RBI: Who Will Be The Next RBI Governor
The sudden resignation of Urjit Patel as governor of the Reserve Bank of India, with immediate effect, opens up the question of who will take on the job.
The government has to nominate an official to take over in the interim, said a former central bank veteran. And thereafter appoint a new governor.
The RBI Act, 1934 says -
If the Governor or a Deputy Governor by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the Central Government may, after consideration of the recommendations made by the Central Board in this behalf, appoint another person to officiate for him...
This could also include an officer or employee of the bank, says the law.
While both the Prime Minister and Finance Minister have offered their best wishes to Patel, there is no intimation yet of who will step up to the job.
Former RBI Deputy Governor Rakesh Mohan said there’s a protocol in place. “The way the Reserve Bank is structured is that there is always at a given point in time a pecking order among the Deputy Governors. Essentially, dependent on the date of them being appointed. I am not sure who is the senior-most but automatically the senior-most Deputy Governor assumes charge in such a situation, if and when it arises.”
RBI board member Sachin Chaturvedi told Bloomberg News that traditionally the senior-most deputy governor is the next head.
There are four deputy governors in the RBI - NS Vishwanathan (appointed July 4, 2016), Viral Acharya (appointed December 28, 2016), BP Kanungo (appointed March 11, 2017), MK Jain (appointed June 4, 2018), and 12 executive directors.
Meanwhile, a government official told BloombergQuint, on condition of anonymity, that a search committee will be appointed to select the next governor.
I would imagine the government will have to be deliberate about its choice of governor because it will have to restore confidence RBI’s functioning and the joint functioning of the RBI and the centre.Rakesh Mohan, Former RBI Deputy Governor
“The centre always has a plan B in place,” said Pronob Sen, former chief statistician, in an interview to BloombergQuint.
There is a backup system. The question is will the backup system be allowed to play its role? If someone is appointed within a week, the fear will be that this person had already been identified. And therefore the appointment will be seen as political. And that may turn out to be more damaging than the resignation itself.Pronob Sen, Former CSO