Rarguram Rajan Has Failed India's Banking Case Study
How Raghuram Rajan Has Failed India's Middle Class
-Harshvardhan Tripathi
On September 20, 2013, the commercial markets were beaming with expectations. Raghuram Rajan was going to declare his first monetary policy as RBI chief. He had been appointed as the Governor of the central bank barely two weeks ago.
The banks, bazaars, as well as common people, were hoping that Rajan's policy would make bank loans cheaper. The rupee was relatively stronger against the dollar, the Sensex was approaching the 21,000 mark and crude oil prices were also on the decline from $ 112 per barrel at that time. The rate of inflation was hovering around 6 percent, but it was largely on account of soaring onion prices. In short, RBI had ample reasons to reduce the …show more content…
As a result of Rajan's policy, SBI, India's largest public sector bank, increased the interest rates. The private banks soon followed its footsteps.
My bank was no exception and I was duly informed that my loan term has been extended from 240 months to 255 months. It meant I had to pay the loan at 10.5 percent rate in more than 21 years.
This was the advent of Raghuram Rajan era in country's fiscal policy. This, when Pratip Chaudhuri, the then SBI Chairman, was waiting for Rajan's appointment, anticipating that the new Governor would reduce the interest rates or at least hint in this direction. However, a disappointed Chaudhuri found repo rate unchanged in September, prompting him to hike interest rates by stating that such an increase was on the cards since July.
Now, there are signals that Raghuram Rajan may leave office after completion of his three-year term. The middle class has been forced to believe during these three years that Rajan's 'far-sightedness' is only going to increase their troubles.
This is the reason few people were surprised at Rajan's new monetary policy made public on June 7. Rajan had once again maintained the repo rate at 6.5 percent citing …show more content…
Rajan has cut down the interest rate by 1.5 per cent till the beginning of 2015. The banks have only extended 0.75 per cent of this reduction to the consumers.
It is clear that the middle class will have to wait for the new RBI Governor for cheaper bank loans. The crude oil rates have come from $112/barrel to around $50/barrel during Rajan's tenure. Yet, he is waiting for inflation to come down further. One might ask whether it is RBI Governor's 'long-term vision' or the lack of it.
It is strange that the economists within the country along with the international lobby are trying to portray Rajan as 'martyr' after BJP MP Subramanian Swamy raised serious questions over his style of functioning.
A prominent economic journalist wrote a long article to argue that Rajan's ouster could result in the vanishing of all the foreign capital from the country.
One can only pity at the wisdom of such experts. Going by their logic, the country does not need any elections. Only a good RBI Governor is enough to attract foreign
-Harshvardhan Tripathi
On September 20, 2013, the commercial markets were beaming with expectations. Raghuram Rajan was going to declare his first monetary policy as RBI chief. He had been appointed as the Governor of the central bank barely two weeks ago.
The banks, bazaars, as well as common people, were hoping that Rajan's policy would make bank loans cheaper. The rupee was relatively stronger against the dollar, the Sensex was approaching the 21,000 mark and crude oil prices were also on the decline from $ 112 per barrel at that time. The rate of inflation was hovering around 6 percent, but it was largely on account of soaring onion prices. In short, RBI had ample reasons to reduce the …show more content…
As a result of Rajan's policy, SBI, India's largest public sector bank, increased the interest rates. The private banks soon followed its footsteps.
My bank was no exception and I was duly informed that my loan term has been extended from 240 months to 255 months. It meant I had to pay the loan at 10.5 percent rate in more than 21 years.
This was the advent of Raghuram Rajan era in country's fiscal policy. This, when Pratip Chaudhuri, the then SBI Chairman, was waiting for Rajan's appointment, anticipating that the new Governor would reduce the interest rates or at least hint in this direction. However, a disappointed Chaudhuri found repo rate unchanged in September, prompting him to hike interest rates by stating that such an increase was on the cards since July.
Now, there are signals that Raghuram Rajan may leave office after completion of his three-year term. The middle class has been forced to believe during these three years that Rajan's 'far-sightedness' is only going to increase their troubles.
This is the reason few people were surprised at Rajan's new monetary policy made public on June 7. Rajan had once again maintained the repo rate at 6.5 percent citing …show more content…
Rajan has cut down the interest rate by 1.5 per cent till the beginning of 2015. The banks have only extended 0.75 per cent of this reduction to the consumers.
It is clear that the middle class will have to wait for the new RBI Governor for cheaper bank loans. The crude oil rates have come from $112/barrel to around $50/barrel during Rajan's tenure. Yet, he is waiting for inflation to come down further. One might ask whether it is RBI Governor's 'long-term vision' or the lack of it.
It is strange that the economists within the country along with the international lobby are trying to portray Rajan as 'martyr' after BJP MP Subramanian Swamy raised serious questions over his style of functioning.
A prominent economic journalist wrote a long article to argue that Rajan's ouster could result in the vanishing of all the foreign capital from the country.
One can only pity at the wisdom of such experts. Going by their logic, the country does not need any elections. Only a good RBI Governor is enough to attract foreign