Experts wary of Dec. 14 after quick appointment

The Centre on Tuesday appointed former finance secretary Shaktikanta Das as the new Governor of RBI, a day after Urjit Patel resigned from the post due to disagreements with the government.

The Narendra Modi government chose a former bureaucrat and not an economist as the new governor, is seen as an attempt to have a person to head RBI who is more in line with New Delhi's thinking during crucial year of 2019 when Lok Sabha election are going to take place.

Mr Das, 63, is looked as someone who is close to the government and as economic affairs secretary was the part of the select core team which undertook demonetisation of ` 500 and ` 1,000 notes in 2016.

Mr Das, a history graduate from the prestigious St. Stephen's College in Delhi, will take over as the 25th Governor of the Reserve Bank of India for a period of three years, as per the government notification.

His appointment means that the next RBI Board meeting, currently scheduled for December 14, is expected to go smoothly and likely to undertake steps on concerns raised by the North block.

The immediate announcement of a replacement of Mr Patel by the Appointments Committee of the Cabinet headed by Prime Minister, according to analysts is an attempt by the government to send the signal that it is in control and dismiss any suggestion of vacuum or unstability created due to resignation of Mr Patel.

It also means that the government wants to send signal that Mint street will have to follow direction given by the political leadership and no longer take an independent line from the concerns of the government.

The last IAS officer to head the Reserve Bank was D. Subbarao, who demitted the office in September 2013. The appointment of a new RBI governor by the government within 24 hours of his predecessor’s resignation, despite adverse political developments in three major states, is unprecedented, according to analysts.

The general practice is to let the senior most deputy governor don the mantle of the RBI chief until the government decides upon its choice.

Though there were suggestions of RBI deputy governor N. S. Vishwanathan would fort until the Centre makes its mind, the government appointed Shaktikanta Das in a shortest record time.

The rupee on Tuesday plunged 110 paise in early trade but recovered later to end 53 paise lower at 71.85 against the US dollar following Urjit Patel’s shock exit coupled with the loss of the ruling BJP in key state elections.

Niti Aayog vice- chairman Rajiv Kumar batted for the government by saying that the functioning of the RBI is not dependent on any particular individual and its institutional capabilities are very strong.

While some analysts feel that the unprecedented haste was caused by the government’s intention to reassure equity and currency markets that things are in control, others say the real reason for the appointment appears to be the impending RBI board's meeting on December 14.

The RBI board is expected to deliberate on issues of concern to the government that were left unresolved in the last meeting. The board was also expected to appointed its representatives to a three- member panel that would decide the amount of capital that the central bank could hold.

The government has set its eyes on over ` 3 lakh crore from the RBI’s capital, which Dr Patel and his colleagues had refused to part with as the asset appreciation was notional in nature.

It is speculated that the appointment of a bureaucrat would make things easier.

A section of analysts also claimed that Dr Patel had informed the Prime Minister of his intention to resign, but he was asked to wait till the state elections were over as his decision could have wider ramifications.