Rexit ! Raghuram Rajan, India's icon who tripped
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Raghuram Rajan, India’s icon who tripped
By Sugata Ghosh, ET Bureau
As the markets grapple with imponderables and New Delhi hunts for a credible face, to many, Rajan’s missive would come across as less than funny — even somewhat irresponsible, given its timing.
NEW DELHI: Raghuram Rajan had once said that he would like to carry back to classroom what he learnt in the world outside the campus. In September, when he heads back to Chicago — the mecca of many hard-nosed economists — he would carry with him lessons on just not monetary policy but also ones he picked from the unforgiving world of realpolitik. For the `rock star’ central banker, the autumn of 2016 could well be one of rumination. His announcement to quit is as dramatic as was his entry three years ago: no RBI governor had ever done an impromptu presser to rein in the rupee hours after assuming office; no governor in the history of the bank signed a media release to announce his exit. Rajan’s sense of drama is unmistakable.
Less than a week before the referendum on Brexit — a known unknown across financial markets — Rajan’s letter, replete with veiled hints that NEW DELHI wasn’t particularly keen to hold him back, could unnerve traders on Monday. A fortnight ago the governor had said it would be cruel of him to spoil the fun that media was having while speculating about his appointment. As the markets grapple with imponderables and New DELHI hunts for a credible face, to many, Rajan’s missive would come across as less than funny — even somewhat irresponsible, given its timing.
Rajan did what any self-respecting person would have done. The Governor saw the writing on the wall when he was left with little say in selection of his deputies and when New Delhi remained silent and a senior minister gave a guarded statement even as an unrestraint lawmaker — a gun for hire – relentlessly spew venom.
This is why Rajan would be fondly remembered by his admirers though the Governor has had his share of failures and was certainly not the best man to have occupied the 18th floor office of the Mint Street tower. But his visible earnestness, brilliant one-liners and forthcoming demeanour often masked the foibles of the central bank. His critics, though far outnumbered by his supporters – who attacked the government and twitted their resentment on Saturday – have had their points. Rajan’s monetary policy was flawed as he kept money markets gasping for liquidity while lowering interest rates – a style that never allowed free transmission of rate cuts through the banking system; it was only in the third year of his job that Rajan changed tack, but perhaps, it was too late by then; his drive to clean up banks – though unanimously accepted as the need of the hour – was pushed through in a way that left large high-street banks running for cover; and some of the companies which once rushed to bag license for running payment bank – widely perceived as one of Rajan’s smartest measures to spread financial inclusion – have returned the license.
But such criticism, though valid, was lost as it was aired by businessmen and politicians who lacked integrity: debt-laden promoters, wilful defaulters and politicians, some of whom known for their proximity to business groups. Thus, to Rajan’s votaries, his sudden decision to discontinue would go down as a defeat in the hands of India’s crony capitalists. When tainted men, attack a person of immaculate pedigree the vanquished (despite his flaws) ends up as the victor. If Rajan was overhasty and unwonted in putting his quit-notice in public domain, the government’s inept handling of the situation and displaying its dislike for the governor was curiously amateurish.
Rajan, few may notice, would leave behind an RBI where the role of the Governor – particularly as far as monetary policy goes – has diminished: the policy would now be decided by a committee with the Governor (even if considered as first among equals) having a casting vote. The larger job for the next governor is banking reforms.
Rajan’s decision would make markets choppy but it would be simplistic to fear that it would make the rupee a runaway currency and drive foreign portfolio managers out of equities and debts. RBI is an institution and even if there is a kneejerk sell off in stocks, there is little to believe that overseas fund managers are any different from Dalal Street punters who will go long when the government is stable, growth is good and reforms are visible. Outcome of state polls and macro numbers – rather than the choice of Governor – would influence markets in future.
With Rajan’s letter dominating the social media, New Delhi has the unenviable task of choosing the next Governor. Weekend speculations have thrown up names like SBI chief Arundhati Bhattacharya, former cag head Vinod Rai, chief economic advisor Arvind Subramanian, deputy governor Urjit Patel and former DG Subir Gokaran as possible successor to Rajan. Perhaps, the PMO has already made up its mind. But till now and across disparate governments, the appointment of RBI governor has been the only decision that has been least influenced by the byzantine intrigue of Delhi, its formidable club of babus, and the pressures of large business groups. It would be a pity if that changes.
Rajan shielded Indian banks from a Lehman-like crisis. And how
By Kshitij Anand, ECONOMICTIMES.COM
Raghuram Rajan said two weeks back on the sidelines of the money policy meet that he would make sure that India does not have its own Lehman Brothers moment.
NEW DELHI: Ever since Raghuram Rajan took charge as the 23rd governor of the Reserve Bank of India in August 2013, the central bank, in tandem with the government, has introduced a series of reforms and measures in the banking system to support growth and bring down non-performing asset.
But has RBI really done enough to pre-empt a possible collapse of the Indian banking system, far less to avoid a Lehman-like crisis in India?
The collapse of the global investment bank, Lehman Brothers, in September 2008 had brought the financial sector the world over to its knees. With $639 billion in assets and $619 billion in debt, Lehman’s bankruptcy filing was the largest in history.
“Even though the economic recovery is not happening at the desired pace, RBI and the bank boards have made it reasonably clear that they would not let a Lehman moment occur in India,” Saurabh Mukherjea, CEO Institutional Equities, Ambit Capital, said in an interview with ET Now.
Raghuram Rajan specifically said two weeks back on the sidelines of the money policy meet that he would make sure that India does not have its own Lehman Brothers moment.
“The banking system is not going to the dog house and that is why I took the crisis call off the table. So, assuming a modest scenario of around 10 per cent earnings growth this financial year, it will lead Sensex to around 29,000-29,500 in FY17,” he added.
So what steps have RBI and the government really taken to support the banking system and reduce stress on assets in the banking system?
Asset quality review: The asset quality review (AQR), which was started by the Reserve Bank of India (RBI) back in February this year, was to ensure banks were taking proactive steps to clean up their balance sheets, which will help them in the long run.
Under the scheme, banks have been advised to clean up their balance sheets and declare certain accounts as non-performing assets (NPAs), which are at present not marked as such.
Following the asset quality review, banks have reported a near 70 per cent surge in non-performing assets over the past six months.
Gross NPAs of banks and institutions have shot up by Rs 2,41,000 crore in December and March quarters, mostly due to aggressive provisioning undertaken by the PSU banks at the behest of RBI.
The acceleration in recognition and provisioning for non-performing assets (NPAs) is only an initial step in the revamp of Indian banking.
The Centre is looking to inject some life into the public sector banks (PSBs) with the launch of a seven-pronged plan – Indradhanush – on August 2015 to infuse Rs 70000 crore.
The Indradhanush plan is already in works with an allocation of Rs 250 billion in the Union budget for 2016-17 for capital infusion into PSBs. While this allocation is largely being seen as insufficient, the government emphasised that it would not be considered the last word with respect to recapitalisation of PSBs and that the government is committed to providing more capital.
PSBs should raise the remaining Rs 1,10,000 crore from the market. Moreover, the government is committed to making extra-budgetary provisions in FY18 and FY19 to ensure that the PSBs remain adequately capitalised to support economic growth.
The government gave a nod to the new bankruptcy code in May 2016. The bankruptcy bill will make it easier to exit or attempt a revival of business and will help speedy winding up of insolvent companies.
“The new law will provide for dealing with bankruptcies, replacing multiple laws dealing with the issue, including the Companies Act, 2013. This will also help drastically in containing the non performing loans in the financial sector,” The Institute of Company Secretaries of India said in a report.
The law will ensure time-bound settlement of insolvency, enable faster turnaround of businesses and create a data base of serial defaulters-all critical in resolving India’s bad debt problem, which has crippled bank lending.
“Apart from this, foreign lenders will also be more comfortable in extending loans, which are a plus for the country. The new law is expected to improve India’s ranking in the World Bank’s index of ease of doing business,” the report said.
Sustainable structuring of stressed assets: The Reserve Bank of India’s scheme for sustainable structuring of stressed assets (S4A) is yet another tool provided to the banks to tackle the growing challenge of stressed assets emanating from loans given to large companies turning bad.
Experts say this is an improvisation of the two other tools announced by the regulator in the past 18 months to address asset quality challenges at banks: structuring of project loans under the 5:25 scheme, and strategic debt restructuring (SDR).
Crisil estimates that weak assets in the Indian banking system will touch a high of Rs 8 lakh crore by the end of this financial year.
S4A could help banks limit fresh slippages to non-performing assets (NPAs) from large corporate exposures. “S4A envisages the determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity/quasi-equity instruments, which are expected to provide upside to lenders when the borrower turns around,” said the Crisil report.
MCLR – Enabling faster policy transmission: The Reserve bank of India (RBI) slashed rates by 150 basis points (bps) since the start of last year, but the country’s banks have cut lending rates by less than half that. The repo rate stands at a five-year low of 6.50 per cent. Enabling faster transmission would help credit growth in the system to pick up which has remained almost flat in the last 4-8 quarters.
The banks have reduced their lending rates between 0.6% to 0.8% only. The changes in repo rates did not directly affect their lending rates, leading to a mismatch in the transmission of these reductions to banks’ customers.
In order to deal with the mismatch and bring parity between lending rates, the RBI mandated banks to adopt the marginal cost of funds based lending rate (MCLR) method.
“This was because the banks calculated their base rate on the basis of the average cost of funds which is computed using the interest payable on its deposits, the cost of maintaining the CRR with the RBI, the profit margin needed and of course, operating costs,” LKP Securities said in a report.
The MCLR considers the marginal cost of funds, which is based on the cost of funds due to the interest payable on its deposits as well as the repo rate, cost of maintaining CRR, operating costs & a tenor premium. The final rate for a borrower will be calculated after adding the credit risk premium to the MCLR.
@B@R_0_0_D Uncle, Wonderful article…. 
@gambitrite wrote:
@B@R_0_0_D Uncle, Wonderful article….
An introductory 5 minutes speech given in London at an event, by a young professional of Indian origin. His name Dhritiman Biswas. He spoke extempore and the points are reproduced here.
The topic was a round table on :
" India – is it a gigantic success or a colossal failure ? "
This is what he said:
“Ladies and Gentleman, I am glad that I am merely introducing the debate and not participating as in my humble opinion the question itself is wrong.
India, unlike, many western paradigms cannot be analysed in black and white..
In linear equations or algorithms such as this….
We hate test cricket yet are the No1 test ranked country;
our ranking in gender diversity is 134, yet the majority of our bank CEOs, the most misogynist yet of the industries are women;
our health services creak and crumble, yet 36 % of all NHS consultants are Indians;
we love Bollywood tamasha, yet New York philharmonic sold out in 5 mnts in Calcutta in 1984;
we struggle with illiteracy, yet are the largest English speaking country in the world;
we riot, fight and squabble, yet remain a thriving democracy , whilst Russia, Arabia, Brazil, Pakistan fall to authoritarianism…
India is a concept devised by the British and therefore in many ways a contradiction, a process , a work in progress.
Our poverty index suggests we are a hopeless failure, our mobile usage however may allude to resounding success.
Our private sector defaults diabolically like Kingfisher but spectacularly turnaround JLR like TATA.
This question cannot be answered because it is the wrong question to ask.
The right question is –
Can India be allowed to fail ?
JP Morgan elegantly points to the ruins of emerging markets and says India is a nice house in a bad street !
I would add further…
The western world is founded on the principles of liberal, free market, democracy…
Outside the OECD and the western Anglo Saxon Protestant world, literally in the entire globe there is one other example of this experiment and that is India…
We are the West and England’s most natural ally…
We speak the language, sing Beatles’ songs, read Wodehouse and want to grow up to be Sherlock.
Despite our many failings we are a giant ;
and a colossus and for the sake of the world let’s hope we succeed."
swami bhakt will be happy now…. interest rates would be reduced to 5% starting october 2016… what has infaltion got to do with this…. raghu was responsible for price rise, he was in collusion with middlemen, robbing farmers, the govt does not fix taxes like excise, customs, VAT, GST… all this was done by raghu the great….
BJP mission accomplished – reduce the interest rates and see the benefits from october.
@superwoman wrote:
swami bhakt will be happy now…. interest rates would be reduced to 5% starting october 2016… what has infaltion got to do with this…. raghu was responsible for price rise, he was in collusion with middlemen, robbing farmers, the govt does not fix taxes like excise, customs, VAT, GST… all this was done by raghu the great….
BJP mission accomplished – reduce the interest rates and see the benefits from october.
Either plan for a smart way or be patient to win in the long run. 
Who are these guys Raghu Ram Rajan ?
Andaaz Apna Apna ke cast hain kya? 
@19 Female Gurgaon wrote:
Who are these guys Raghu Ram Rajan ?
Andaaz Apna Apna ke cast hain kya?
Swamy says Rajan not picked by popular vote, Chidambaram sad
http://economictimes.indiatimes.com/news/politi...
@B@R_0_0_D wrote:
@19 Female Gurgaon wrote:
Who are these guys Raghu Ram Rajan ?
Andaaz Apna Apna ke cast hain kya?
Swamy says Rajan not picked by popular vote, Chidambaram sad
via The Economic Times App(Download Now): http://ecoti.in/...ps
http://economictimes.indiatimes.com/news/politi...
Bhai itna high-level baatein karte ho.
IAS ka paper do, nikal jayega. (Think it over)
Yaha toh koi BA pass ka bhi certificate nahi milega. 
Sab mere level ke log aagye hain!
And @plz perfect Match
By jeevansathi.com
@B@R_0_0_D wrote:
And @plz perfect Match
By jeevansathi.com
Girl and girl.
But thanks for suggesting!
Raghuram Rajan is one of the best central bank governors: Mohamed El-Erian
Lets see what happens in coming days. Banks will be over burdened by Govt sponsored schemes with no security and rising NPA level
@B@R_0_0_D wrote:
Raghuram Rajan is one of the best central bank governors: Mohamed El-Erian
if everyone is praising him then whats wrong with swamy ?
@ssarvesh wrote:
@B@R_0_0_D wrote:
Raghuram Rajan is one of the best central bank governors: Mohamed El-Erian
if everyone is praising him then whats wrong with swamy ?
Swami himself economist and lawyer.
He can find wrong with any1.
There’s a Oscar winning documentary called “Inside job” pls watch it if you want to know about Raghuram Rajan. 
feeling bad he’s leaving
@B@R_0_0_D wrote:
@ssarvesh wrote:
@B@R_0_0_D wrote:
Raghuram Rajan is one of the best central bank governors: Mohamed El-Erian
if everyone is praising him then whats wrong with swamy ?
Swami himself economist and lawyer.
He can find wrong with any1.
chetan chauhan is nift director so who will be RBI governor ?
He had to leave. He is not one of those person who would bend with govt pressure.
If he (Raghu Ram rajan) leaves then that would be very tragic moment for whole country. Swamy is ruining everthing.
He did not seek 2nd term. It was his choice.
And he did keep the interest rates very high which was against the growth government was hoping for. And I see many people, who doesn’t have any iota of knowledge of economics, who knows only education qualifications of R3, are saying he was the best governor India ever had.
@DealDeveloper wrote:
He did not seek 2nd term. It was his choice.
And he did keep the interest rates very high which was against the growth government was hoping for. And I see many people, who doesn’t have any iota of knowledge of economics, who knows only education qualifications of R3, are saying he was the best governor India ever had.
So You do understand Indian Economy? How Can you say this to anyone you don’t know?
Why media and few people taking so much interest first time for a RBI Governor ???
When we all know govt elects them every 3 years .
People are judging it sad day , how ?? This is the thing only time will tell . we are behaving like we are loosing like something big , if this happens rajan himself said he will be available if we need in future .
Specially media is so concerned . and this is the time when we leave thing on govt of which we have no knowledge , let them decide and if it go bad then it will hurt them too . govt elect bureaucrats at time interval but when media cares so much for a person then it is really either he is best or something fishy which we don’t know .
And regarding news media became private property of some powerful people or org. so we can not trust them without verifying fact . dono about this but many other news are proven paid and fake and only political angle .
@goyal.dkg wrote:
Why media and few people taking so much interest first time for a RBI Governor ???
When we all know govt elects them every 3 years .
People are judging it sad day , how ?? This is the thing only time will tell . we are behaving like we are loosing like something big , if this happens rajan himself said he will be available if we need in future .Specially media is so concerned . and this is the time when we leave thing on govt of which we have no knowledge , let them decide and if it go bad then it will hurt them too . govt elect bureaucrats at time interval but when media cares so much for a person then it is really either he is best or something fishy which we don’t know .
And regarding news media became private property of some powerful people or org. so we can not trust them without verifying fact . dono about this but many other news are proven paid and fake and only political angle .
U mean to say, people should be neutral on appointment if key post and let swami keep poisoning so that RRR can be disinterested to continue ?
Of course, govt. Has all time choice and even sack some1 before due date. However, making disruption in some1 job well done is not justice.
Who so ever is crying is but natural, else we can have Amitabh as President of India playing in Beer , kuch din to Gujaro. Chetan Bhagat in RBI with ½ girlfriend and Salman as Olympic ambassador , another chetan IN Fashion with 6 Sixer’s.
Already Pehlaj, sushma, Gajendra and Vasundhara, Gadse and few other ministers in Raj. Were named in disputes / doubtful activities. So, talent and deserving persons are ignored and what is being promoted , is anybody’s guess ?
why such kolaveri
let him work for the remaining months and have a graceful exit… let govt appoint another bhakt on this position who would work according to their wishes….
this happens with all the govts… so let us see what does the new person does in the coming months…
swamy happy means bosses happy
@B@R_0_0_D wrote:
@goyal.dkg wrote:
Why media and few people taking so much interest first time for a RBI Governor ???
When we all know govt elects them every 3 years .
People are judging it sad day , how ?? This is the thing only time will tell . we are behaving like we are loosing like something big , if this happens rajan himself said he will be available if we need in future .Specially media is so concerned . and this is the time when we leave thing on govt of which we have no knowledge , let them decide and if it go bad then it will hurt them too . govt elect bureaucrats at time interval but when media cares so much for a person then it is really either he is best or something fishy which we don’t know .
And regarding news media became private property of some powerful people or org. so we can not trust them without verifying fact . dono about this but many other news are proven paid and fake and only political angle .
U mean to say, people should be neutral on appointment if key post and let swami keep poisoning so that RRR can be disinterested to continue ?
Of course, govt. Has all time choice and even sack some1 before due date. However, making disruption in some1 job well done is not justice.
Who so ever is crying is but natural, else we can have Amitabh as President of India playing in Beer , kuch din to Gujaro. Chetan Bhagat in RBI with ½ girlfriend and Salman as Olympic ambassador , another chetan IN Fashion with 6 Sixer’s.
Already Pehlaj, sushma, Gajendra and Vasundhara, Gadse and few other ministers in Raj. Were named in disputes / doubtful activities. So, talent and deserving persons are ignored and what is being promoted , is anybody’s guess ?
I am not defending swamy or pahlaj or chetan chouhan appointment. They can be criticized . so without knowing my point on these you defended seems you are well outraged by something made you angry .
and rest I stated the point why we are caring so much for a resign . if govt choose a non deserve govr then criticize can be logical .
And BTW sushma swaraj is already doing good , rest ppl performance not so good and phlaj like are totally shame .
https://www.google.co.in/amp/indianexpress.com/...#
Raghuram Rajan-mukt RBI: ‘was open (to second term), consulted govt… will return to academia
Raghuram Rajan’s exit as RBI Governor: Subramanian Swamy is probably now the David who felled Goliath
Raghuram Rajan’s letter makes it clear – leaving the RBI wasn’t his decision
Raghuram Rajan did not just do what he did at RBI (he also dared to speak out)
http://scroll.in/article/810213/not-only-did-ra...
A man of his own mind, a free speaker and a brilliant thinker, he lived up to what he once said: “My name is Raghuram Rajan and I do what I do.”
Rexit: Raghuram Rajan’s letter to RBI staff
Rexit: Raghuram Rajan’s letter to RBI staff
“Today, I feel proud that we at the Reserve Bank have delivered on all these proposals. A new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time.”
Dear Colleagues,
I took office in September 2013 as the 23rd Governor of the Reserve Bank of India. At that time, the currency was plunging daily, inflation was high, and growth was weak. India was then deemed one of the “Fragile Five”.
In my opening statement as Governor, I laid out an agenda for action that I had discussed with you, including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our foreign exchange reserves, transparent licensing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map and resolve the extent of system-wide distress. By implementing these measures, I said we would “build a bridge to the future, over the stormy waves produced by global financial markets”.
Today, I feel proud that we at the Reserve Bank have delivered on all these proposals. A new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time. We have also been able to cut interest rates by 150 basis points after raising them initially.
This has reduced the nominal interest rate the government has to pay even while lengthening maturities it can issue – the government has been able to issue a 40 year bond for the first time. Finally, the currency stabilized after our actions, and our foreign exchange reserves are at a record high, even after we have fully provided for the outflow of foreign currency deposits we secured in 2013. Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five.
We have done far more than was laid out in that initial statement, including helping the government reform the process of appointing Public Sector Bank management through the creation of the Bank Board Bureau (based on the recommendation of the RBI-appointed Nayak Committee), creating a whole set of new structures to allow banks to recover payments from failing projects, and forcing timely bank recognition of their unacknowledged bad debts and provisioning under the Asset Quality Review (AQR).
We have worked on an enabling framework for National Payments Corporation of India to roll out the Universal Payment Interface, which will soon revolutionize mobile to mobile payments in the country. Internally, the RBI has gone through a restructuring and streamlining, designed and driven by our own senior staff. We are strengthening the specialization and skills of our employees so that they are second to none in the world.
In everything we have done, we have been guided by the eminent public citizens on our Board such as Padma Vibhushan Dr. Anil Kakodkar, former Chairman of the Atomic Energy Commission and Padma Bhushan and Magsaysay award winner Ela Bhatt of the Self Employed Women’s Association. The integrity and capability of our people, and the transparency of our actions, is unparalleled, and I am proud to be a part of such a fine organization.
I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished. While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.
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, 2016. I will, of course, always be available to serve my country when needed.
Colleagues, we have worked with the government over the last three years to create a platform of macroeconomic and institutional stability. I am sure the work we have done will enable us to ride out imminent sources of market volatility like the threat of Brexit. We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Morale at the Bank is high because of your accomplishments.
I am sure the reforms the government is undertaking, together with what will be done by you and other regulators, will build on this platform and reflect in greater job growth and prosperity for our people in the years to come. I am confident my successor will take us to new heights with your help. I will still be working with you for the next couple of months, but let me thank all of you in the RBI family in advance for your dedicated work and unflinching support. It has been a fantastic journey together!
With gratitude
Yours sincerely
Raghuram G. Rajan
Source: RBI website