Raghuram Rajan Quotes

The RBI is interacting with the banks every day.

The Central Bank should have a permanent window for discounting high quality securities where banks could go and discount these. It gives peace of mind to the banks. In the absence of this facility, what banks tend to do is to keep a liquidity cushion for emergency requirements. This is a very expensive way of managing liquidity.

Banking should be boring..

Over time, low rates can put pressure on the business models of financial institutions.

To be sure, the provision of liquidity alone can by no means solve the problems of credit risk and credit losses; but it can reduce liquidity premiums, help restore the confidence of investors, and thus promote stability.

I do believe that banks are special - they are very leveraged institutions by nature; therefore, it's even more critical to ensure that the governance and the process of running a banking company are well-organised, managed and regulated.

Central banks don't have divine wisdom. They try to do the best analysis they can and must be prepared to stand or fall by the quality of that analysis.

A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.

Leverage is great when it works, and when it doesn't work, it creates a lot of issues. So I think if you limit the amount of leverage that people can borrow, or that banks can borrow, I think you'll find that you'll have a lot less issues going forward.

The Federal Reserve has never suffered any losses in the course of its normal lending to banks and, now, to primary dealers.

You can't fuel real economic growth with indiscriminate credit. You can only fuel it with well-allocated, long-term investment.

Talking about Korea, it has pretty high capital ratios at banks and maintains a good credit rating.

One way to ease liquidity for banks is that the government can buy all highly rated securities held by the banks. Every single bank in the U.A.E. has some sovereign debts in their portfolios. I am not asking them to buy any junk bonds, rather the high quality U.A.E. government debt.

You cannot take bank interest rates very sharply down: you will lose your deposit franchise.

If you think about it: a big bank in any country, what is it? Really, as an investment, it's a warrant on economy.

We have to make sure that the banks pay every nickel of loan losses that they create, but we don't want to hold them responsible for withdrawals if we want the economy to recover.

The basic theory of bank regulation is that, left to their own devices, bankers would make banks too risky, so regulators and supervisors are there to make banks more boring. A bank is, roughly, a big pot of assets bought with depositors’ money; the bank owns essentially an option on those assets. If the assets go up, the bank gets a highly leveraged return; if the assets go down, the losses are largely the depositors’ (or the taxpayers’) problem. “Heads I win, tails you lose” … So banks have incentives to buy high-risk, high-return assets with as much leverage as possible, and risk-based capital regulation and prudential bank supervision counteract those incentives. The bankers — who own stock in their banks and get paid bonuses for making money — push for more risk and more volatility, and the bank supervisors push back.

Let us remember that postponement of tapering is only that-a postponementLet's not lose the chance, the warning that we have been given, because this is going to come back and what we need to do is put our house in order before.

It's not that the regulator doesn't want the banking industry to grow. The growth of the industry has always been in relation to the GDP (gross domestic product) growth.

The Fed cannot levitate markets forever. And when they finally do move, I think we have to be prepared for a considerable amount of turbulence.

There is no risk-free path for monetary policy.

Divestment measures would improve overall banking sector health.

There is a belief, at least on the part of the American people, that they can borrow money forever without consequence.

What is very negative is that in every country in Europe, the largest owner of that country's sovereign bonds are that country's banks.

Yes, we can pay the interest on the debt. We can renew the $500 billion worth of bonds that are coming due. We can mail out our Social Security checks. We can make sure those Medicare claims are honored. We can pay our military. We can protect our veterans. But when you get beyond that, the soup gets a little thin.