The decision of the Union government to appoint political activist Swaminathan Gurumurthy to the central board of the Reserve Bank of India (RBI) earlier this month has raised questions about the autonomy of the institution, and has focused public attention on the RBI board.

A Mint analysis of RBI annual report data since 1999-2000 shows that Gurumurthy is only the third political activist to sit on the RBI central board over the past 18 years. Erasu Ayyapu Reddy of the Telugu Desam Party (TDP), a member of RBI’s southern regional board was on the central board in 1999-2000, the first year for which archival data is available. Rajeev Gowda of the Congress, who was also appointed first to the southern local board in 2011, became a member of the central board the same year. Gowda was a professor of economics at the Indian Institute of Management, Bangalore, when he became a board member but he was also associated with the Congress in various capacities since the mid-2000s. Annual reports prior to 1999-2000 are not available on the RBI website. RBI’s spokesperson declined to share annual reports prior to 2000 despite repeated requests over phone and email over the past week.

Considering that the central board is the RBI’s highest decision-making body, which approves all key decisions the central bank takes, the central board members are responsible for the broad direction the central bank takes. Unlike the monetary policy committee (MPC), which releases the minutes of its meetings, central board meetings are closed-door affairs, and hence, do not attract the same level of public scrutiny as MPC meetings. But the mandate of the central board is far larger than that of the MPC. After all, it was the central board that gave its assent to the demonetisation exercise in November 2016, disrupting the lives of a billion citizens. Under the RBI Act, the central board is designed to consist of 21 members: the governor and four deputy governors [under Sec 8(1)a], four directors from the four regional boards of the RBI [under Sec 8(1)b] who are elected by their respective local board members, 10 directors nominated by the Union government who are usually experts in their respective fields [under Sec 8(1)c], and two government appointed officials (usually from the finance ministry) [under Sec 8(1)d].

While there have been political appointments in the local boards in the past, and some of them have found their way to the central boards, Gurumurthy’s appointment marks a departure since he has been directly nominated as a central government nominee under Sec 8(1) c, the first such case at least since the turn of the century. Gurumurthy is a chartered accountant by training but his claim to fame rests on being the key ideologue and one of the founding members of the Swadeshi Jagran Manch, an anti-globalization outfit allied to the ruling party.

Typically, Union government appointees to the board largely tend to be academics, bureaucrats (or former bureaucrats), industrialists, bankers or finance professionals, and corporate professionals (chart 1). The share of industrialists has come down sharply over the past few years while the share of corporate professionals has risen, the analysis shows. Promoters of companies have been classified as industrialists while non-promoter executives have been classified as corporate professionals in this analysis.

Industrialists were the dominant group among Union government appointees to the RBI board between 2005 and 2010. Industrialists on the RBI board have included the promoters of some of India’s richest firms such as Ratan Tata of Tata Sons and Kumar Mangalam Birla of the Aditya Birla Group. They have also included the founders of some of India’s most indebted companies such as G.M. Rao of GMR Group, and K.P. Singh of DLF group. Over the past few years, the share of industrialists has fallen.

Another change over the past few years has been the rising presence of men to the point that the central board has no women at all at present. Since 2016, the government has not appointed a single woman on the board. And as of today, all ex-officio members are also men.

Including ex-officio directors, only 12 women have been on the central board over the last 18 years. There have been ten times as many men in the same period. The current crop of executive directors (different from the central board) of the RBI has a far more promising gender mix, with six men and six women. 2016 also saw another break in board appointments. The number of appointees to the board saw a sharp fall as vacancies rose that year.

It is worth asking whether a fuller and stronger board might have been able to resist the demonetisation move in 2016. Had the board resisted, the government could still have superseded the board. But in such an event, the government would have had to explain to Parliament why it did so. As the former RBI board member and academic, Indira Rajaraman, argued in a Mint piece then, the under-staffing in the central board that year might have weakened “the ability of the board to reflect the considered judgement of various sections of the informed population". While the latest appointments have partly filled the vacancies on the board, the number of vacancies is still higher than what it was even five years ago. Matters are worse when it comes to the regional boards.

There are four local boards, with five seats each. Vacancies across the local boards doubled to 10 in 2014 compared with the year-ago period, and have gone up to 15 in 2018. The Northern local board has not had any member at all since 2016, and thus, does not have any representative on the RBI central board. The southern board just has one member. Gurumurthy’s appointment has raised hackles of many, and his insensitive tweet about Kerala’s flooding has not helped matters.

But there are other problems as well in RBI’s decision-making structures. The lack of women and the shrinking space for regional representation stand out as the two main ones.

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