Government, RBI Have Respectful Relationship: Raghuram Rajan

New Delhi: Reserve Bank of India Governor Raghuram Rajan on Friday said there is a "respectful relationship" between the central bank and the government, though the onus of taking monetary policy decision rests with the RBI.

"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.

Mr 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 a rate cut to boost growth, the RBI takes a conservative view lest the rate cut should fuel inflation.

Mr 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 (NPAs) in the banking sector, Mr Rajan said, "There are challenges... we got to roll up our sleeves and work at them. But I don't think it's a cause of distress."

He added that there is a need for better global safety nets "without the stigma attached to going" to the International Monetary Fund (IMF) and suggested inter-central bank swaps to deal with the global economic situation.

Referring to the point in time when the US was in a way in charge of global governance, Mr Rajan said that is a vacuum in global governance and there is no consensus on how to govern global economy.