Indian bank chief in surprise resignation

  • 19/06/2016
Raghuram Rajan (AAP)
Raghuram Rajan (AAP)

India's central bank governor Raghuram Rajan, who has faced criticism from members of the ruling party for keeping interest rates too high, has stunned officials by announcing he would step down when his term ends on September 4.

Rajan, a former chief economist at the IMF, has been popular with foreign investors for his efforts to tackle inflation, and won praise for helping rescue India from its worst currency crisis in more than two decades after taking the helm in September 2013.

But in a nearly 900-world letter to staff he said he planned to return to academia, even as he noted two of his actions - the creation of a monetary policy committee to set interest rates and the clean-up of the banking sector - remained unfinished.

"While I was open to seeing these developments through, 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," Rajan said in the letter released by the Reserve Bank of India (RBI).

"I will, of course, always be available to serve my country when needed."

Rajan, who is on leave from the University of Chicago, was appointed RBI Governor by the previous Congress government, where he had served as chief economic adviser to the finance minister for about a year before taking the helm of the central bank.

"The government appreciates the good work done by him and respects his decision. A decision on his successor would be announced shortly," Finance Minister Arun Jaitley said in a tweet on Saturday.

Although feted by investors, Rajan had faced strident criticism from right-wing members of Prime Minister Narendra Modi's Bharatiya Janata Party, including parliament member Subramanian Swamy, who has waged a public campaign against his economic policies.

Rajan had also veered into topics -- such as intolerance in society -- that have angered some BJP members, as did recent comments that were seen by some government officials as playing down their economic accomplishments.