TIL Desk/Business/Mumbai/ Former RBI Governor Raghuram Rajan on Thursday said the central bank has been expanding its balance sheet and buying government debt on the back of excess liquidity amid the economic slowdown but cautioned that this comes at a cost and cannot be a lasting solution.
He said central banks in many emerging markets are resorting to such strategies and disagreed with votaries of the “modern monetary theory” who support this, making it clear that there are no free lunches.”The RBI has been expanding its balance sheet and it has been buying government debt.
“But effectively, in that process, what it is doing is borrowing from the banks at the reverse repo rate and lending on to the government,” Rajan said speaking at a conference organised by Singaporean lender DBS Bank.
