Shaktikanta Das – India’s new RBI Governor and his challenges

indica News Bureau –

Barely 48 hours after Urjit Patel abruptly stepped down and India’s ruling Bharatiya Janata Party (BJP) suffered a setback in the just concluded state assembly polls – former bureaucrat Shaktikanta Das assumed charge as the 25th governor of the Reserve Bank of India (RBI).
A 1980 batch IAS officer from Tamil Nadu cadre, Das, 61, came in amid a tussle between the government and the central bank over several issues, including the latter’s autonomy, rich cash reserves, and liquidity crises in the economy.
“Assumed charge as Governor, Reserve Bank of India. Thank you each and everyone for your good wishes,” Das, who has been appointed for a three-year term, tweeted.
A former economic affairs secretary from 2015 to 2017, Bhubaneswar-born Das worked closely with the central bank. He is also a member of the Finance Commission of India, and the government’s representative at the Group of 20 summits.
Unlike his last two predecessors Patel and Raghuram Rajan, who were renowned economists, Das, is a history graduate from St Stephen’s College in Delhi.
In an embarrassment of sorts for the BJP, a party leader from Gujarat raised questions about the new governor’s qualifications in a series of baffling tweets.
“The New RBI Governor Das’s educational qualification is MA (History). Hope and pray he doesn’t make RBI also a History. May God Bless the New Arrival!,” Jay Narayan Vyas tweeted.
The Finance Ministry had roped in Das soon after the BJP-led NDA government came to power in mid-2014. Das was the key man behind the planning and execution of demonetization drive and is perceived as an ‘upright’ bureaucrat with a style of highly organized functioning.
A lot of experts believe that the ‘botched-up’ demonetization drive is the reason Das should not become governor of the Reserve Bank of India.
Indian American economist and professor of economics at the Massachusetts Institute of Technology Abhijit Banerjee slammed the Indian government on the new appointment and warned that the decision leaves a lot of “frightening” questions about governance issues at key public institutions.
The immediate challenges, meanwhile, before Das will be to balance the autonomy of RBI and the revenue and liquidity needs of the government and Indian economy.
Immediately after taking charge, Das stated that he will uphold values and autonomy of the central bank.
“I would not like to go into what the issues between the government and the RBI are but every institution has to maintain its autonomy and also adhere to accountability… I will try and uphold the professionalism, core values, credibility and autonomy of Reserve Bank as an institution,” Das said in a media interaction on his first day at office in Mumbai.
“All issues can be resolved through discussions…Independence of RBI as an institution is very important and it will remain intact,” he added.
Many experts believe that by eyeing RBI’s cash reserves, the government is trying to impinge upon the central bank’s autonomy, while others say that the RBI has to come to terms with the fact that the independence of an institution cannot be ground for supremacy.
Das will also have address the problems of the lack of capital and deteriorating asset quality, while also ensuring the banks do not indulge in reckless lending mode.
The RBI is under pressure from the government to relax the Prompt Corrective Action (PCA) framework that has put the wide-ranging restriction on banks on lending. A total of 11 public sector banks (PSBs) are under the PCA framework. This framework has put immense pressure on banks as well as the government as the credit capacity of the banks has dried.
A lot remains to be seen and understood post a crucial upcoming meeting of the upcoming RBI board on December 14.

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