Mumbai: The Reserve Bank of India (RBI) kicked off the process of identifying outgoing deputy governor Usha Thorat’s successor on Thursday with a search committee interviewing six of the seven executive directors of the bank.
According to three persons familiar with the development, the front-runners for the post are Anand Sinha and V.K. Sharma, the second of whom is the senior-most among the executive directors.
All three persons are RBI officials, but none of them is part of the search committee.
RBI governor D. Subbarao is the head of the four-member committee, which also includes R. Gopalan, financial services secretary, and Govinda Rao, director, National Institute of Public Finance and Policy.
Sinha oversees critical departments such as the department of banking operations, development and supervision while Sharma looks after internal debt management.
Four other executive directors—V.S. Das, G. Gopalakrishna, H.R. Khan and D.K. Mohanty—were interviewed on Thursday.
C. Krishnan, senior-most among the executive directors after Sharma, opted out of the race.
If Sinha becomes a deputy governor, he will supersede Sharma but this is not without precedent. For instance, Thorat herself superseded P.K. Biswas, another executive director, on her way to becoming deputy governor.
Similarly, K.J. Udeshi became a deputy governor in June 2003, superseding K.L. Khetrapal.
Thorat, whose five-year term comes to an end in November, is in charge of many critical portfolios including banking regulation and supervision, currency management, rural credit and urban cooperatives.
She is also the central bank’s representative at the Basel Committee on Banking Supervision and on the board of the Securities and Exchange Board of India, the capital market regulator.
Shyamala Gopinath, the senior-most deputy governor, will retire in May 2011.
The other two deputy governors are K.C. Chakrabarty and Subir Gokarn.
Traditionally, RBI has four deputy governors. While one of them is an economist and another a commercial banker, two of them are insiders.
The constitution of the search committee follows a petition filed by a former executive director of RBI in the Delhi high court against the Union government of India and the central bank governor challenging the appointment of Thorat in 2005.
Biswas, then executive director, had argued that he should have been made deputy governor, but was superseded by Thorat, a junior colleague.
Both Biswas and Thorat had joined RBI in 1972, but Biswas was placed higher on the merit list.
The Delhi high court refused to quash Thorat’s appointment, but observed that the RBI governor should make a “comparative assessment of the suitability and performance of all eligible candidates” at the time of recommendation.
This was the second instance of the appointment of a deputy governor causing discontent among senior central bank officials. When Udeshi became a deputy governor, then executive director Khetrapal resigned in protest.