The government is likely to name a successor to Reserve Bank of India governor Raghuram Rajan within a month, official sources said. Rajan on Saturday said he would not seek a second term.
As is the practice, Prime Minister Narendra Modi in consultation with finance minister Arun Jaitley will decide on the next governor, they added, refuting reports that a search committee, led by the Cabinet secretary, has been assigned to shortlist the names for the post.
At a juncture when cleaning up of banks’ books and the process to set up a monetary policy committee are underway, a decision on the next RBI governor has to taken with due diligence, they said.
Rajan’s three-year term will come to an end on September 4.
Even as many names are doing the rounds as possible replacements to Rajan, sources said these are “speculations” and “nobody has any idea on (Rajan’s successor) as of now.” According to reports, the possible candidates include current RBI deputy governor Urjit Patel, former RBI deputy governors Rakesh Mohan and Subir Gokarn, SBI chief Arundhati Bhattacharya, former chief economic adviser Ashok Lahiri and former finance secretaries Ashok Chawla and Vijay Kelkar.
Rajan’s decision to return to the academia was not completely unanticipated in the government circles, after BJP MP Subramainain Swamy had launched broadsides at him. There have also been indications that the government was not happy over his comments such as the one on “intolerance”.
In a letter to his colleagues at the central bank, Rajan wrote: “While I was open to seeing the developments (asset quality review and monetary policy committee) through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as governor ends on September 4.”
Raghuram Rajan, who was appointed by the previous UPA government in 2013, significantly contributed to containing inflation, rein in rupee decline and cleaning up of bank books. In all these endeavors, he was backed by the Modi government, which has also undertaken concomitant fiscal reforms. In one area, where probably the government wanted more from the governor was a steeper interest rate cut than 150 basis points he delivered since January 2015 to support growth.
“Given the kind of things we were reading in newspapers and rumours floating around (on Rajan), it (his decision not to seek a second term) was not a complete shock,” said Rupa Rege-Nitsure, group chief economist at L&T Finance Holdings.
Rege-Nitsure was all praise for Rajan’s tenure as the RBI governor. “His tenure of was excellent and he played an instrumental role in making monetary policy exercise more predictable, development of financial benchmarks and cleaning the balance sheet of banks by undertaking asset quality review,” she said, adding that Rajan excellently managed financial stability and other tasks assigned to him.