Shaktikanta Das to take over as new RBI governor
AT THE HELM Das was secretary in department of economic affairs during demonetization
NEW DELHI/MUMBAI: The government on Tuesday appointed Shaktikanta Das, member of fifteenth finance commission as the new Reserve Bank of India (RBI) governor, a day after Urjit Patel resigned at the end of a bruising tussle with the government over the regulator’s independence and the regulation of banks.
Das, who was secretary in the department of economic affairs (DEA) when Prime Minister Narendra Modi demonetized the high-value currency notes in November 2016, has the immediate task of normalizing the RBI’S relations with the government and reassuring the financial markets about the direction of the central bank’s policies. The last thing the government wants at this juncture is a sell-off in the rupee, after having taken a series of fiscal measures, including raising import tariffs on certain goods, to try and arrest the domestic currency’s recent depreciation.
The rupee ended 53 paise lower at 71.85 against the US dollar on Tuesday, recovering from an intraday fall of 110 paise.
The appointments committee of the cabinet has cleared Das’ appointment for a period of three years, said an official order issued by the department of personnel and training.
Another key challenge before Das is to win over the support of RBI executives, especially deputy governor Viral Acharya, who may still be smarting from government interference and Patel’s exit.
Patel’s predecessor Raghuram Rajan’s term too was tumultuous, with the govern- ment and the RBI failing to see eye-to-eye on issues like managing liquidity and regulation of weak banks. The Modi administration, which believes the RBI is not doing enough to ease the liquidity crunch faced by nonbank lenders or to ease lending curbs on banks to finance new projects, has made its displeasure abundantly clear.
Rajat Kathuria, director and chief executive of the Indian Council for Research on International Economic Relations (ICRIER) said the uncertainty that hit the central bank with the shock resignation of Patel was only temporary. He said the direction of the RBI’S policies in tackling the toxic assets in the banking system is expected to continue. The Modi administration, which is keen to boost access to finance, especially for small businesses, has been keen to ease the lending curbs on about a dozen weak banks.
“The economy needs the banking system to be resilient. The RBI has been working on it. That will continue. There is no other way,” said Kathuria.
Das, who will preside over the next board meeting of the RBI on Friday, will have to decide on some of the thorny issues. At the last board meeting on November 19, the RBI made some concessions on capital adequacy of banks but decided to refer proposals relating to the transfer of surplus capital to the government and easing lending curbs on weak banks, to certain committees. Despite RBI being known to mould individuals to rise above their allegiances, it is to be seen if Das will succeed in striking a balance between achieving the government’s objectives in a pre-election period and protecting the central bank’s operational free-