PMO unhappy with ministry's choice for RBI deputy governor

The government is still struggling to find a replacement for Anand Sinha, who was spearheading the bank licence process and retired as deputy governor of the Reserve Bank of India (RBI) last month.

This might derail the central bank's plan to issue fresh bank licences by the end of March, as an advisory committee headed by former RBI governor Bimal Jalan, vetting the 25 applications, will soon complete its work and send its recommendations to RBI Governor Raghuram Rajan. The committee, scheduled to hold a crucial meeting on Monday, is expected to complete its work by March 10, three months after it held the first meeting.

The appointment of a successor to Sinha had first hit hurdle when the finance ministry had rejected the search panel's recommendations on the grounds of seniority. Now, a second hurdle has come with the Prime Minister's Office expressing its reservations over the finance ministry's fresh recommendations.

THE STATE-OF-DG AFFAIRS

• After Anand Sinha's retirement on Jan 17, RBI has reallocated deputy governors' portfolios
• H R Khan now looks at banking development and operations, besides nine other portfolios
• Sinha has been appointed advisor for three months to complete the banking licence process
• K C Chakrabarty's term as deputy governor ends on June 13
• Khan's three-year term ends on July 3
• RBI has put executive director appointment on hold

The search panel, headed by the RBI governor, had suggested the names of three executive directors - B Mahapatra, P Vijaya Bhaskar and R Gandhi -, while ignoring G Gopalakrishna, the seniormost executive director. The finance ministry had put the name of R Gandhi, the seniormost among the three shortlisted by the search panel, on top.

RBI deputy governor H R Khan has been given interim charge of the department of banking operations and development, which is looking after the banking licence process. His three-year term ends in July, though he is eligible for an extension. The five-year term of another deputy governor, K C Chakrabarty, ends in June.

So, if the government does not act fast, there might emerge a situation where three of the four deputy governor posts would be vacant.

Following a deadlock over Sinha's replacement, the central bank has put executive directors' (EDs') appointments on hold. Sources indicate ED appointments might be made only after the government has appointed a deputy governor.

If the present government is not able to complete the selection process, the new government that takes charge in May will have to take a call immediately. Typically, a deputy governor's appointment process takes two-three months to complete.

An RBI deputy governor can be appointed for five years or till the age of 62, whichever is earlier. To be eligible for the post, a candidate needs to be less than 60 years old. However, there have been instances when both the criteria have been relaxed.