Rajan said the government would look to reduce investments by banks in government bonds "in a calibrated manner". He added the RBI would work together with the government and the market regulator to steadily liberalise markets.

Rajan, 50, an economics professor who also served as chief economist at the International Monetary Fund, took charge from D Subbarao.

The duo shook hands warmly and hugged after Rajan signed papers taking over as the 23rd Governor of the Central Bank.
    
"Ten minutes ago, I handed over charge to Raghuram Rajan. The country could not have asked for a more capable person to lead the RBI in these most difficult times," Subbarao said after stepping out of Mint Road.

Rajan, who famously predicted the 2008 global financial crisis, officially becomes the 23rd Governor of the RBI after signing an oath of secrecy on Wednesday. But he will not take charge operationally until Thursday.

What New RBI Governor Said?
•    First policy statement to come out on September 20
•    Besides inflation control, RBI mandate is inclusive growth and development and financial stability
•    Banks will not be required to approach RBI for opening branches
•    New bank licences to be given out around January 2014
•    Bimal Jalan to chair committee that will screen applications for bank licences
•    RBI actions will be at measured pace given the current market turmoil
•    RBI will push for more settlements in rupee
•    Monetary stability prime role of RBI
•    RBI to issue inflationary index saving certificates
•    Positive developments like good monsoon will help going forward
•    Good reason to believe medium rung future of India strong; gloom and doom is overdone
•    We have to be careful of not injecting more uncertainty than economy can handle
•    We have very stable, solid economy; we are going through challenging times
•    S&P statement of one-third chance of India rating downgrade nothing new, will not read too much into it.

               
Aware markets are scrutinizing everything he says for clues about his intentions, Rajan has been circumspect in public, revealing little about whether he will pursue the policies of his predecessor, Duvvuri Subbarao, or change tack.

Hope Rajan will cut rates, improve credit flow: India Inc

India Inc said it looked forward to the new RBI Governor Raghuram Rajan initiating cut in interest rates and improving credit flow to crucial sectors like infrastructure to put economy back on high-growth path.
    
Assocham President Rana Kapoor:
We are sure that he would be able to tackle the current state of difficult times in the economy. We are sure, that as soon as the situation so allows, reversing interest rates downward along with taming inflation would be Dr Rajan's top priorities.
    
Ficci Secretary General Didar Singh:
There is an immediate need to manage on several fronts. Reviving growth, giving an impetus to investments, arresting the downslide in the rupee value and keeping inflation under check are the areas that merit attention.
    
President of PHD Chamber of Commerce and Industry Suman Jyoti Khaitan: He (Rajan) should immediately take steps to kick-start the economy and restore investor confidence. One is to reduce interest rates and also improve the flow of credit to infrastructure sector.
    
CII Director General Chandrajit Banerjee: He (Rajan) is assuming office at one of the most difficult times in our recent economic history. CII is confident that as the new Governor, Dr Rajan would be able to deal with the complexities that the RBI is faced with. We hope that given Rajan's extensive experience and knowledge of the financial markets, we could see some innovative moves by the central bank as well as greater coordination on policy with the Government to ease the situation and bring confidence back in the economy.

President of Federation of Indian Export Organisation (FIEO) M Rafeeque Ahmed:
We are really fortunate to have a leading economist like Raghuram Rajan as the RBI Governor. He (Rajan) takes over at a time when the economy is in the midst of a difficult situation.
 
Top bankers repose confidence in Rajan, wish him the best

Top bankers exuded confidence that Rajan  has the intellectual prowess to wade through the present difficulties facing the economy and wished him all success for the stint at Mint Road.
    
"Dr Rajan has too much of intellectual reputation and we wish him all the best," chairman of country's largest lender State Bank of India Pratip Chaudhuri told reporters.
    
Alluding to Rajan's impeccable record--he famously predicted the 2008 financial crisis--Kotak Mahindra Bank vice-chairman Uday Kotak said, "It is good to have a governor with this background to lead the country."

Bank of Baroda chairman and managing director SS Mundhra said Rajan is experienced, qualified and competent to lead the economic thinking in the country during these trying times.
    
It can be noted that Rajan assumes charge amidst extremely difficult pressures on the external front which are resulting in the rupee getting battered to become one of the worst hit currencies globally.



MF industry hopes of deepening of corp bond market under Rajan
    
Mutual Fund managers expect the Reserve Bank to have a fresh approach to the monetary policy under the new governor and hope that corporate bond market would deepen under his leadership.
     
"We expect that the corporate bond market would be deepened under the new governor. During (the term of) Governor Subbarao, repo trade was introduced in the corporate bond market but the market is not deep. We hope that this will be deepened," Head of Fixed Income of Sundaram Mutual, Dwijendra Srivastava said.
     
He also said that as in the government securities market where trade is settled electronically, CP and CD market should have similar facility, to bring transparency.
 
Fund managers expect the new governor to do a balancing act between growth and inflation. "We hope that he will bring a different approach to the monetary policy and also do a balancing act between growth and inflation," Chief Executive of Association of Mutual Funds in India, H N Sinor said.

"Market appears to be cautious....If he is able to show growth, market will respond," Chief Executive Officer of LIC Nomura Mutual Fund Nilesh Sathe said.


    
Another fund manager from a large fund house said that the new governor should bring back growth as its top priority. "Reserve Bank should create a yield curve which is rational. You can't have negative returns in the fixed income market and expect retail investors to come in," the fund manager said, wishing not to be named. He also said the onus of deepening the corporate  bond market lies with the Reserve Bank, which should create an enabling environment.

Rupee recovers, stocks surge


Indian markets staged a smart pullback with the rupee rebounding 56 paise to 67.07 and the Sensex surging 333 points on apparent hopes pegged on Raghuram Rajan taking over as RBI Governor.
    
The BSE benchmark Sensex opened higher and moved in a range of 18,188.43 to 18,612.60 before settling at 18,567.55, a rise of 332.89 points or 1.83 percent. Gains were led by metal, healthcare and auto stocks. Investors became richer by around Rs 1 lakh crore as overall 1,347 stocks rose on BSE.

On the currency side, suspected intervention by the Central Bank helped the rupee retreat from near record lows and end at 67.07 against the dollar, up 56 paise. The rupee had lost 193 paise in previous two sessions.

The strong show in the markets was a positive sign for Rajan, who took over at the helm of the RBI, which has been combating a currency slump, high inflation, low growth and a widening current account deficit.
    
The RBI on Wednesday eased external commercial borrowing norms to allow companies to use overseas loans for general corporate purposes. It also clarified that the August 14 curbs were not intended to restrict bona fide overseas investments.
    
Meanwhile, barring New Delhi, gold prices mostly dropped in major metros. The precious metal fell Rs 710 in Kolkata, Rs 570 in Mumbai and Rs 465 in Chennai. In the national capital, gold gained Rs 660 to end at Rs 32,200.

JPN/Agencies

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