Shaktikanta Das, who steered demonetisation drive, is new RBI governor

Das will take over after incumbent Urjit Patel abruptly resigned on Monday

Former economic affairs secretary Shaktikanta Das will be the new governor of the Reserve Bank of India, after Urjit Patel resigned unexpectedly a day before.

He will have a three-year term. Das, 63, was economic affairs secretary from 2015 to 2017, and worked closely with the central bank, according to a Bloomberg profile. He is currently a member of the Finance Commission of India, and the government’s representative at the Group of 20 summits.

The government initially brought Das into the Finance Ministry to head up the revenue department, later moving him to economic affairs, where he helped to spearhead the controversial demonetisation drive in 2016.

His appointment is likely to cheer markets as investors expect communication between the government and the central bank to improve following a public spat that deepened an existing rift between the two sides, Reuters reported.

"Bonds and rupee should react positively following this news," Ashish Vaidya, executive director and head of trading at DBS Bank in Mumbai, told Reuters.

"He is a bureaucrat and will help in improving the RBI-government relationship. We expect the RBI to take a pragmatic approach under him, be pro-growth and change its stance going ahead, given that inflation has come off sharply."

The RBI had been at loggerheads with the government for weeks, fending off pressure to ease lending restrictions and transfer more of its excess capital to the government. A board meeting had been scheduled for Friday, at which government representatives were expected to seek changes to the central bank’s governance structure.

Industry association Confederation of Indian Industry welcomed Das's appointment and urged him to take steps to help the liquidity squeeze in economy.