MUMBAI: In his swansong monetary policy, RBI Governor Raghuram Rajan has lambasted banks for passing on rate-cut benefits “only modestly” to borrowers on one pretext or other – the latest being dollar deposit outflows – even as he decided to stay put on inflation-control as priority.

The outgoing Governor also sought to make light of his critics, saying he also gets ‘anonymous thank you notes’ even while on plane and described his tenure at RBI as “fantastic”.

Rajan, who has decided to return to academia after his three-year tenure ends on September 4, said today’s policy review was likely to be the last one to be Governor-led, as a the exercise would be conducted by new six-member panel going forward. Complaining that banks have passed benefits only in a “modest” measure to borrowers, Rajan said a pick-up in credit demand, which would follow the economic recovery and competition for corporate loans after the ongoing balance sheet clean-up by the state-run lenders, will ensure softer lending rates. Rajan charged bankers with inventing newer excuse for delaying the rate cuts and pointed out that concerns over the FCNR(B) redemptions, despite RBI’s public assurance of making it non-disruptive, are the latest one in a series. “Earlier, some bankers said it was lack of liquidity that was holding the rates high. Now, I hear from some that it is the fear of FCNR redemptions that is making them reluctant to cut rates. I have a suspicion that some new concern will crop up once FCNR redemptions are behind us,” Rajan said. “We would be happier if there was more transmission,” he said, adding that the RBI is sensitive to “some of the difficulties” which banks have to face following the balance sheet clean-up. With the system staring at an outflow of USD 26 billion in foreign currency deposits (FCNR-B), raised when the rupee was bleeding in September-November period of 2013 following the ‘taper tantrums’ in the summer of that year, Rajan sought to assuage concerns of the banking system saying RBI will ensure there is no market disruption because of it. Rajan also exuded confidence that inflation target of 5 per cent for March 2017 will be met. “We are within the inflation band given to us by the government and expect to be around 5 per cent CPI inflation target by March 2017, absent unforseen eventualities… Broadly, we are comfortable that we should be reaching the 5 per cent target,” Rajan told reporters after announcing the third bi-monthly review of the monetary policy, 2016-17.—PTI