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New RBI Governor promises bold reforms, predictability in policy

Reserve Bank of India (RBI) Governor Raghuram Rajan Wednesday promised bold reforms and predictability in policy, saying the medium-term fundamentals of the Indian economy remain strong.

He said the economy was passing trough challenging times, but it should not be called a crisis. And the recent "gloom and doom" was overdone.

"We certainly do not need false optimism... but all the doom and gloom is probably overdone," Rajan said, addressing a media conference shortly after taking charge as the 23rd governor of the RBI.

"These are not easy times, and the economy faces challenges. At the same time, India is a fundamentally sound economy with a bright future," he said.

"Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that," he added.

Rajan said in his new role at the RBI, he would focus on "transparency and predictability" in the central bank's functioning.

"At a time when financial markets are volatile, and there is some domestic political uncertainty because of impending elections, the Reserve Bank of India should be a beacon of stability as to its objectives," he said.

"That is not to say we will never surprise markets with actions. A central bank should never say never, but the public should have a clear framework as to where we are going, and understand how our policy actions fit into that framework," Rajan said.

The new governor said the central bank will announce its next policy review Sep 20.

"I have postponed the originally set date a bit so that between now and then, I have enough time to consider all major developments in the required detail," he said.

When asked whether he would reverse the policy of his predecessor, Rajan said, "To know that you will have to wait till Sep 20."

On new banking licences, Rajan said these will be issued by January next year.

"We hope to announce new licences by January 2014," he said.

Rajan said a committee headed by former RBI Governor Bimal Jalan will screen licence applications and the decisions will be largely based on the recommendations of that committee.

As many as 26 firms, including top corporate houses like Tata Sons, L&T, Reliance Group, Adiya Birla Nuvo, Bajaj, Shriram and Religare, have sought banking licence. The last day for application was July 1.

Rajan said the RBI intended to make the banking licencing process "more frequent".

Rajan, an alumnus of the Indian Institute of Technology (IIT) in New Delhi, the Indian Institute of Management (IIM) at Ahmedabad and the Massachusetts Institute of Technology, said he hoped to do the "right thing" in the new role in spite of criticisms.

"Any entrant to the central bank governorship probably starts at the height of their popularity. Some of the actions I take will not be popular. The governorship of the central bank is not meant to win one votes or Facebook likes," he said.

"But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism," he added.