Mumbai: Reserve Bank of India (RBI) governor Raghuram Rajan will return to academia after his term ends in September. In a message sent to the RBI staff, put out on the central bank’s website, Rajan said that he is proud of what has been accomplished over the last three years at the RBI and recognizes that some of what has been initiated remains work in progress. Nevertheless, Rajan said he had decided to return to academics.

“....on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country when needed," said Rajan.

“I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished..." he wrote.

Rajan took over as the governor in September 2013 when the economy was facing high inflation, battling a high current account deficit and the currency had plummeted to record lows. This combination had put India in the infamous “fragile five" grouping of vulnerable economies.

On 4 September, when Rajan took over as the RBI governor, he laid down several priorities to put the economy back on track. Among these was a new monetary policy framework that focused on bringing down inflation, raising of Foreign Currency Non-Resident (B) deposits to bolster foreign exchange reserves, transparent licensing of new universal and niche banks and developing a large loan database to resolve stress in the banking sector.

“Today, I feel proud that we at the Reserve Bank have delivered on all these proposals," said Rajan.

He noted that the new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time. Consumer Inflation which was in double digits when Rajan took over was at 5.76% in May 2016. The RBI intends to bring it down to 5% by March 2017.

“We have also been able to cut interest rates by 150 basis points after raising them initially," said Rajan in his missive to the central bank staff while adding that the currency has also stabilised and foreign exchange reserves of over $360 billion are at a record high.

“Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five," said Rajan.

The banking sector has been another point of focus for Rajan, who, last year initiated a sector wide asset quality review. The review forced banks to clean up their balance sheets and led to a surge in reported bad loans to over ₹ 5.8 trillion across the country’s 40 listed banks. Rajan acknowledged that the process is still underway. During his tenure, the RBI has also licensed differentiated banks including payment banks and small finance banks, apart from starting the process of putting universal bank licences on tap.

Concluding his message, Rajan highlighted some of the issues that the economy and markets would need to tackle in the coming weeks and months.

“Colleagues, we have worked with the government over the last three years to create a platform of macroeconomic and institutional stability. I am sure the work we have done will enable us to ride out imminent sources of market volatility like the threat of Brexit. We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event," he said.

“I am confident my successor will take us to new heights with your help. I will still be working with you for the next couple of months, but let me thank all of you in the RBI family in advance for your dedicated work and unflinching support. It has been a fantastic journey together!"

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