WORDS OF WISDOM

Raghuram Rajan’s no-bullshit letter on how India’s central bank must get in shape

Quartz india
Quartz india

“My name is Raghuram Rajan and I do what I do.”

The governor of the Reserve Bank of India (RBI) isn’t one who minces his words. From speeches to press conferences, Rajan says it like it is—never mind the bluntness—and then backs it up with masterful execution. Not for nothing has The Financial Times Group’s The Banker magazine crowned Rajan the central banker of the year 2015.

True to form, on the last day of 2015, Rajan reached out to the RBI’s 17,000 employees. In a 2,500-word letter that brooked no bullshit, he called out the rot within the RBI, outlined his game plan for an overhaul, and warned employees against complacency.

In the past, Rajan, the former International Monetary Fund chief economist, has spoken his mind on everything—from India’s corrupt politicians to the ambiguous nature of its new GDP calculation method.

Quartz obtained a copy of Rajan’s letter to the RBI employees. Here are some excerpts:

Banking needs a clean up, the RBI is sweating bullets

I continue to be impressed by the dedication and capabilities of many of our staff—most recently, a team of regulators and supervisors that has worked tirelessly over the last few months, foregoing numerous holidays, on the very important task of cleaning up bank balance sheets.

Set your own house in order

Our regulations are not always very clear, our staff sometimes is neither well informed of our own regulations nor willing to help the customer, our responses are occasionally extraordinarily slow and bureaucratic (in the sense of hiding behind opaque rules or avoiding a decision rather than taking a sensible course of action). The imagery that comes to mind for critics is of a traditional unimaginative organization rather than a dynamic intelligent one.

We are working on streamlining our regulations in the new master documents, and trying to weed out old historical ones. We need to continue to improve the language in them so that every concerned person can understand without much effort the letter and spirit of what we want to say…

Unfortunately, our performance evaluation system did not help us identify who needed motivation and improvement, and how they could be helped to do so. Almost everyone was deemed excellent, ranging from those who gave their heart and soul for the Bank to those who shirked all responsibility or duty.

We need to change this, to reward those who perform and to help those who do not.

Go after the rich and famous wrong-doer

Not only are we accused of not having the administrative capacity of ferreting out wrong-doing, we do not punish the wrong-doer—unless he is small and weak. This belief feeds on itself. No one wants to go after the rich and well-connected wrong-doer, which means they get away with even more. If we are to have strong sustainable growth, this culture of impunity should stop. Importantly, this does not mean being against riches or business, as some would like to portray, but being against wrong-doing.

As the premier and most respected regulator in the country, we should take the lead.

We cannot be seen as a paper tiger. We are changing our attitude towards compliance, but this is work in progress.

Thank you Mr Rajan, from every journalist!

We also need to communicate better with the outside. This means that we should get ahead of the press, rather than be reactive. If we want to highlight achievements or regulations, we should prepare a press release to focus the press on what is important—with the release getting to the point quickly rather than starting with pages of irrelevant history. Press releases are best done at or before 5:30pm if we want them to show up in the papers the next day. Beyond that, reporters do not have the time to write copy for the next day, and the news is too old for the day after.

RBI will look outside for talent

But this also means we should be prepared to hire new capabilities into the organization. While we will look for home grown talent where possible, we need lateral entry in some areas. We will minimize these areas, but if we are as good as we think we are, we should be prepared to see some lateral entry wherever necessary—provided internal people have a fair chance to compete for the jobs. This is one area where I feel protectionist attitudes in the organization are strong and require to be debated.

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