New RBI governor works to untangle mess of urgent issues

Shaktikanta Das appointed as the 25th governor of India on December 11

Business

December 14, 2018

/ By / New Delhi

Shaktikanta Das takes charge amidst the clamour about intruding the autonomy of RBI and controversy regarding his educational qualification.

Shaktikanta Das, the new governor of the Reserve Bank of India, the central bank, has his hands full. Besides tackling the challenge of addressing the health of the banking system, Das will also have to find a middle ground with the government over the issue of independence of the central bank.

former-governor-urjit-patel

Former governor of the RBI, Urjit Patel.

Before former governor Urjit Patel resigned, numerous disagreements had surfaced between the then governor and the government on the functioning of the RBI and its autonomy. The government was unhappy with Patel’s stance on adopting account standard based on International Financial Reporting Standard and stiff BASEL-III norms which could push the fragile Indian banks into deeper troubles. Another dispute was on transfer of a chunk of RBI’s reserves, which have swollen to INR 96 trillion (Eur 1.2 trillion). The government was also not pleased with RBI’s directive seeking mandatory insolvency for the debt servicing default beyond 180 days as well as the RBI’s stance on maintaining relatively higher levels of capital adequacy ratio.

Working towards solution

As one of his first engagements Das is meeting bosses of all public sector banks, which account for 70 pc of total banking assets of the country, about tackling the issue of bad loans that have crippled many of these banks in India. The total bad loans or NPAs (Non-performing Assets) with public sector banks stand at 8.97 trillion.

In the meeting of the governing board of the RBI, slated for Friday, Das will also have to tackle the question of independence of the RBI. This will be the first meeting of the board since Patel’s resignation that followed days after a particularly stormy meeting.

Bridging the disconnect between government and the RBI is now in the new governor’s hand.

At a press conference in Mumbai, Shaktikanta Das detailed his tactics to the media, “I will try and uphold professionalism, values and credibility of this institution. It’s an honour and great opportunity to serve the RBI.” Speaking on the term between RBI and government, he added, “I don’t know whether the relationship is good or bad but we have to have stakeholder’s consultation. The government is not just a stakeholder but also runs the country, economy and manages major economic policy decisions. So, there has to be discussion between government and the RBI.”

Controversy regarding his appointment 

New governor’s educational qualification has been the subject of much discussion lately. Google trend showed people’s interest regarding the education of Das shot up after the announcement. For the first time in 25 years, a non-economist has been appointed as the governor of the RBI. The last non-economist appointee of this post was S.Venkitaraman in 1990. Indian economist and politician Subramanian Swamy has called the appointment of Das as the governor of Reserve Bank of India ‘wrong’. Former state minister of Gujarat and BJP leader Jay Narayan Vyas tweeted, “The new RBI governor Das’s education qualification is MA(History). Hope, he doesn’t make RBI a history.”  Finance minister, Arun Jaitley has backed Das’s appointment by saying “He has the right credential and he has been extremely professional.”

Similar Articles

YOU MAY ALSO LIKE

0 COMMENTS

Leave a Reply

Your email address will not be published. Required fields are marked *