The Reserve Bank of India (RBI) Governor Raghuram Rajan (pictured), a voice of an emerging market on global policy fora, has been appointed as vice-chairman of the Bank for International Settlements (BIS).
This is first time that a central banker from India becomes vice-chairman of the board at BIS. Former RBI Governor Y V Reddy was appointed in 2007 as chairman of BIS Asian Consultative Council.
Rajan was appointed to a three-year term at BIS, RBI said in a statement. He first joined the BIS board of directors in December 2013. He will work with BIS Chairman Jens Weidmann, who is also president of Germany's Bundesbank. Rajan's current tenure at India's central bank runs till September 2016.
The board of BIS is responsible for determining the strategic and policy direction of the BIS, supervising BIS management, and fulfilling the specific tasks given to it by the bank's statutes. It meets at least six times a year. The board has four advisory panels, established pursuant to Article 43 of the bank's statutes; assist the board in its work.
The board of directors elects a chairman and a vice-chairman from among its members each for a three-year term. The board may have up to 21 members, including six ex-officio directors, comprising the central bank governors of Belgium, France, Germany, Italy, the United Kingdom and the United States. Each ex-officio member may appoint another member of the same nationality. Nine governors of other member central banks may be elected to the board.
Rajan is a votary of greater space for emerging markets in global debates in shaping policies for growth in world economy and financial market.
S K Ghosh, chief economic advisor, State Bank of India said BIS is much more relevant forum for policy making especially for financial sector, which is at heart of global system. The concerns like liquidity ratios (for resources in banks) for banks in emerging markets will get attention.
Last month, the RBI governor, while addressing a G20 consultation meeting, had called on the International Monetary Fund (IMF) to play an active role in questioning the monetary stimulus policies of developed economies that significantly impact the global economy.
Rajan, a former chief economist of the IMF, said developed countries were adopting monetary policies without consideration for the negative impact they have on the global economy and he noted emerging markets were engaging in currency intervention that sparked competitive devaluations.
"The IMF has been sitting on the sidelines and applauding these kinds of policies right from when they have been initiated, and hasn't really questioned the value of these kinds of policies," he told a G20 consultation meeting.
Some central banks, including those in the US and the euro zone, adopted quantitative easing policies to counter the global financial crisis. After cutting rates to zero, they pumped cash into their economies to try to revive economic activity.
HOW THE BANK OPERATES
n Headquartered in Basel, Switzerland, BIS fosters international cooperation amongst central banks with a view to ensuring global monetary and financial stability
n Rajan joined the BIS board of directors in December 2013
n The board of directors elects a chairman and a vice-chairman from among its members each for a three-year term