Govt, RBI have 'respectful relationship': Rajan

Reserve Bank Governor Raghuram Rajan today said there is a "respectful relationship" between the RBI and the government though the onus of taking monetary policy decision rests with the central bank. "Government and the RBI have a respectful relationship. We are obviously a part of the overall government structure.

But they are also very respectful when it comes to monetary policy decision, the decisions stays with Reserve Bank. Reserve Bank makes the decision," he said while delivering the IHC annual lecture here. Rajan further said that he had agreed with the suggestions of the government a number of times while opting to cut interest rates.

"I have agreed a number of times with the suggestions. That is why we had 125 basis points of rate cuts so far (in 2015)," he said. While the Finance Ministry has continued to press for rate cut to boost growth, RBI takes a conservative view lest the rate cut should fuel inflation.

Rajan also said reduction in inflation would help stabilise the rupee. "Sustained rupee rate can be achieved by bringing down inflation, " he said. On the rising Non Performance Assets (NPA) in the banking sector, Rajan said, "There are challenges...