 "Raghuram Rajan")
Reserve Bank of India (RBI) Governor Raghuram Rajan was named The Banker magazine's Global and Asia-Pacific Central Bank Governor of the Year 2015, for stabilising the Indian rupee, initiating key reforms to attract much needed foreign capital in the country and reining in a runaway price appreciation.
The Banker is a prestigious monthly magazine of the Financial Times Group.
"India is the one global economy that arguably weathered the capital outflow and currency storms in emerging markets that were fuelled by uncertainty over the US Federal Reserve interest rate hike in 2015," the magazine said in its article on Rajan.
"At 7.4 per cent, India's 2015 third-quarter gross domestic product growth was the strongest among large economies; the rupee was one of the few stable emerging market currencies in 2015; and a clear financial market liberalisation path is attracting foreign investors and making India's financial markets more sophisticated," the magazine said.
The RBI governor has been named central bank governor of the year several times by other international magazines. In October 2014, Euromoney and in January 2015, Central Banking awarded him the best central banker award for his contribution in stabilising the Indian economy.
After he took over in September 2013, the first priority for the RBI governor was to stabilise the local currency, which hit a record low of 68.87 a dollar on August 28. Through a series of innovative measures, including attracting dollars from non-resident Indians by offering higher interest rate on deposits, Rajan stabilised the rupee. The local currency soon moved back below the psychological level of 60 a dollar.
Since then, the rupee has been trading within a narrow band with a depreciation bias. The stability in the currency not only assures foreign investors, vital for bridging India's current account deficit, but also helps companies plan better for the future.
The rupee depreciated less than five per cent in 2015 even as its Asian and other emerging markets peers bled on US rate hike concerns. When eventually the US Fed raised rates in mid-December, the rupee strengthened.
"The worst thing for a foreign investor is to have a whole lot of money coming into a market, the country not being able to handle it, and capital outflows leaving damage," The Banker magazine quoted Rajan.
It lauded Rajan's inflation targeting mandate and said the stability in prices ensured stability in markets.
"RBI's focus on taming inflation - India is set to hit its 6 per cent target in 2016 - was key to this performance and reinforced foreign investors' confidence in India's currency and rupee-denominated assets," the magazine said, quoting Rajan that a healthy yield in the domestic market wouldn't be healthy if inflation were high.
Rajan also opened up the local markets more for foreign investors. Last year, the central bank said it would denominate the bond investment limit for foreigners into rupee and would allow them to hold up to five per cent of the government's debt. This allowed investors to buy another Rs 1.2 lakh crore of government bonds by March 2018. Even as global risk-off saw outflow of funds from the emerging markets, foreign investors are fighting aggressively to reserve their rights to invest in government bonds. On Monday's debt limit auction, the investors were ready to pay a record 88 basis points to reserve their rights to invest in government bonds.
Steps like offshore rupee bonds, nicknamed Masala Bonds, and RBI's efforts in pushing green bonds were two other key achievements of Rajan, the magazine noted.
The magazine also noted Rajan's efforts in cleaning banks' balance sheets from bad debts and introducing 23 new sets of banks in 2015.
"We need to give banks power to deal with distressed debt… because India does not have an efficient bankruptcy or corporate resolution system," Rajan told the magazine.
