Raghuram Rajan wants central banks to keep off competitive devaluation

Mumbai: Reserve Bank Governor Raghuram Rajan today asked central banks across the globe to desist from currency depreciation to create competitive advantage in the wake of Britain's exit from the European Union.

"Currencies do help adjustment and some movement is warranted... what I have been concerned about is intervention in a big way in the currency so as to move it in a particular direction and create a competitive advantage... we as central bankers will have to get together and make sure we do not do it," Rajan told CNBC TV18 after the UK vote to leave the EU.

The Governor said the issue of competitive devaluation of currencies is one of the concerns for the past many months and he has been fairly public about it. "I do not think anybody would argue that Britain engineered Brexit to depreciate the pound," Rajan added.

Britain voted to leave the EU in a deadly blow to the 28-nation bloc, forcing Prime Minister David Cameron to resign, triggering panic reaction in world markets and raising questions over immigration and other issues in Britain after the separation.

Britons' decision to exit led to a sharp fall in the domestic market as well as the rupee following which the government and the RBI said the economy has enough "firepower" to deal with the situation.

In a statement issued today, Rajan said RBI is watching markets closely and is ready to act if there is any disorderly behaviour. "RBI is watching all the markets... we are ready to act when there is disorderly conduct, disorderly behaviour (in the markets)," he said.