set up a technical panel to study feasibility of using SMS-based fund transfer system that can run on any handset
To emphasise the use of the unique ID, Aadhaar, in building individual credit histories