RBI chief Raghuram Rajan keeps repo rate unchanged at 6.5%

Raghuram Rajan, RBI Governor
Raghuram Rajan, RBI Governor

The Reserve Bank of India (RBI) kept its policy interest rate unchanged at a five-year low of 6.50 percent on 7 June, while indicating the prospect of another slash later this year.

After unveiling the Second Bi-monthly Policy Statement for the year 2016-17, RBI Governor Raghuram Rajan broke his silence on the speculation rife within the media over his re-appointment and said the decision will be taken only after discussion with the Centre.

He said, “I am intrigued by the letters I am supposed to have written. Anyway, it would be cruel of me to spoil the fun the media is having on my extension.”

Last week, a news report said Rajan, 53, had written to PM Narendra Modi saying he would prefer going back to the US as he doesn’t want to remain with the RBI. His term expires in September.

Government sources said the decision (Rajan’s re-appointment) rests with the PM and he has not said anything yet. Modi recently didn’t indicate his leaning, telling the Wall Street Journal that Rajan’s reappointment would come up in a few months.

According to Reuters, Rajan will be retained as RBI chief, should he wish to stay on. “He will get another term and he will accept it,” said Arvind Mayaram, former Finance Secretary who Rajan worked closely with. “Rajan knows the pros and cons of India’s political economy.”

Some politicians and Finance Ministry officials were opposed to him for his reluctance to cut interest rates to stimulate growth.

Rajan was recently in the firing line of Rajya Sabha MP Subramanian Swamy who went to the extent of calling him ‘mentally not fully-Indian’. Levelling serious allegations against him, Swamy had written to the PM seeking that Rajan’s services be terminated.