Pressure From Governments On Central Banks Nothing New, Says KKR’s Henry Kravis
KKR & Co. Co-Founder Henry Kravis said central banks have to be independent but there’s “nothing new about the government trying to jawbone them”.
“I laugh when I see India putting pressure on the Reserve Bank of India,” said Kravis during a media interaction in Mumbai. “We have exactly the same situation in the U.S.”
The autonomy of the central bank is crucial to foreign investors to deploy funds in a country, Kravis told BloombergQuint. Replying to a question if issues regarding institutional integrity or independence matter to foreign investors, he said, “If all of a sudden, they woke up and closed the spigots (credit controls), then yes.”
But he doesn’t see that happening here. “Today’s excitement is about the new RBI governor. Tomorrow it will be just news. The more fundamental issue here is that you have a government that is pro-business. And over the next five to six months there will be large amount of liquidity in the system due to elections,” Kravis said.
Urjit Patel resigned as the RBI governor about nine months before his term ended after a standoff with the government over the independence of the central bank. The government yesterday named former bureaucrat Shaktikanta Das as his successor for three years.
Here are the other highlights from the interaction with Kravis:
On India’s Credit Market
- Absence of a big bond market makes it tough for mid-sized and small companies to find capital in India.
- India's got areas that need improvement such as developing a credit market.
- Goods and services tax, bankruptcy law very positive steps taken.
- KKR has invested $7 billion in the Indian credit market.
India’s Piling Bad Loans
- If banks have bad loans, then they need to take the tough medicine and go to the bad bank solution.
- The drip test of putting good money after bad money never pays off.