MUMBAI India’s move to clean up the books of its banks saddled with $120 billion of sour loans will be largely unaffected by the decision of central bank chief Raghuram Rajan to step down, say bankers and government officials. “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”, he said.
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Shrugging off cries of outrage and allegations from the opposition holding him responsible for RBI Governor Raghuram Rajan’s decision to not continue with his post, Bharatiya Janata Party (BJP) leader Subramanian Swamy on Sunday asserted that he did not care what the others said, as Rajan was the government’s employee, adding that he was a Congress “agent” bent on sabotaging the Indian economy.
But he has faced mounting criticism from a faction within Prime Minister Narendra Modi’s ruling party for keeping interest rates high and over a perception that he had begun to stray into politics.
“I wonder what precipitated him to take this action”, Deepak Parekh, chairman of Housing Development Finance Corp., India’s largest mortgage lender, told Bloomberg Quint, Bloomberg’s India television and digital venture. He said that India is losing one of the most skillful economic thinkers in the world.
“What Rajan has done is what any self- respecting man under such circumstances will do”, he had said, adding the RBI governor had done “phenomenal” work in his tenure.
One senior official said Rajan had signalled his willingness to work until next March – the deadline he had set for completing a clean-up of bad debts in the banking sector.
Rajan’s letter on Saturday caught Modi’s government by surprise, according to a person familiar with the situation.
Swamy remained unrelenting. “Raghuram Rajan was an employee of the Government of India”.
“It’s a volatile period and as an investor I feel this was unnecessary”.
Terming it as the “most unpleasant thing” for the country, he said, “I think in the present context of the governance and also the present regime, I think they do not deserve a person of his level”.
As recently as June 7, Rajan told reporters to watch for statements from Modi and Jaitley regarding his future, joking that it would “be cruel for me to spoil the fun the press is having with all this speculation”.
The uncertainty over Rajan’s future has hung over the markets for weeks.
“My recommendation to the government is to appoint a successor as soon as possible”.
The candidates are Vijay Kelkar, Rakesh Mohan, Ashok Lahiri, Urjit Patel, Arundhati Bhattacharya, Subir Gokarn and Ashok Chawla, the official said, speaking on condition of anonymity due to the sensitivity of the matter.
The former International Monetary Fund economist, who was one of the few to predict the 2008 financial crisis, has been praised for his handling of the Indian economy.
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“I’ll be very frank with you – that is not our assessment”, he said.
