India’s central bank governor to quit after term ends

BJP leader Subramanian Swamy, who has been one of the chief critics of Raghuram Rajan, on Saturday welcomed the latter decision to leave his post as the Reserve Bank of India (RBI) Governor on the completion of his term this year, saying he was not even getting a second term in the first place.

Rajan assumed charge as the 23rd Governor of the Reserve Bank of India on September 4, 2013 and now is on leave from the University of Chicago, where he is the Distinguished Service Professor of Finance at the Booth School.

Still, analysts said markets would stabilize as investors await word on who will be appointed as the next RBI Governor, with RBI Deputy Governor Urjit Patel and State Bank of India chair Arundhati Bhattacharya seen as potential replacements.

RBI Governor Raghuram Rajan announces he will not accept second term and plans to return to academia.

Arun Jaitley said the government appreciates the work done by Rajan and respects his decision.

Earlier in the day Rajan said that he will not be seeking a second term after his tenure ends on September 4. Markets may nonetheless shudder come Monday. “Whoever takes over as RBI governor after Rajan must take note of these, especially banking sector stress”, Singh added.

Rajan, who is on leave from the University of Chicago, had faced strident criticism from right-wing members of Modi’s Bharatiya Janata Party, including parliament member Subramanian Swamy, who has waged a campaign against his economic policies. The 53-year-old said more work was left to be done on reining in inflation and cleaning up the banks.

Here’s the full transcript of Rajan’s letter that was made public by the RBI on Saturday.

Mr Wood, whose “Greed & Fear” newsletter is widely tracked, described Dr Rajan as the world’s “most articulate” central bank governor in his column. Swamy also said that Rajan was “not fit” for the job and that he was not “Indian at heart”.

“This is clearly Raghuram Rajan’s choice”. At that time, the currency was plunging daily, inflation was high, and growth was weak.

He went on to speak about his unfinished agendas: a consumer price index inflation target of five percent by March-end [May CPI inflation touched a 19-month high of 5.76 percent this month] and a monetary policy committee – which will set future policies – but has yet to be formed. No such thing likely.

Lawrence Summers, a former US treasury secretary, called Rajan “one of the few central bank governors who has changed the regime in a major country”.

Inflation is now under control, and interest rates have been substantially reduced.

Rajan, who introduced a slew of measures on the liquidity front, also counted the issue of 40-year government bond as an achievement. Rajan’s own outspokenness has not gone down well in political circles. “It has been a fantastic journey together!” “We now require a very pivotal kind of leadership from the central bank in order to work with the government”, said Kiran Mazumdar Shaw, Chairperson, Biocon.