Raghuram Rajan cautions investors over governance and growth of Bitcoin

India’s central bank governor Raghuram Rajan on Wednesday raised concerns over the governance and growth of virtual currency Bitcoin, urging investors to stay cautious.

The Reserve Bank of India released a caution note a few weeks back but has stopped short of issuing norms for the Bitcoin market. China has become the biggest Bitcoin market in recent months but concerns have been raised globally over regulation and scope for abuse of the system.

“As a currency, I do worry a little bit when the underlying fluctuates tremendously,” Rajan told a packed audience of IT industry executives at the start of the National Association of Software and Services Companies (Nasscom) three-day conference in Mumbai.

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[caption id=“attachment_51825” align=“alignleft” width=“380”]  RBI Governor Raghuram Rajan. PTI[/caption]

“One of the values of a currency is stability and the extent a currency is the target of speculation as opposed to primarily a means of exchange, it does create some concerns for the user,” Rajan said.

“In that sense, it has a more diminished value as a means of exchange than something more stable.”

Rajan urged the country’s flagship IT outsourcing sector to help strengthen financial inclusion in India, through product innovation, payment solutions and improving consumer literacy.

“Technology with its capacity to reduce transaction costs is key to enabling large growing, local transactions that is at the heart of financial inclusion. Our banks have improved tremendously, but they need the benefit of technology to reach out much further,” Rajan said.

“The Guv”, as Rajan is popularly known, urged that the IT sector could “do better” to improve the flow of finance to innovation.

Nasscom, a day earlier, forecast the country’s India’s IT-Business Process Management exports to grow to $97-$99 billion, a jump of 13 to 15 percent in fiscal 2014-15, compared to $ 86 billion level projected for the twelve months ending March 2014.

Several of India’s IT outsourcing giants like Infosys and TCS have reported better-than-expected quarterly earnings in the three months to December, led by outsourcing orders as the business climate in key markets of United States and Europe improves.

Analysts are confident that India’s IT industry could witness a better 2014-15 than what was achieved in the last twelve months.

“The Q3 guidance of most Indian companies has been positive. The deal pipeline is growing, clients budgets are on the rise and discretionary spending, which had dried up earlier, is improving” said Ankita Somani, IT analyst with Angel Broking.