Rexit: Surgeon leaves theatre before 'deep surgery'

MUMBAI: Raghuram Rajan has managed to check off most items on the `to do' list that he had drawn when he took charge. Two issues, however, continue to remain work in progress. First, the creation of a monetary policy framework recommended by deputy governor Urjit Patel's panel, and second, the cleansing of the bank balance sheets of bad loans which Rajan described as `deep surgery'.

Following his monetary policy announcement earlier this month, Rajan highlighted the unfinished agenda. “The continuing issues would be financial inclusion, achieving the last-mile in banking, setting up of the payments banks, the Unified Payments Interface, the receivables exchange and the Bharat Bill Payment system,“ he said. “One of the reasons we have been hesitant to liberalise significantly on the markets side is because of fears of externally induced volatility. As the world normalises, we will be able to liberalise significantly more at that point,“ said Rajan.



The governor in his announcement today hinted that he would have liked to leave at a time when there was more stability in the financial markets. “International developments also pose some risks in the short term,“ said Rajan while talking about pending tasks.

Rexit: Raghuram Rajan's letter to RBI staff

Many in the financial sector were also waiting for Rajan to elaborate on what he had in mind for `wholesale banks' and `custodian banks' ­ two new categories of differentiated bank licences that Rajan had promised to issue.

Markets have also been looking forward to see how banks manage to take forward the scheme for sustainable structuring of stressed assets (S4A) for resolution of bad loans of large projects announced by RBI this week.

Read: Catch all the reactions, views and news on Rexit here

While loan restructuring schemes have been announced in the past, what made this one different was the creation of an overseeing committee, set up by the Indian Banks Association, in consultation with the RBI. This panel was expected to go a long way in addressing bankers' fears of vigilance bodies questioning past decisions.

In his last monetary policy Rajan had announced he will tweak the new benchmark rate to ensure policy rate changes are passed on to borrowers.With over two months left in his current term, this is one issue the governor might address before hanging his boots.

The five principles of consumer service and protection the RBI had directed banks to adopt in one year is yet to be implemented and the deadline expires next month. In his letter to RBI staff listed out the targets achieved which include; stabilizing the rupee, creation of new institutions for bill payments and a trade receivable exchange.