Free diesel prices, reform bank appointment system: RBI chief Rajan

The governor of the Reserve Bank of India, Raghuram Rajan, today urged the government to speed up the deregulation of diesel prices.

''It's the right time for the government de-regulate diesel prices in the wake of falling global crude oil prices.''

The RBI governor said the falling inflation is consistent with RBI forecast. India's macroeconomic indicators are improving and inflation has been coming down, but Asia's third-largest economy needs investment growth to pick up, he added.

Friday's industrial output and inflation data suggested that recovery was "uneven", he said.

Output from mines, utilities and factories grew by a much slower than expected 0.5 per cent year-on-year, government data showed on Friday, down from June's revised 3.9 per cent rise.

Retail inflation, which the central bank uses to decide key lending rates, edged down marginally to 7.8 per cent in August from 7.96 per cent a month earlier.

Strengthen banking
In a strong speech at a banking conclave in Mumbai, he also underlined the need to change appointment system for public sector bank managers to make it more transparent.

The central bank is in talks with the government to improve governance in public sector banks, Dr Rajan said, adding significantly that the problems that have emerged in recent bank scandals were due to outsourced project evaluation.

''Banking must become more engaged and informed,'' he added.

Rajan said the Prime Minister Narendra Modi's 'Jan Dhan' scheme to extend banking facilities to the poor is a good, but warned that its target should be ''universal reach and not speed and numbers''.

The caveat is significant, as PSU banks have been virtually urging clients to open a free 'Jan Dhan' account with insurance added on, irrespective of whether they already hold a bank account or not.