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No free lunches: Rajan says monetisation by RBI has a cost, not everlasting

He said central banks in many emerging markets are resorting to such strategies and disagreed with votaries of the "modern monetary theory" who support this

Raghuram Rajan put in place a series of actions to impose greater financial discipline on banks and forced them to recognize stressed assets

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Rajan said there are limits to monetisation and the process can go long only for a limited period of time

3 min read Last Updated : Jul 23 2020 | 9:44 PM IST

Former RBI Governor Raghuram Rajan on Thursday said the central bank has been expanding its balance sheet and buying government debt on the back of excess liquidity amid the economic slowdown but cautioned that this comes at a cost and cannot be a lasting solution.

He said central banks in many emerging markets are resorting to such strategies and disagreed with votaries of the "modern monetary theory" who support this, making it clear that there are no free lunches.

"The RBI has been expanding its balance sheet and it has been buying government debt. But effectively, in that process, what it is

Topics : Raghuram Rajan RBI

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