Raghuram Rajan first Indian to be VC of Bank for International Settlements
MUMBAI: Reserve Bank of India governor Raghuram Rajan has become the first Indian central banker to be appointed as vice-chairman of the Bank for International Settlements (BIS) -the bank for central banks. The appointment is expected to give stronger voice to Rajan, who has been repeatedly calling for more coordination among central banks in monetary policy.
Rajan was elected to the number two position for a period of three years from November 10, 2015 at a meeting of the BIS board. Rajan had joined the BIS board in December 2013. As vice-chairman, Rajan will work with BIS chairman Jens Weid mann, who is also president of Germany’s Bundesbank.
Rajan has for long been a critic of central banks in the develo ped world opening up the monetary sluice gates and flooding emerging markets with capital flows. Rajan once even had a face-off with former chairman of the Federal Reserve Ben Bernanke when he said that powerful central banks should pay attention to how their policies affect other countries.
On Tuesday , speaking at Frankfurt, Rajan forecast volatility when the Federal Reserve raises rates. However, he said that the consequences of the inaction by the Fed would be even more severe.”When it happens, there will be volatility . I worry more about the consequences of staying in the ultra accommodative … world. I think there will be volatility, but I think we have to bear it,” he said.
Prior to Rajan, former RBI governor Y V Reddy had a key role as chairman of the BIS Asian Consultative Council which comprised all governors of BIS member central banks in the Asia-Pacific region.
As an organization of central banks, BIS seeks to bring more predictability and transparency in monetary policy . The framework for regulations that prescribe capital requirement for banks is also prescribed by the BIS. The capital norms are known as Basel norms, named after the location of the BIS headquarters where they were framed.