When the 23rd Governor of Reserve Bank of India (RBI), Dr Raghuram Govind Rajan, announced that he would not seek a second term in office, the reactions poured from various quarters of policy makers as well as civil society members. Never has such a flutter observed surrounding a supposedly low-key post of RBI Governor. But, Dr Rajan (yes, he does what he does) has changed the whole scenario, he brought ‘Mint Street to the Main Street’ (Mint Street is the HQ of RBI). But, what makes him so popular, so talked-about in financial as well as social circle? There are many things that are different about him starting from his achievements in such a young age to being a person who calls the spade a spade.
RBI Governor: Where does he come from?
The present RBI Governor was born in 1963 in Bhopal to an IPS officer dad who used to travel all over the world for his various assignments. Rajan followed and visited many places before enrolling in IIT Delhi, from where he went to IIM Ahmadabad to pursue MBA. The next stop was MIT in USA for PhD, the thesis of which was ‘Essays on Banking’. After that, he started teaching at Booth School of Business, University of Chicago. His illustrious career includes stint with IMF, Chief economic advisor to Indian PM and FM, being a member of the Group of Thirty, being the President of the American Financial Association etc. Dr Rajan has written books such as ‘Faulty Lines’, ‘Saving Capitalism from the Hands of the Capitalists’ etc. So, we can safely assume that Dr Rajan has been the most high profile governor RBI has ever had.
Dr Rajan: Being the ‘Surgeon’ with Care
Dr Raghuram Rajan took over as the Governor of RBI on September 4, 2013 when the Indian economy has long passed the stage of being the fastest growing economy and was actually staring at the title of a member of ‘Fragile Five’ with rupee seeing wide ranging volatility, Forex reserves dwindling along with global slowdown especially in US and Europe.
- Tossing the ‘Fragile Five’ Tag Away: Our economy is no more described as one of the Fragile Five economies of the world, in fact, now we are the fastest and largest growing economy of the world. For that matter, Indian economy is giving Chinese economy a run for its money regarding the growth rate.
- Stability of Currency: This is another area where Dr Rajan has achieved a lot during his tenure. At the start of his term, Indian Rupee saw a lot of volatility because of global issues but Dr Rajan made sure that the domestic currency achieves some stability in order to give the country some credibility in the international arena.
- Forex Reserves: India’s Forex Reserves are at a record high at the moment and the reason is attributed to the confidence the Foreign Institutional Investors (FIIs) have shown in Indian economy under the astute leadership of Dr Rajan.
- Being a Surgeon regarding Bad Loans: This is one area where Dr Rajan has been completely different from his predecessors since he has stopped the practice of the banks not disclosing the so called NPA Accounts in their balance sheets to avoid provisioning. But, Dr Rajan has made it compulsory for the banks to clean up their balance sheets. This has resulted in big banks such as Bank of Baroda, Punjab National Bank, Bank of India posting huge losses whereas SBI, ICICI etc have seen a deep decline in their profits.
- Monetary Policy Framework: RBI has agreed to the proposal of the government regarding the formation of a committee which will be tasked to decide the monetary policy instead of the governor alone, as is the practice now. Under Rajan’s tenure, this has also been realized with the committee being formed with members from central government and RBI.
- Universal Payment; a Reality: The RBI governor has made it possible to launch a universal payment interface in the country. This interface is used to pay all types of utility bills and that reduces the hassle of the common man. RBI has started the work to make this a reality with various players already submitting their proposals regarding the same.
- Small and Payments Banks: Regarding financial inclusion, the governor has always given keen eyes and that has resulted in 11 payments banks and 10 small banks getting licenses in the era of Raghuram Rajan. He has also made proposals for wholesale banks and other differentiated banks. The revolution will have long-standing effect on the Indian economy.
- More Competition in the Sector: RBI has also been very vocal about customer service and that is why, two new banks have been given licenses and they have also started operating in the country. Bandhan Financial Services Limited and IDFC Limited have started operation in India in 2015 itself.
- Controlling the inflation: This has been the biggest achievement of the Rajan era, most probably. When he took over, the rate of inflation was hovering around double digit figures but with strict monetary policy, RBI has brought it down to less than 4 percent in two and half years.
- Setting up of Bank Board Bureau (BBB): Dr Rajan has overseen the establishment of BBB with the former CAG Vinod Rai being appointed as its first chairman. The bureau will be instrumental in selection of chiefs for public sector banks and also will identify big projects for which viable modes of finance or restructuring can be found out.
Dr Raghuram Rajan is often termed as ‘Rockstar Governor’ or ‘The Guv’ and the reason lies in the fact that he has done all the right things in the three year term that he has got (still around two and half months to go). He has controlled a falling economy with his determination, knowledge and gumption. Losing him is certainly a big blow for the country since his guidance will always be missed in the top floor room of the RBI Headquarters. The government will do well if it can find somebody as well and crafty as Rajan for the next governor or RBI.