Raghuram Rajan, the governor of India’s central bank, is to step down by 4th September. It will be the first time in 24 years that a RBI chief has departed after a single three-year term.
He had been expected to stay on in the role but will return to academia. Mr. Rajan had been “open” to continuing after his initial three-year term, but has made his move after “due reflection and consultation with the government”.
However, Rajan has faced pressure from a faction within Prime Minister Narendra Modi’s ruling party for keeping interest rates high. There has also been criticism that he had begun to stray into politics. The RBI governor has had plenty of public detractors – including one recently from a senior figure in the ruling BJP party that he was “mentally not fully Indian” because he has a US green card.
But while not pleasing all politicians – Mr. Rajan’s economic track record means he’s hugely respected by investors both at home and abroad. And with India relying heavily on foreign investment to keep its growth going, there is a lingering worry that the country’s economic credibility overseas could now be called into question by the decision not to make sure the man nicknamed the “rockstar” banker was talked into staying for another term.
In a letter to Reserve Bank of India (RBI) workers, Mr. Rajan remarked that two of his major policy ideas – the creation of a monetary policy committee to set interest rates and reform of the heavily indebted banking sector – had not been completed. He also made passing reference to the referendum in the UK next week on EU membership.
Indian Central Bank Boss to Step Down In Surprise Move
