Raghuram Rajan’s journey at Mint Road

We take a look at some of the key moments and decisions during his three-year term.

June 18, 2016 07:52 pm | Updated November 17, 2021 05:08 am IST

RBI Governor Raghuram Rajan on Saturday said that he would not be returning for a second term of office. We take a look at some of the key moments and decisions during his three-year term:

Sept 4, 2013: Appointed for three years as 23rd governor of RBI. “The country could not have asked for a more capable person to lead the RBI in these most difficult times,” his predecessor Dr.Subbarao said upon handing over the charge to Mr. Rajan. >In a seven-page statement, Mr. Rajan declared that he would “preserve the value of the currency”, and said that India is a fundamentally sound economy with a bright future.

Outgoing Reserve Bank of India Governor D. Subbarao greets Raghuram Rajan after handing over charge on Wednesday. Photo: Vivek Bendre

Oct 29, 2013: Surprises market by hiking repo rate by 25 bps to 7.75%, in order to put a check on rising inflation. “With the more recent upturn of inflation and with inflation expectations remaining elevated… it is important to break the spiral of rising price pressures,” Raghuram Rajan said. Retail inflation was pegged to remain over 9%.

Jan 28, 2014: Stating that >inflation is a tax that is grossly inequitable , falling hardest on the very poor, Rajan hiked the repo rates further by 25 bps to 8%.

April 2, 2014: >Grants universal bank licences to IDFC Ltd & Bandhan Financial Services. The RBI originally received 27 applications in July 2013, but Tata Sons and Videocon Group withdrew from the race, leaving 25 contenders. Bandhan Financial Services Private, the first micro-finance firm to get a bank licence, said this was a recognition to the micro-finance sector and its hard work to reach un-banked areas and provide financial services.

Nov 2, 2014: Announces final guidelines for differentiated bank licence.

Jan 15, 2015: Cuts the repo rate by 25 bps for the first time after taking charge.

Feb 28, 2015: Enters into an agreement with government for a >monetary policy framework with inflation targeting as objective. This Framework clearly stated the objective of keeping inflation below 6%. In a document dated February 20,2015, the two sides set a consumer inflation target of 4 per cent, with a band of plus or minus 2 percentage points, for the financial year ending in March 2017.

March 4, 2015: Delivers another 25 bps repo rate cut to 7.25%

August 19, 2015:>Grants in-principle licence to 11 entities, including Reliance Industries, Aditya Birla Nuvo, Vodafone and Airtel, to start payments banks. The other entities which have been given ‘in-principle’ approval are Department of Posts, Cholamandalam Distribution Services, Tech Mahindra, National Securities Depository Limited (NSDL), Fino PayTech, Sun Pharma’s Dilip Shantilal Shanghvi and PayTM’s Vijay Shekhar Sharma. Payment banks allow mobile firms, supermarket chains, and others to cater to individuals and small businesses.

The central bank said that it selected the applicants after three different committees contributed to the final decision, backed by a detailed case study of each applicant.

September 16, 2015:>Grants in-principle licence to 10 entities to start small finance banks. The RBI said that it intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is virtually ‘on tap,’ going forward.

Sept 29, 2015: Shifts focus to growth, >cuts repo rate by 25 bps to 6.75%. In saying that “more domestic demand is needed to substitute for weakening global demand in order that the domestic investment cycle picks up”, Rajan underlined the fact that local demand and investment hold the key to sustaining an incipient recovery.

April 5, 2016:>Cuts repo rate by 25 bps to 6.5%. Introduces a host of measures to smoothen liquidity supply so that banks can lend to the productive sectors and indicated accommodative stance going ahead. Rajan welcomed the government move to amend the RBI Act to create a monetary policy committee, saying it will further strengthen the policy's credibility.

June 18, 2016: Says >not to continue as RBI governor after present terms ends on 4 September, 2016.

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