TIL Desk/Business/New Delhi/ Former RBI Governor Raghuram Rajan has cautioned that transfer of excess reserve to the government may bring down rating of the central bank. Rating downgrade of the RBI from ‘AAA’ would make borrowing costlier for the central bank and will have implication for the entire economy.
Asked if the transfer of excess reserve by the RBI to the government could lead to downgrade of the rating, Rajan said: “It could…it depends on how much.It may not be an issue now…may be an issue at some point of time. That’s one concern”. This is something both the government and RBI should discuss before reaching some conclusion, he told in an interview.
“We are ‘Baa’ country. We are barely investment grade. Sometime, we need to undertake international transactions which require really high credit rating.For example swap we did in 2013. So, for that we need unimpeachable balance sheet. Why don’t we keep the RBI as an unimpeachable balance sheet with AAA credit rating that requires certain amount of equity,” he said.
