Bengaluru, June 20: Reserve Bank of India (RBI) Governor Raghuram Rajan has decided not to go for a second term, creating quite a stir in financial, political and social circles.
The banking and financial fraternites have expressed their displeasure over Rajan's exit, apprehending a negative impact. Oneindia spoke to Dipanjan Naha, a senior investment banker based in Bengaluru on the issue (he called Rajan a rockstar RBI governor who did not want to be dictated by the government) and here are some excerpts of the interview:
Oneindia: What will be the biggest loss for the Indian economy with Rajan's exit?
Dipanjana Naha: With Rajan's exit, bond market and currency will take the worst hit. The two have already started reacting to the decision. The final exam will be in September when close to $20 billion of FCNR will be maturing and ready to leave the country. These two things will be to watch out for.
Oneindia: Was Rajan preparing India to tackle a likely recession like the Chinese?
Dipanjan Naha: Absolutely. India was becoming the blue-eyed boy globally because of Rajan. His way of seeing things and reacting are unique and far from bookish. He focussed on domestic growth, cleaning up the banking system, credit off take and the list goes on. Even Moody's and the World Bank always kept a close watch on the moves that Rajan made. While China is facing impact, we as an economy stood strong because of our strong central bank policies.
Oneindia: How will his absence affect the banking sector? He brought to the fore ideas like payment banks, wholesale banks etc. Will those suffer now?
Dipanjan Naha: I don't think so. Whatever has been laid down by him will be taken forward by his team. But yes, thay will surely miss his vision and wisdom. Payment banks and wholesale banks agenda will go forward as it is, I think.
Oneindia: Was Rajan doing well in dealing with crony capitalism?
Dipankan Naha: Depends. To me, his job was to fight inflation, cleaning up the banking system, bringing credit to our economy, standing strong in volatile times and India should look good against criticism. For me, he has come out with flying colours. He is no Bollywood actor who has to depend on PR to fight people who understands only politics. He is a personality of much higher stature to be bothered by these terms.
Oneindia: Did Rajan also err in some cases as the RBI governor?
Dipanjan Naha: Honestly, I don't think so.
Oneindia: What should the next RBI governor do to take forward the work done by Rajan?
Dipanjan Naha: Everything said and done, he or she will have huge shoes to fill. First, to understand the way he visualised will be a challenge. He is a institution by himself and had he been in the office for another 2two years, we would have been in a different league. The government will also have its task cut out. Tomorrow, if the price of crude oil rises, we will face the real test. Whoever replaces Rajan will have his or her task will be cut out.