Uncertainty over US growth probably forced Fed to hold rates: Raghuram Rajan

Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said that worries over global economy coupled with probably uncertainty about the US growth forced US Federal Reserve to hold the key interest rates.

"Limping global growth coupled with uncertainty about US growth probably compelled US Fed to stay on hold," Rajan said after the Fed Chair Janet Yellen announced no increase in the rates.

On the US central bank's decision to delay the muchawaited rate hike, Rajan said, "We have noted the Fed decisionof yesterday. I presume it reflects their desire to wait formore information before they take a final view. Clearly, thus far the markets seem to have reactedsomewhat benignly certainly toward us. What we will have to dois continue what we have been doing which was anyways theintention regardless of the Fed decision."

Rajan said, "The key for sustainable growth is low inflation not just today but also in future."

On situation in India, he said the Consumer Price Index(CPI) based retail inflation at 3.6 per cent currently was"largely due to base effect" excluding which it would bearound 5.5 per cent.

"The differential between WPI (Wholesale Price Index) andCPI is a source of problems. We have to be careful whilepursuing growth and have to make it sustainable. The key is tokeep inflation low not just today, but also in the future,"Rajan said.

Speaking on payments banks and small finance banks he said that going forward all banking licensing will be on-tap.

Expressing disappointment over use of Aadhaar being curbed, he said that it can help regulators contain over-borrowing.

Rajan welcomeed the government move to bring in bankruptcy code to tackle rising NPAs adding that the banks have to clean their books.

(With agency inputs)