What Rajan pushed through
* Brought retail inflation down to half from where double digit in 2013
* Raised Foreign Currency Non-Resident (B) deposits to bolster foreign exchange reserves which are at record high. Even the rupee has been stable
* Transparent licensing of new universal and niche banks
* Cut interest rates by 150 basis points in the last 18 months
* Created structure that allows banks to recover payments from failed projects and forced banks to recognize their unacknowledged bad debts and provision under Asset Quality Review
* Rolled out the Universal Payment Interface for mobile to mobile payments
His unfinished agenda
* Monetary policy committee that will set policy framework is yet to be formed
* The bank clean up initiated under the Asset Quality Review, is still ongoing
* Navigate the country through the Federal Reserve’s interest hike cycle
Risks looming large
Brexit: On June 23, Britain will vote whether it wants to remain a part of the European Union, or leave. In the near term, an exit could will heighten global volatility, thereby impacting capital flows into emerging markets and could have a currency impact in the longer run. India has a big trading corridor with the EU.
FCNR bonds: A big risk could be the redemption of the Foreign Currency Non-Residential (FCNR) bonds issued by Rajan way back in October 2013 to protect the rupee from its worst slide in decades. The bonds are due for redemption and the currency market could face an impending outflow of $20 billion, which will put the Rupee under pressure.
Inflation risk: The latest policy statement highlights the upside risk to inflation; CPI has been rising due to a rise in food prices while core inflation also remains high.