Raghuram Rajan, who will be demitting office as the Reserve Bank of India (RBI) Governor in less than two months, today said that the rupee level currently is pretty reasonable and any attempt to devalue it may lead to a surge in inflationary pressures and offset any benefits.
Addressing the national seminar on 'Equity, Access and Inclusion-Transforming Rural India through Financial Inclusion' here, Rajan said the central bank is trying to make it attractive for institutions to offer banking services to everyone, as it is necessary for sustainable growth.
The Governor also ruled out another interest rate cut in the upcoming monetary policy review on August 9, citing the firming-up of inflation.
He said that the CPI June numbers last week were 5.8 percent and the policy rate is 6.5 percent.
"Somehow inflation is very low for us to be seen as behind the curve. I don't pay attention to this kind of dialogue," added Rajan.
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Commenting on the progress of monsoons and favorable base effect in second half of FY17, the Governor added that RBI is near achieving its target of 5 percent inflation by end-March 2017.
Further, the expectation of additional monetary easing by major central banks amid increasing global uncertainty may provide additional policy leeway.
Rajan also ruled out any blanket guarantee to bankers from scrutiny by central investigative agencies for their decisions. At the same time, he said, commercial decisions taken in the right spirit and with the information available should be respected.
"Bankers have expressed some concern that they should not be held liable for actions that are taken in the full spirit of what is needed; and I think everyone has respected that need that where they take actions based on appropriate due diligence, on a proper application of mind given the situation, they should have some freedom to take actions, because otherwise, we will not get the kind of clean-up, the kind of putting over-leveraged projects back on track that the economy needs," he said.
