RBI governor warns against loosening fiscal deficits

He also reiterated that the central bank would not change its monetary policy strategy of targeting inflation

Reserve Bank of India Governor Raghuram Rajan warned about the danger of straying from a fiscal consolidation path saying the country already has high consolidated fiscal deficits, while recent power reforms would likely pressure finances of state governments.

Rajan, in a speech to a research body in New Delhi on Friday, also reiterated the central bank would not change its monetary policy strategy of targeting inflation, saying that doing so would hurt policy credibility.

Turning to lenders, Rajan said some banks needed to take more proactive action to recognise and resolve stressed loans in a timely fashion.

He also said the RBI is working with the government and banks to ensure that the stressed assets are "dealt with on a proactive basis" and that bank balance sheets reflect "a true and fair picture.