Published: Wed, August 31, 2016
Economy | By Melissa Porter

Raghuram Rajan Signs His Last Major Report As RBI Governor: 10 Facts

Raghuram Rajan Signs His Last Major Report As RBI Governor: 10 Facts

The Reserve Bank of India has said the near-term economic growth outlook for the country appears brighter than during the last fiscal.

Ghosh also highlighted several demands and concerns of RBI as a reason for joining the strike. The projections are still at the upper limits of the RBI's objective of containing inflation at five per cent by March 2017.

In the foreword to the report, Rajan said while the economic growth was showing signs of a pick-up, it is still below the levels that the country is capable of achieving.

In the name of recapitalisation of banks suffering from huge bad debt to corporates, government plans to drain out RBI Reserve Fund of Rs 2 lakh crore overriding RBI objections and crippling RBI financially, he claimed.

Outlining the short-term macroeconomic priorities of the RBI, he said that it continues to focus on bringing down inflation to 4 per cent.

As per the report, headline inflation (total inflation, including food and fuel) is expected to trend towards the target of 5 per cent by the last quarter of the year, although at the current juncture, upside risks are prominent.

But that apart, considerable slack in the industrial sector continues to weigh on the outlook; the capex cycle remains weak; and subdued private investment could be one of the reasons for below-par growth past year.

Referring to the code - Charter of Customer Rights - that banks had to follow in dealing with the customers, brought out by RBI in 2015, Rajan said the banks were asked to appoint an internal ombudsman to monitor grievance redressal process. This, at a time when weak corporate investment has reduced the volume of new profitable loans accompanied by stressed assets that have largely contrived the capital positions of these banks and hampered their lending to corporate houses. The stressed assets of the lenders was also preventing them from taking fresh exposures freely. "The reluctance to lend to industry and small businesses is more visible among the stressed public sector banks compared to the private sector lenders". With final demand picking up, capacity utilisation is likely to increase, and so will investment.

"A virtuous cycle of growth is possible, reinforced by anticipation of the coming benefits from reforms like the recently passed Goods and Services Tax legislation in Parliament", he said.

Further, the implementation of Monetary Policy Committee will help in fortifying transparency, continuity and independence of monetary policy. The Asset Quality Review initiated in early 2015-16 has improved the recognition of NPAs and provisioning in banks enormously.

"We now will examine how banks are faring, and whether further regulations are needed to strengthen consumer protection".

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