Rise of digital transactions a blip: Rajan

Rise of digital transactions during the demonetization exercise was a blip on the radar, said former RBI governor Raghuram Rajan.

When asked about costs of demonetisation, Rajan said, “Post-demonetisation, electronic transaction volumes reverted back to earlier pre-demonetisation trends. I didn’t see any permanent upliftment arising as a result of the exercise,” he said, while launching his book “I do what I do” in the city on Tuesday.

The former RBI governor also said that some of his comments about the Indian economy were taken out of context. “When I said the Indian economy is a case of “the one-eyed man being king in the land of the blind,” I didn’t end it there. I also said the Indian economy has a lot of strengths.

I don’t follow social media, but I believe here was a huge furore over my comments. But every quarter after that comment our growth has been slowing. I’m not claiming to be prophetic,” said Rajan.

“It is just in our nature to be conservative; to under promise and over-achieve. It is this approach, which will give more confidence to the markets and investors.”

When asked about State Bank of India merger with associate banks and other possible mergers in future among the PSUs, Rajan said, “I would advocate mergers, when the two entities are in good financial health. When both banks are under stress, they need to focus more on cleaning up their balance sheets. A merger at this stage is not really conducive.”

On demonetisation, Rajan said he had to break his silence.“I had to clarify as there were committees which gave responses to Parliament and that did not accord with my recollection of the events and communications. I felt I owed it to Parliament to share my knowledge of the situation.”

On US-North Korea crisis, “In a world of strong men; or at least men who like to appear strong -I worry that room for adjustment is limited. I don’t think anyone is comfortable with the chief protagonists in this situation. But, the US democratic set-up is vast and I’d like to believe has sufficient checks and balances in place.“

The FCNR deposits scheme he introduced in 2013, “was a calculated risk, which paid off.”

On emerging currencies, Rajan said, “The concept of a distributed ledger is interesting. Many banks have started making use of such a system for financial transactions. It remains to be seen how they bring in wider adoption. As to bitcoins or the crypto-currency, there is no underlying asset justifying the valuations -it seems to be a frenzy of bidding up.”