Raghuram Rajan announced his exit as the Governor of the Reserve Bank of India (RBI) in a letter to the employees of the bank on Saturday. He declared that at the end of his term in September, he will return to academia and sent shockwaves through the country.
Deepak Parekh, Chairman of Housing Development Finance Corporation (HDFC) bank, spoke to Menaka Doshi of BloombergQuint, and called his exit a pity.
Read the excerpts from the interview.
What’s your initial reaction to Rajan’s exit?
It is a pity to lose the governor. I wonder what precipitated him to take this action. I am sure the government at the right time would have considered a further two-year extension.
What will be the impact of his exit on market and economy?
I don’t see.. Indian economy doesn’t depend on one individual. It will be a shock for the financial system. But people move; and we have accept it.
Who do you think will be the next RBI Governor?
The government has formed a committee and there are a number of names that are being talked about. I am sure the committee under the Chairmanship of Cabinet Secretary will decide a competent person to take over the position.
How will this impact the FII flow picture?
I don’t think it can happen. Sure there may be a blip when the announcement is made but we are a large market. As I said, it is a pity to lose such an excellent governor that we have had, but if he has decided on his own we cannot force anything on him. The government cannot force him to stay. It is his call. He has written a letter. He has mentioned it in RBI website. So he must not be interested in continuing. I don’t think it is going to make a big difference or that money will start going out because the governor has stepped out. I think that is an over exaggeration. Sure there will be a few concerns. Sure there will be a few editorial. But I think we can weather the storm.
How does Rajan’s exit reflect on India’s image internationally?
I think India is doing pretty well at this stage compared to other global economies and the growth rate good. There is interest in foreign investment; FDI is at an all-time high. Obviously losing a competent person like Raghu is a setback but as I said you cannot force someone on a job if he is not interest or if he has other commitment or if he wants to go back to academia as he [Rajan] said.
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