The Reserve Bank of India (RBI) Governor Raghuram Rajan, on Monday, said that the macro-economic indicators were improving and inflation had been coming down in line with the central bank’s expectation.
“We are in the process of picking up growth, even if the journey is likely to be bumpy at times. Inflation is coming down, consistent with our forecasts,” said Dr. Rajan while addressing the FICCI-IBA annual banking conference here.
However, he said, “inflation is high, and the best solution for the country is to bring it down. I have no desire to keep interest rates higher than they should be. I want to bring down interest rates when feasible.’’ The RBI Governor said there was no point in cutting interest rates to see inflation pick up again.
The RBI remains committed to the dis-inflationary path of taking retail inflation to 8 per cent by January, and further to 6 per cent by January 2016.
Dr. Rajan said that the banking sector was facing a lot of challenges. According to him, public sector banks must have the independence to take commercial decisions. However, he told bankers to ensure quality and effectiveness of bank boards. “Bank boards have to be more empowered to hold the bank management accountable,” he said. The recent scandals called for better internal evaluation of lending process, he added.
Credit cultureHe also emphasised on a more healthy credit culture in the country. “We have PSL norms which channel credit to certain sectors. Why should some sectors get more easy credit? For example, we subsidise student loans for study abroad. Should a student loan for study abroad come under priority sector?” he said.
The RBI Governor also justified the move by the apex bank RBI to restrict the number of free transactions at ATMs.According to him, people doing fewer transactions at any bank’s ATMs ended up cross-subsidising those doing five free transactions.
