Tuesday, 28 June 2016

Next RBI Chief Faces Balancing act on bank Clean-up

India's next central bank chief faces a tricky task completing a bank clean-up spearheaded by outgoing Governor Raghuram Rajan, while coping with the demands of a government that is desperate to see a revival in lending to businesses. 

Rajan was feted by investors for his efforts to deal with a mountain of bad debt clogging India's financial system, but his critics say an excessive focus on asset quality has scared banks out of lending and is partly to blame for credit growth slumping to a near two-decade low. 

"The bad thing is that funding by banks has almost stopped. There's too much negativity. The government may not want it to precipitate more," said a senior banker, adding it would be hard for the new governor to push balance sheet reform much further. Senior officials have told Reuters the government has narrowed down to four its list of candidates to replace Rajan, who stunned markets when he announced on June 18 he would not seek reappointment in September. 

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