New Delhi: Former bureaucrat Shaktikanta Das was on Tuesday named the new governor of the Reserve Bank of India (RBI) after Urjit Patel abruptly resigned amid a face-off with the government over issues related to governance and autonomy of the central bank.
Das, 61, who was the first to field questions on the shock November 2016 decision to junk 86 per cent of the currency in circulation, will have a three-year tenure.
Having often favoured a cut in interest rates by the central bank, he will be the 25th Governor of the 83-year-old institution. “The Appointments Committee of the Cabinet has approved the appointment of Shaktikanta Das, former Secretary, Department of Economic Affairs, as Governor of the Reserve Bank of India (RBI) for a period of three years,” an official order said.
He replaces Urjit Patel, who surprisingly resigned from the central bank on Monday amid growing differences with the government over a range of subjects, including the central bank’s autonomy.
Das, a 1980-batch IAS officer from the Tamil Nadu cadre, retired as Economic Affairs Secretary in May 2017 and was since appointed India’s Sherpa to the G-20 and a member of the Finance Commission.
Having worked equally at ease under three different finance ministers — P Chidambaram, Pranab Mukherjee and Arun Jaitley — he is described as a person who prefers to take a non-confrontational approach to problem solving.
His skills will be put test when he would deal with the government’s eagerness for a tighter supervision on functioning of the RBI and the demand for the central bank to part with some of its reserves to help meet the budget deficit.
The Finance Ministry, confirming the appointment of Das in a Twitter post, said the government has accepted the resignation of Urjit Patel.
Das will be the first bureaucrat to head the central bank in almost five years.
While it was widely expected that the government will name an interim RBI head during its search for Patel’s replacement, the Appointments Committee of the Cabinet headed by Prime Minister Narendra Modi chose Das within a day.
Das, who was the economic affairs secretary from 2015 to 2017, worked closely with the central bank and oversaw the demonetisation exercise in late 2016.
Having worked on five consecutive budgets under Chidambaram and Mukherjee between 2008 and 2013, Das was brought back into the Finance Ministry when the BJP government swept to power in mid-2014. He initially headed the revenue department but was later moved to the economic affairs department, which oversaw the demonetisation exercise.
Das would also have to deal with the government’s request to ease the liquidity of certain sectors and relax norms to boost lending so as to spur growth and create jobs.
From addressing the first press conference following Prime Minister Narendra Modi announcing the decision to junk old 500 and 1000 rupee notes on November 8, 2016, Das was often seen defending the government’s decision even as the RBI remained silent.
During that period, when cash was in short supply, he toed the government’s line that demonetisation would help reduce unaccounted wealth in the economy, bring down the problem of counterfeit money and help push digital payments.
He had also countered the concerns over the growth impact of demonetisation, saying that any short-term dip in growth has been factored in.
“One year of demonetisation. Significant gains for the economy. Great memories of this day last year,” he had tweeted on November 8, 2017.
His appointment comes ahead of the December 14 meeting of the RBI central board. It remains to be seen if Das would go ahead with the meeting or seek a postponement for him to prepare the ground before he faces pressure from the government nominee directors over governance issues.
A post-graduate in history from the Delhi University, he will be the first bureaucrat in Mint Street in five years.
While the BJP government chose an economist in Patel to head the RBI after it had denied extension to former IMF Chief Economist Raghuram Rajan for a second term in 2016, the position has once again gone to a bureaucrat. Bureaucrats have occupied the position for the most number of years.
The last IAS officer to head the RBI was D Subbarao, who demitted office in September 2013.
Urjit Patel, who initially appeared to have toed the government line on issues like demonetisation, had in the recent weeks clashed with the Finance Ministry over issues of liquidity, reserves of the central bank and lending norms.
The face-off led to the government invoking a never-used-before provision of the RBI Act to bring the governor to the negotiating table on these issues.
Patel chose to resign four days ahead of the crucial meeting of the RBI Board where government nominee directors were expected to push the central bank on governance issues.
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