The central board of directors of the Reserve Bank of India, or RBI, met in Mumbai on 14 August to finalize the bank’s annual accounts (it follows a July-June financial year). Governor Y.V. Reddy, say people familiar with what happened, gave a farewell speech at the meeting.
After a five-year stint, Reddy is due to hang up his boots on 5 September. Will he?
I am not very sure whether he himself knows the answer now. Not too many RBI governors have had such a long stint at one stretch and Reddy does not seem to be keen to continue, but extensions to tenures for RBI governors are fairly common.
In fact, both his immediate predecessors Bimal Jalan as well as C. Rangarajan, whom Jalan succeeded, received extensions. Jalan’s original three-year term ended in November 2000 and he served three more years.
Just 10 days from now, Reddy’s term will end but those normally in the know seem to have any idea whether he could be asked to continue or if the central bank will get a new governor.
Two months ago this column discussed the subject (”Who will be the next RBI governor?” Click here to read it.) But the mystery has deepened since June even as the deadline looms.
Many people are speculating about a possible extension for Reddy because a change of guard at this juncture, with the Congress-led United Progressive Alliance government readying itself for a general election and the inflation running at a 16-year high, may not be appropriate.
But, if the government wants a new central bank chief or Reddy insists he won’t agree to any extension, who will be RBI’s 22nd governor?
Until recently, Rakesh Mohan, a deputy governor, was the strongest contender for the post but, now, several people say he may take up an assignment at the World Bank.
Mohan first came to Mint Road in Mumbai in September 2002 but did not finish his three-year term. He moved back to the finance ministry as secretary, department of economic affairs, only to return to RBI. A former chief economic adviser to the finance minister, Mohan is an insider who knows the organization well.
The other contender, people say, is D. Subbarao, India’s finance secretary since July 2007. He was secretary to the Prime Minister’s economic advisory council before joining the finance ministry and had a stint at the World Bank as an economist for five years between 1999 and 2004.
There are other names too being heard in different quarters. For instance, Adarsh Kishore, an Indian Administrative Service officer of the 1969 batch, a former finance secretary, and now executive director of the International Monetary Fund, seems to be in the race. And, Planning Commission deputy chairman Montek Singh Ahluwalia’s name continues to do the rounds although some people say he is not interested in the job.
There is a technical issue as well in the case of Ahluwalia. As deputy chairman of the Planning Commission, he has the rank of a cabinet minister, while the RBI governor’s post is of the rank of a minister of state. So, the government will have to upgrade the rank of RBI governor as otherwise Ahluwalia will be moving down a notch in the hierarchy.
Interestingly, even before Reddy’s successor is identified, bankers are speculating about who will become a deputy governor. Mohan’s post will be vacant if he moves out to the World Bank or becomes the next governor. Besides, V. Leeladhar, another deputy governor, retires by year-end.
Narendra Jadhav, vice-chancellor of the University of Pune, and former principal adviser and chief economist of RBI, seems to be a strong contender. Jadhav has spent three decades with RBI. The other names being heard are Arvind Virmani, chief economic adviser, ministry of finance; Suman K. Berry, director general of the National Council of Applied Economic Research; and Shankar Acharya, former economic adviser with the ministry of finance and currently a professor at the Indian Council for Research on International Economic Relations.
However, if Reddy gets an extension and Mohan chooses to stay in RBI, then Jadhav and others will have to wait.
While Mohan’s post is that of an economist, Leeladhar’s successor will be a commercial banker. Here, a strong contender is T.S. Narayansami, chairman and managing director of Bank of India and the senior-most chief executive officer among public sector bank chiefs. The other banker in contention seems to be K.C. Chakrabarty, chairman of India’s second largest public sector bank, the New Delhi-based Punjab National Bank.
Indeed, there is too much speculation on the change of guard at RBI—in financial circles as well as in the media. That’s because the governor’s position is very critical, particularly when high inflation and rising interest rates are hurting growth. And no one knows the importance of the RBI governor better than Prime Minister Manmohan Singh, who headed the central bank between September 1982 and January 1985.
Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as the Mumbai bureau chief of Mint. Please email comments to email@example.com
To read all of Tamal Bandhyopadhyay’s earlier columns, go to www.livemint.com/bankerstrust