In recent interviews, former Reserve Bank of India (RBI) governor Raghuram Rajan spoke candidly about a number of issues that are currently making headlines in the country –the liquidity crisis facing non-banking finance companies (NBFCs), the question of RBI’s autonomy, and most importantly – on the list of wilful defaulters that he had sent to the Prime Minister’s Office in February 2015.
Here are some important quotes from his interviews:
- Referring to deputy RBI governor’s Viral Acharya’s recent speech where he had said that governments which undermine the independence of the central bank “incur the wrath of the financial markets”, Rajan said, “Once you have appointed a governor or deputy governor, you should listen to them.”
- “Dr Viral Acharya gave the analogy of T20 and a test match. But a good analogy is central bank is a seatbelt for the government which is the driver. The driver can decide whether to put on the seatbelt or not. The driver may not put on the seatbelt but the seatbelt is useful in times of a crash.”
- “As far as possible, it is in the interest of the country that we respect the institutional autonomy of the Reserve Bank, as well as the traditions.”
- “I think that the relationship has gone on for long and the fact that the RBI says no is not new. The government can keep asking and say please consider this, please consider that but at some point, it says okay I respect your decision, you are the financial stability regulator and I back off.”
- “If frauds go by unpunished, it simply encourages more fraud. If there is a sense that there is no place on earth where you can hide because the long-arm of the Indian law will come after you, I think it will send a very sound message.”
- “I’m very worried about the change in it as they (RBI board members) are supposed to be the wise people who bridge differences, rather than force greater ones. We’ve had excellent people on its board and there are still very good people on those boards…I don’t think India should have a breakdown in the dialogue between the central bank and government.”
- “There is the issue of a number of business people who the banks believe are not paying them when they have the ability to pay and eventually through a quasi judicial process declare them wilful defaulters. I am not well versed enough in the law to understand why those names cannot be made public after they have been through a judicial process. But this is something that belongs the legal realm rather than something I have expertise in.”
(The above quotes have been taken from the CNBC-TV18 interview and the ET interview)