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Business News/ Politics / Policy/  RBI, finance ministry differ over COO post
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RBI, finance ministry differ over COO post

The new position at the central bank would be at the same level as the deputy governor

Raghuram Rajan’s attempt to revamp the organization comes at a time when RBI has a heavy reform agenda ahead of it. Photo: Bloomberg Premium
Raghuram Rajan’s attempt to revamp the organization comes at a time when RBI has a heavy reform agenda ahead of it. Photo: Bloomberg

Mumbai/New Delhi: The Reserve Bank of India (RBI) and the finance ministry struck contrasting notes on Thursday regarding the creation of the post of chief operating officer (COO) of the central bank—a new position that would be at the same level as the deputy governor.

The Economic Times on Thursday cited RBI as saying that its board “has approved the broad contours of a restructuring plan, including the creation of a position of a COO".

RBI stuck to this position on Thursday, and said in a statement: “The board approved the broad contours of the proposals. It advised the Reserve Bank to operationalize the restructuring, while taking into account the need to continuously keep communication channels open with stakeholders as the process moves forward. It also asked the Reserve Bank to initiate a dialogue with the government on the additional post of deputy governor and the legislative changes that will be needed. The Reserve Bank will proceed further in the matter keeping such advice in view."

India’s financial services secretary G.S. Sandhu said that while the proposal was discussed at the RBI board meeting on 10 August, it was not approved because the RBI Act needs to be amended before any change can be made. “We have asked RBI to justify the creation of the new post and send the proposal to the government. First, we have to amend the RBI Act to increase the number of deputy governors after which we will see if a new post needs to be created or not. The new post, if created, also has to be approved by the Appointments Committee of the Cabinet," he added.

The 17-member RBI board has two government representatives—economic affairs secretary Arvind Mayaram and Sandhu.

Part of the ambiguity on whether the proposal for a revamp had been “approved" by the board may have emerged from the fact that while the RBI board discusses and debates a number of the issues, it is not a voting body.

“The proposals essentially revolve around bringing functional synergies in operations by grouping departments into clusters and also leveraging human resources to bring about greater professionalism and specialization so as to enhance the effectiveness of the bank’s operations and policy making. The proposals involve professionalization of HR functions in the Reserve Bank, including a more effective Performance Management System and responsive and proactive skill and leadership development programmes," RBI said in its statement.

“The restructuring proposals and the grouping of departments into five functional clusters have been widely discussed at various levels in the Reserve Bank. One of the proposals envisaged the creation of an additional position of a chief operating officer of the rank of deputy governor to head one of the five functional clusters," it added.

RBI currently has four deputy governors—H.R. Khan, Urjit Patel, R. Gandhi and S.S. Mundra. Patel looks after the monetary policy, financial markets divisions among others, Khan’s key roles include management of the foreign exchange and debt management departments, Gandhi has the department of banking operations as one of his portfolios, while Mundra is looking after banking supervision, financial stability and currency management.

Rajan’s attempt to revamp the organization comes at a time when RBI has a heavy reform agenda ahead of it. Since Rajan took over as governor in September 2013, he has introduced a number of changes in the functioning of existing banks and also sought to introduce new banking models such as payment banks and small banks.

Over the past year, RBI has appointed a number of committees headed by private sector banking veterans such as Nachiket Mor, former deputy managing director at ICICI Bank Ltd and P.J. Nayak, former chairman of Axis Bank Ltd.

The Economic Times report on Thursday said Mor is a frontrunner for the proposed COO position.

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Published: 14 Aug 2014, 11:44 PM IST
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