The Reserve Bank of India (RB) left key policy rates unchanged, mostly on the back of rising inflation, which has been above the 5 per cent level in May and June, with eyes on the impact of the 7th Pay Commission payout and the monsoon.
While the move was largely in line with the expectations put forth by experts, bankers and the markets, this was also RBI Governor Raghuram Rajan's last monetary policy review. Rajan will be stepping down from the RBI chair on September 4 when his term comes to an end.
In the customary post-policy interaction with the media, Rajan, while answering the questions posed to him, left messages for the public, his critics and supporters, and talked about the RBI job and his future plans.
On RBI job
"This has been a fantastic job. I have enjoyed every minute of it because everyday my RBI colleagues and I sit and work, we manage to move the needle a little bit everyday...there are very few places you can do this. So it has been fantastic. I hope there's some value add," he asserted.
Advise to successor
"I don't advise my successors," Rajan said.
Answering a question whether his successor will be pressurised to cut rates and sharply soon, the out-going Governor said, "the next decision will be made by the monetary policy committee. There will be six people deciding the interest rates path. So it will be an independent decision."
To his critics and supporters
"I have nothing to say to my critics. At the end of the day (what matters is) do you feel like you have made a useful contribution, are some people are better because of it? There are times I get notes in a plane saying thank you for what you're doing," he said.
"The snap judgements by critics or supporters don't matter. What matters is what plays out the long run -- sustainable growth of the country, job creation, movement to middle income economy," Rajan added.
Rajan's message to the public
The RBI will be rolling out a 'public awareness and consumer protection campaign' very soon. Highlighting the campaign, Rajan said that there are two main pain points for bank customers and banks
- Meeting Know Your Customer (KYC) rules: Rajan said, while the KYC rules have been largely simplified, there may be instances that the local bank branch may not be aware of the changes made by the RBI. To simplify this, the RBI has added a FAQ (Frequently Asked Questions) tab on its website on the morning of August 9, to intimate the customer and the bank branches of the changes made to KYC norms.This includes all the guidelines currently in place to fulfil the KYC norms needed to open and maintain a bank account. A complete list of 24 questions with further links, have been provided by the central bank.
While speaking at the conference, Rajan said, according to the revised KYC norms, it's not necessary to physically go to the bank to get your address changed if you move houses. Your new address can be self certified but the bank branch may not be aware. You can show them the KYC guidelines of RBI's website, he said.
- Rajan's second warning on fraudulent e-mails in his name: The outgoing RBI chief warned the public about responding or paying service fees to e-mails (or senders) that are sent in his name or any future RBI Governor's name, promising a huge sum of money, in exchange of a small fee. "Delete the email," he said, "the e-mails are not from me, and RBI doesn't give out money to ordinary citizens even though we print plenty of it."
"I'm comfortable with the recognition process (towards NPA). The banks have taken a lot of steps (to address NPAs), some of them have taken more than required steps. The culture of clean up is embedded and so is the culture of recovery," he was quoted as saying.
In the future, even after he steps down, Rajan said he was confident there will be no backtracking on NPA. "There has been cooperation all along the way between the government and the RBI. The banks know what needs to be done," he said.
On impact of GST and 7th Pay Commission
"It is not wise to assume that Goods and Services Tax (GST) implementation will increase inflation. What's important, is to see whether the impact of the GST implementation will be long term or short term."
In terms of the 7th pay commission payout, the housing allowance maybe into prices over time but it may be a one time thing, he summed up.
It's pertinent to mention that salaries for central government employees and pensioners for the years 2016 to 2026 is based on the recommendations of 7th pay commission that comprised a four-member panel and took 21 months to prepare the report.
(This report first appeared in DNA)