We could have managed liquidity in banking system better: Rajan

PTI
Published Sep 11, 2017, 5:41 pm IST
Updated Sep 11, 2017, 5:41 pm IST
He adds central bank acted promptly to retrieve situation once problem of liquidity shortage was thrown up by data.
Former RBI governor Raghuram Rajan. (Photo: PTI)
 Former RBI governor Raghuram Rajan. (Photo: PTI)

New Delhi: Former RBI Governor Raghuram Rajan has said that in hindsight it appears that the central bank under his governorship could have managed the liquidity in banking system in a better manner on certain occasions.

Rajan, however, added that once the problem of liquidity shortage was thrown up by data, the central bank acted promptly to retrieve the situation.

"There is one place we did not recognise that the liquidity was tightening in the system," he said, adding that "once I saw it in the data, we took a decision very quickly to move towards neutrality but it was something that I should have seen earlier".

He was responding to a question if he wanted something to do differently in hindsight during his three-year tenure as RBI Governor. In an interview to PTI, he said, he wished he could have acted couple of months in advance to ease liquidity situation.

"We were operating from a system of liquidity deficit, which is how RBI always operated, but it was wasn't working well in that environment. So having recognised that probably a little later than we should have recognised, we moved it to a  neutral liquidity position. So, that's the place I think I
could see that happen a couple of months earlier," he said.

There was a tight liquidity situation in the banking system in the second half of 2015-16 and it was addressed at the April 2016 policy. As a result, banks were delaying easing of monetary policy transmission to the customers.

At one point, BJP MP Subramanian Swamy accused him of being "mentally not fully Indian" and that his inflation centric monetary policy stifled growth.
Asked if he would want to comment on Swamy's remarks against him, Rajan said, "No."

"I think some issues that are better not (commented on). I think as soon as you start addressing these issues, you give it more weight than it deserves," he said.

Location: India, Delhi, New Delhi




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