The Exit of India’s Banking Watchdog

Royal Bank of India’s (RBI) governor, Raghuram Rajan, has been let go at a precarious time in India’s economic development. Before Rajan could make any headway in his initiative on pushing lenders to clean up their act, his term ended and it was not renewed. Rajan had rejected the idea of the central bank pressing its own balance sheet into rescue efforts and rightly so, but the government could still help itself to the monetary authority’s equity and use the funds to bail out troubled lenders. It is estimated that it will take RBI about $59 billion of its capital for a bank clean up. This could have a major impact on India’s economy if not handled well.

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