Delays in RBI, SBI appointments slow down policy decision-making

Inordinate delays by the government in making appointments for crucial posts in Reserve Bank of India and State Bank of India have resulted in slower policy decision-making.

For more than two months now, the deputy governor’s position has been vacant in Reserve Bank of India. Usha Thorat, one of the four deputy governors of the central bank, retired on November 10. To identify Thorat’s replacement, a search committee was formed and interviews were conducted as early as the first week of September. Though a search panel, headed by RBI Governor D Subbarao, recommended a few names soon after the interviews were over, the government is yet to make up its mind.

Similarly, the managing director’s post in State Bank of India (SBI) — the country’s largest lender — is also vacant after the retirement of S K Bhattacharyya on October 31. SBI’s case is, however, slightly complicated.

A few rounds of interviews have already been conducted, in which four of the seven deputy managing directors have appeared. Sources said those interviews were conducted not only to choose Bhattacharyya’s replacement but also to appoint two more MDs. Following the amendment to the SBI Act, the government can appoint four managing directors on the board of the bank. However, no appointment has come so far. The government has also conducted interviews for the SBI chairman’s post as the present chairman O P Bhatt will superannuate on March 31.

Whatever may be the reasons for the delays in the appointments, important policy formulations, especially at the central bank, are getting delayed as a result.

Mint Road sources said the work of issuing guidelines for new banking licences has been going on at snail’s pace since Thorat’s exit was finalised.

Thorat was heading the department of banking development and operations – the department which is forming the guidelines. “The absence of a full-time deputy government has affected the progress on this crucial issue,” an RBI source said. RBI had decided that another deputy governor Shyamala Gopinath would look after Thorat’s department till a new DG was appointed. As a result, Gopinath has been handling 19 departments since early November. That RBI will issue guidelines for the entry of new banks was announced in the budget of 2010-11, in February, and in the last one year only a discussion paper was floated. Towards the end of December, RBI published the gist of feedback that it had received from individuals, banks, business houses and others on the discussion paper.

Similarly, the road map for foreign banks in India, for which a discussion paper was scheduled to be put up by September, was announced by the governor during the Annual Policy Statement in April. But that deadline was missed long back.

On the issue of new bank licences, sources said RBI was keen to issue the draft guidelines very soon as it was announced in the budget last year, and the government may want to know the progress made since then. Over the past few years, the government has started presenting an action taken report of the last budget announcement along with the budget of that year.