Trusted old hand Shaktikanta Das named RBI governor ahead of board meeting

Crucial board meeting to take place as scheduled for December 18

When Shaktikanta Das retired as secretary, Department of Economic Affairs, in May 2017, he got a Rs 1 note from the government with his signature on it as a farewell gift. Das, who was appointed 25th governor of the Reserve Bank of India (RBI) on Tuesday, will now have his signature on all the banknotes that are printed during his three-year tenure.

As early as Wednesday, Das is expected to move to the Mint Road corner room, vacated by Urjit Patel after his sudden exit as RBI governor. While there’s been much speculation on whether the RBI board meeting scheduled for December 14 will be put off or not, it is learnt that there’s no change in date. In fact, Department of Economic Affairs Secretary Subhash Garg told reporters that as of now, the board meeting was as scheduled. 

Trusted old hand

• Das, a 1980 batch Tamil Nadu cadre IAS officer, retired as economic affairs secretary in May 2017
   
• He worked closely with RBI and oversaw Modi's plan to junk 86% of the currency in circulation in November 2016
   
• He had been brought back to finance ministry soon after NDA govt came to power in mid-2014 and given charge of revenue dept; later he was moved to economic affairs dept
   
• After retirement, Das was named India’s G-20 sherpa and also appointed member of the 15th Finance Commission
   
• He worked under three different finance ministers — P Chidambaram, Pranab Mukherjee and Arun Jaitley

The government moved swiftly to select Das as Patel’s successor at the RBI. The appointment of the 1980 batch Tamil Nadu cadre IAS officer, who was a key official in overseeing the demonetisation drive announced in November 2016, as RBI governor came just a day after Patel’s resignation, which had caught the government unawares. 

“The Appointments Committee of Cabinet (ACC) has approved the appointment of Shri Shaktikanta Das, former Secretary, Department of Economic Affairs, as Governor, Reserve Bank of India, for a period of three years,” the government notified Tuesday evening. While he has stepped down as member of the 15th Finance Commission, he would also be relieved of his duties as G-20 Sherpa.

The career bureaucrat, who’s believed to have a good working relationship with Prime Minister Narendra Modi, has been directly involved in shaping eight Union Budgets, the last of which was for the financial year 2017-18.

Often fondly referred to as a ‘bureaucrat’s bureaucrat’ by Finance Minister Arun Jaitley, Das was the main ‘face’ of demonetization as he held daily press conferences to explain the multiple change of rules, at a time when Patel or any other RBI official did not. Besides his edge in the government as one of the planners of demonetization, Das is also credited for being the only bureaucrat to feature in an Amul advertisement.

Other prominent personalities too cheered his appointment. "As he moves to the RBI, he should stand by what the institution stands for. Each institution has its own dharma. He should maintain the integrity, credibility and autonomy of the Reserve Bank," former RBI Governor C Rangarajan told Business Standard. 

Sources said Das’ name was among a shortlist of three candidates discussed in a hastily convened meeting of the Financial Sector Regulatory Appointment Search Committee on Monday evening, hours after Patel’s resignation. The other candidates in the shortlist, which was forwarded to the ACC, were Economic Affairs Secretary Subhash Garg and Chairman of Securities and Exchange Board of India (SEBI), Ajay Tyagi, sources said.

Former RBI Deputy Governor R Gandhi said that Das’ first priority will be to carry the RBI and the government together at a time when relations between the two institutions are at a low point. “He will take care of institution he heads and also recognise the expectations from stakeholders including government. With vast administrative experience, he has communication skills to deal stakeholders,” Gandhi said.

Taking charge ahead of the December 14 board of directors meeting, Das is expected to take up pending issues between the RBI and the government. The issues are related to providing liquidity to the non-banking financial companies (NBFCs) and discussing the recommendations of the RBI board for financial supervision on the prompt corrective action (PCA) norms.

Das was the Economic Affairs Secretary from September 2015 to May 2017. Before that, he was the Revenue Secretary from June 2014 to August 2015. He also had a stint as Secretary in the Fertilizer Ministry before that, and from November 2008 to December 2013, an unbroken stint in the Union Finance Ministry in various roles. He has worked under three finance ministers--Pranab Mukherjee, P Chidambaram and Arun Jaitley.

Industry bodies as well as market analysts hailed the decision of the government to move quickly. “We in industry, are confident that the liquidity squeeze in the banking and non-banking financial sector which is spilling over into the various segments of industry would be taken up with all urgency by Mr Das and there would be seamless flow of credit to industry and trade, especially to the MSMEs,” said Rakesh Bharti Mittal, president, Confederation of Indian Industry (CII). His counterpart at Federation of Indian Chambers of Commerce & Industry (Ficci) Rashesh Shah said, “it’s a great choice. Mr Das has a 360-degree understanding of the financial issues facing the Indian economy and he also understands global issues due to his involvement with G20.”