Dr Raghuram Rajan, governor of the Reserve Bank of India, has said he is stepping down when his three-year term ends in September and would return to academia. In a message to the staff of RBI put on the central bank’s website, Rajan told his colleagues to work to keep inflation low and to complete a cleanup of the large amount of bad debt weighing on India’s commercial banks. He said while he was open to seeing these developments through, on due reflection, and after consultation with the government, he has decided that he will be returning to academia. In his three-year stint at the central bank, Rajan, a former chief economist for the International Monetary Fund, has shifted the bank’s focus to curbing chronic inflation and presided over a period of strengthening growth and rising foreign exchange reserves and he has been successful at that. The announcement came days ahead of a vote on the U.K.’s European Union membership, an event that has already unsettled traders in India and abroad in recent weeks. Finance minister Arun Jaitley in a tweet immediately after Rajan’s announcement, said he appreciated Rajan’s work, and said a decision on his successor would be announced shortly. Rajan, a respected economist who taught at the University of Chicago, charted a more independent path for the central bank, in part through the force of his personality. Rajan, 53, had spent most of his career in the U.S., on the economics faculty of the University of Chicago and then as the first non-Western chief economist at the IMF. After returning to India in 2012 to serve as chief economic adviser to the finance ministry, he was named head of the RBI in 2013 during a period of global financial turbulence that provoked a sharp depreciation of the Indian rupee against the dollar. He initiated number of quick steps, including setting up a new facility encouraging commercial banks to ramp up deposits from overseas. Rajan, who is on leave from the University of Chicago, had faced criticism from certain members of the ruling party for his policies, especially his decisions on interest rate cuts.
