It will be 'cruel' to spoil fun: Raghuram Rajan on 2nd term speculation

RBI Governor Raghuram Rajan also said that a decision is reached in such cases "after discussions between the government and the incumbent".

Mumbai: Keeping the suspense alive, RBI Governor Raghuram Rajan on Tuesday said it will be "cruel" of him to "spoil the fun" media was having with speculation over his extension even as he enumerated an "unfinished agenda" on financial inclusion and cleaning up of books of PSU banks.

He also said that a decision is reached in such cases "after discussions between the government and the incumbent".

Amid intense speculation on whether he would continue or not as RBI Governor, an otherwise outspoken Rajan came armed with a "prepared statement" on this issue to his customary post-policy press conference and read it out word-to-word when asked whether he would be there in September-October period.

"As far as the question of me continuing in this position after September 4 goes, it would be cruel of me to spoil the fun the press is having," said Rajan, whose three-year term ends on September 3.

The Governor also said he is "intrigued" by the many letters purported to be written by him which keep coming up in the press, apparently referring to some unconfirmed reports that he was concerned about markets getting impacted by speculation surrounding his continuation.

"... A decision is reached after discussions between the government and the incumbent. I am sure you will know when there is news. I cannot do better than point you to the statements of the Finance Minister and the Prime Minister on this," Rajan said while sticking to the written script.

In an interview to PTI last week in Tokyo, Finance Minister Arun Jaitley had denounced the personal attacks on Rajan saying the debate should be about issues and policies, and not about the personalities, while Prime Minister Narendra Modi told WSJ recently that appointment of the RBI Governor was an "administrative subject" which was none of media's business.

The ruling BJP's recently nominated Rajya Sabha member Subramanian Swamy has been vociferously attacking Rajan's inflation-focused policies on interest rate, questioning his commitment to the nationalistic cause as he was "not mentally fully Indian".

Swamy had written two letters within a fortnight to Modi demanding termination of Rajan's service.

The investor community however looks at Rajan as a source of stability and there have been a string of statements in his support, warning of flight of capital if he is not given a second term.

Meanwhile, asserting that he has delivered on the key focus areas he had stated at the time of assuming charge, Rajan today said there are a lot of items which can be an unfinished agenda in the short-term.

Rajan said this agenda includes more work on inflation and ensuring it behaves as per the glide path suggested in the Urijit Patel committee report and the RBI's historic inflation targeting agreement with the government as well as continuing with the cleaning up of bank balance sheets and further widening the reach of financial inclusion.

A lot of work also needs to be done on fostering the development of the corporate bond market, Rajan said, adding that he had detailed discussions on this subject with markets regulator Sebi's chairman U K Sinha last weekend.

On financial inclusion, which he specifically said as an "unfinished agenda", Rajan said work needs to be done on creating the last-mile connectivity and also facilitating lending to small businesses by using tools like a register for collaterals and SME loan database.

The former chief economist of the International Monetary Fund, Rajan is currently on leave from the Chicago Booth School of Business. He was appointed as the Governor of RBI by the previous UPA government and there was speculation on his future at the time of Modi government taking over in May 2014.

If denied an extension, he will be the first RBI Governor since 1992 to not have a five-year term.

His predecessors -- D Subbarao (2008-13), YV Reddy (2003-08), Bimal Jalan (1997-2003) and C Rangarajan (1992-97) -- all had five-year (three plus two) terms.

After taking over in September 4, 2013, amidst one of the worst crisis in the post-liberalisation economy, Rajan had raised the short-term lending rate from 7.25 percent to 8 percent and retained the high rates throughout 2014, but began the process of lowering the rates in January 2015. He has since then cut them by 1.50 percent to 6.50 percent.