Shaktikanta Das takes charge as RBI Governor; seeks to allay concerns
Das says will he strive to uphold autonomy and integrity of the central bank
Shaktikanta Das is new RBI governor; Image: Amit Verma
India’s newest Reserve Bank of India (RBI) Governor Shaktikanta Das, who took charge on Wednesday from his predecessor Urjit Patel, in his first day of office sought to allay investor fears that the disagreement between the government and the RBI might escalate further. “The government is not just a stakeholder but also runs the country, economy and manages major policy decisions. So, there has to be a discussion between the government and RBI," he told the media.
He also said that he will try to uphold the autonomy of the central bank. “I will try to uphold autonomy, integrity and credibility of the RBI as an institution. I will ensure that it stays intact,” Das said.
Das takes charge at a time when this very factor – the autonomy of the central bank -- became a prickly issue for Patel to deal with, after an ugly public spat had broken out between policy makers and the central bank a few months ago.
As the Economic Affairs secretary between 2015 and 2017, Das was crucial to the planning and execution of the government's demonetisation drive and later, the rollout of the Goods and Services Tax (GST).
Patel had decided to step down amid concerns that the central bank might start to function more like a board-led institution, rather than a Governor-led institution, experts said.
One of the contentious issues was how the government will use Section 7 of the RBI Act in the future. It empowers the government to give directions to the RBI on matters of public interest—clearly not something the RBI will look forward to. The government used this section in recent weeks in the form of a letter of consultation, but is yet to invoke it to issue specific directions or instructions to the RBI. Invoking it to issue directions was seen as a threat to the central bank’s autonomy.
On October 26, RBI deputy governor Dr. Viral Acharya, at a public event, warned that governments “which do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.”
Patel – who has cited “personal reasons” for his resignation – quit just three days ahead of a crucial RBI board meeting which is expected to discuss governance issues and the way in which the central bank operates.
