Former Reserve Bank governor of India (RBI) Raghuram Rajan said that in retrospect it seemed that the central bank under his government could have handled liquidity in the banking system in some improved ways.
Rajan, however, added that, once the problem of liquidity shortage was rejected by the data, the central bank acted quickly to recoup the situation.
“There is a place where we did not recognize that liquidity was recovering in the system,” he said, adding that “once I saw it in the data, we made a decision very quickly to move towards neutrality, but that is something that should have seen before “.
He was answering a question if he wanted something different in retreat during his three-year term as governor of the RBI.
In an interview with PTI, he said he wished he acted a few months in advance to ease the liquidity situation.
“We were operating from a liquidity deficit system, so the RBI was still working, but it did not work well in this environment.
Having recognized that probably a little later than we would have recognized, we transferred it to a position of neutral liquidity. So this is where I think I can see it happening a few months earlier, “he said.
During the second half of 2015-16, there was a strict liquidity situation in the banking system and was addressed in the policy of April 2016. As a result, banks delayed the monetary policy to customers.
At one point, Bharatiya Janata MP MP Subramanian Swamy accused him of being “mentally not totally Indian” and that his inflationary monetary policy was sweltering growth.
When asked if he wanted to comment on Swamy’s comments against him, Rajan said, “No. I think some problems are not best commented on.
I think as soon as you start to solve these problems, you give it more weight than it deserves, “he said.
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