Mumbai: There aren’t too many takers for the post of a deputy governor at the Reserve Bank of India (RBI), which has been vacant since V. Leeladhar retired in December.
Four out of the seven senior bankers from whom the government sought consent for this high-profile appointment last week have opted out of the race. Such consent is sought before all important government appointments.
The bank chief executives whom the government approached as a possible successor to Leeladhar were State Bank of India’s (SBI) O.P. Bhatt, IDBI Bank Ltd’s Yogesh Agarwal, Bank of India’s (BoI) T.S. Narayanasami, Punjab National Bank’s (PNB) K.C. Chakrabarty, Bank of Baroda’s (BoB) M.D. Mallya, Union Bank of India’s M.V. Nair and Canara Bank’s A.C. Mahajan.
Also See Who’s in who’s out (PDF)
Bhatt, Chakrabarty, Mallya and Nair have not given their consent, leaving Narayanasami, Agarwal and Mahajan in the race. Mint has independently checked with all CEOs who have declined to be considered for the post, but none of them is willing to cite any reason for this.
Indeed, there could be different reasons why these bankers have turned down a plum posting in the central bank.
Bhatt was the lone banker who was also on the government’s radar screen when it started looking for a successor for former RBI governor Y.V. Reddy. In fact, Bhatt and RBI deputy governor Rakesh Mohan had separate meetings with former finance minister P. Chidambaram ahead of the appointment of former finance secretary D. Subbarao as the RBI governor and many bureaucrats in the finance ministry dub such meetings as “interview”.
Leeladhar’s successor will have a three-year term, at least initially, and this could be one reason why many bank CEOs are not showing interest. While Bhatt has a little more than two years to retire, Chakrabarty, Mallya and Nair have about four years each to retire. Bank chairmen retire at 60. So, if the government does not give an extension to the new appointee after his original term expires, any of these three bankers will lose at least one year of service in case they take the deputy governorship.
On the other hand, even after three years, each of them will stand a chance to move to RBI since they will be under 60. A deputy governor’s retirement age is 62, but nobody seems to be sure whether a second term, after the initial three-year term, is automatic if one is under 62.
Narayanasami has three months to retire while Agarwal and Mahajan have about one- and-a-half years left to retire.
It is not known whether the three bankers left in the fray will be formally interviewed by the search committee, constituted to identify Leeladhar’s successor, or their track record will speak for themselves. The committee consists of RBI governor Subbarao, finance secretary Arun Ramanthan, secretary of the department of personnel and training Rahul Sareen, former SBI managing director (MD) Vepa Kamesam and J.R. Varma, former professor of the Indian Institute of Management, Ahmedabad.
Those bankers who have experience as CEO for at least two years were shortlisted by the committee.
Bhatt became a chairman in April 2006. PNB is Chakrabarty’s second stint as a CEO; he took over as chairman of Indian Bank in June 2005. Similarly, before assuming the charge at BoB, Mallya was the chief of Bank of Maharashtra since March 2006 and Nair became Dena Bank head in April 2006 before shifting to Union Bank.
Narayanasami, who is also the chairman of Indian Banks’ Association, a national banker lobby, by virtue of being the senior-most banker, first time became the chairman of Andhra Bank in April 2004. He also headed Indian Overseas Bank before moving to BoI. Mahajan, the current CEO of Canara Bank, headed Allahabad Bank since August 2006.
IDBI’s Agarwal became the chairman of the bank in July 2007. Before that he was MD of SBI.
For the first time in RBI’s 73-year history, a search committee will identify the right candidate for the deputy governor’s post.
This is not because of the importance of the appointment, but a petition filed by a former executive director (ED) of RBI in the Delhi high court against the government of India and the RBI governor challenging the appointment of Usha Thorat, a current deputy governor.
P.K. Biswas, the former ED, had argued that he should have been made the 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 have 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 K.J. Udeshi became a deputy governor in June 2003, then ED K.L. Khetrapal had resigned in protest.
As deputy governor, Leeladhar used to oversee the banking operations and supervision division—a very critical function within RBI at a time when commercial banks are finding it difficult to meet the loan demands of firms and individual borrowers and their stressed assets are on the rise.
However, a commercial banker does not necessarily need to head this division. Before Leeladhar, this was handled by Udeshi, an RBI insider as was her predecessor G.P. Muniappan. The last commercial banker before Leeladhar to don the mantle of a deputy governor was Kamesam, SBI’s former MD and a member of the search committee, but he oversaw internal administration, exchange control and currency management. After Kamesam’s retirement in December 2003, there was no commercial banker as deputy governor until Leeladhar was chosen in September 2004.
Anup Roy of Mint contributed to this story.