Rajan is the best choice but has his task cut out: Bankers

Bankers feel Rajan already familiar with recent developments in country from his position as CEA in finance ministry for about a year now

Bankers have welcomed the appointment of Raghuram Rajan as the 23rd governor of Reserve Bank of India (RBI). Among the probable candidates, Rajan was the best choice, bankers said, because he is already familiar with the recent developments in the country from his position as chief economic advisor in the finance ministry.

“The announcement of the new RBI governor is a welcome step and he is no doubt an extremely good choice for the RBI. He brings with him a deep understanding of international markets and monetary policy. In my interactions with him, I have found him to be extremely grounded and very sound in his analysis,” said Deepak Parekh, chairman, Housing Development Finance Corporation (HDFC).

Rajan will take over from D Subbarao, whose five-year term ends on September 4. One of the priorities of the new governor is to revive the rupee, which has depreciated sharply in recent times. He will also have to focus on economic growth, which was at a decadal low in the last financial year. (HOW RAJAN’s PREDECESSORS FARED)

“He has an excellent reputation and an enviable track record with good network of contacts as he was associated with global multi-lateral agencies. At this point in time, any change in such crucial position always make the market nervous, but there is no such negativity associated with this appointment. He is a known person and was aware of latest issues that the country is facing as he was with the finance ministry for the last one year or so. He is the best choice for the governor's post at the current juncture," said Hitendra Dave, managing director and head of global markets, India, HSBC.

Rajan is a well-known figure globally as he has worked with global multilateral agencies. His experience will come handy at a time when the country is looking at raising debt abroad to attract rapid capital inflows, which could strengthen the rupee.

“Raghuram Rajan brings to the role of governor of the Reserve Bank of India his vast international experience combined with his deep understanding of the Indian economy and financial sector,” said Chanda Kochhar, managing director of ICICI Bank. (RBI GOVERNORS SINCE 1935)

Bankers agreed Rajan’s appointment comes at a time when the economy is facing challenges on several front.

“Rajan has taken over the mantle of the RBI at a time when the country’s economy is passing through a very challenging phase. His familiarity with the dynamics of global economies will be of immense help as India linkages with them continue to increase manifold,” said Shikha Sharma, managing director of Axis Bank.

HDFC’s Parekh agreed the new governor will have his task cut out. “Nonetheless, taking on this position at a time of extreme volatility, and external sector that is so vulnerable, makes his task more challenging. But I am confident that Raghu will tide through. Due credit must be given to the government for opting for the most suitable candidate, rather than the selection process it has followed in the past.”

Anand Mahindra, chairman of Mahindra & Mahindra, also welcomed Rajan’s appointment. “It’s not just his impressive haul of alphabets: IIT (Indian Institute of Technology), IIMA (Indian Institute of Management, Ahmedabad), MIT (Massachusetts Institute of Technology). Also his experience and intellectual integrity. Raghu's made of the 'right stuff’,” Mahindra tweeted.