PM Modi got into action on Monday evening to choose next RBI governor

While the buzz on a bureaucrat getting the top seat at Mint Road grew louder, Surjit Bhalla's exit from the Prime Minister's Economic Advisory Council changed the direction of the narrative

Late Monday evening, soon after RBI governor Urjit Patel announced his resignation, Prime Minister Narendra Modi is learnt to have called a meeting of top officials. With the entire dispensation caught off guard a day before the results of five Assembly elections were to be out and four days ahead of the RBI board meeting, the government quickly got into action to shortlist the names of suitable candidates for the next governor.

A source close to the development confirmed that there was no prior information within the government on the governor quitting. Neither the Prime Minister’s Office (PMO) nor the Finance Ministry had any idea what was coming.

Following the high-level meeting Monday evening, the theory that has gained currency is that the government would like to have a bureaucrat as the next RBI governor, rather than an economist or a technocrat. After the exit of two economist governors (Raghuram Rajan and Urjit Patel) during the Modi government’s tenure, it wants to go back to the tried and tested plan of appointing a bureaucrat as the next chief of the central bank, an official pointed out. ‘’They will try to avoid somebody too closely aligned with the government. They have to play to the markets. Having a bureaucrat as governor would at least mean a modicum of neutrality,’’ a former bureaucrat said.

Although a top government official who’s part of decision-making refused to name any potential candidate, he said, ‘’the next RBI governor will be appointed as soon as possible.’’ The message that is being sent out is, there won’t be any delay.  According to Finance Secretary Ajay Narayan Jha, the government is taking stock of the legal position in appointing a new governor, and some sort of an announcement could be made today. There’s no confirmation on what the announcement could be.

While the buzz on a bureaucrat getting the top seat at Mint Road grew louder, another development changed the direction of the narrative. On Tuesday morning, economist Surjit Bhalla stepped down from the Prime Minister’s Economic Advisory Council, and soon he was being talked about in top government circles as a likely candidate for the next RBI governor. Many just dismissed the theory.  

Other than that, 1984 batch IAS from Jharkhand cadre Rajiv Kumar, who’s now secretary, Department of Financial Services, is leading the list of probable candidates to make a shift to Mumbai. Others in the list are former finance secretary Hasmukh Adhia, former economic affairs secretary Shaktikanta Das, current economic affairs secretary Subhash Garg, former RBI deputy governor Subir Gokarn and member of Finance Commission Ashok Lahiri.

As for procedure, the government is learnt to have asked the Financial Sector Regulatory Appointment Search Committee (FSRASC) to suggest names to the political leadership. The FSRASC is headed by the Cabinet Secretary. When Raghuram Rajan’s successor was to be chosen in 2016, the decision to appoint Patel was taken at the highest levels of the government.

Patel’s resignation on Monday evening had sent shockwaves through the government. In terms of timing and immediacy, it was bigger than Rajan’s announcement in June 2016 that he would not serve a second term at the helm of affairs on Mint Road. That had given the Modi government some time to search for a successor. Patel’s exit is more sudden, making it tougher for the government to search for the 25th Governor of RBI.

For now, RBI deputy governor N S Vishwanathan is the interim chief at the central bank in the midst of a leadership crisis.