(Reuters) - India’s government named Shaktikanta Das, a seasoned financial bureaucrat, as the new governor of the Reserve Bank of India (RBI) on Tuesday, replacing Urjit Patel, whose abrupt resignation roiled financial markets.
Das held key positions both under the ruling Bharatiya Janata Party and the previous Congress-led government before retiring in 2017.
On Monday, Patel’s resignation came after over a month-long tussle over policy with the government that raised concerns about the central bank’s independence.
DEEPAK JASANI, HEAD-RETAIL RESEARCH, HDFC SECURITIES, MUMBAI
“The street would have been more comfortable with independently minded academics/economists who have a grip on world economy and are perceived to be more independent. However we have had bureaucrats as governors in the past who have done well.
“The incoming governor will have to work hard to prove that he has his own independent mind despite his background.
“The recent problems between the government and the RBI have cropped up due to diametric opposing views on some issues. Having a bureaucrat as a governor means he has worked in the ministry in the past and is aware of the government’s position on many issues; so along with proving his independence he will have to work on reaching middle ground on these differences.
“Foreign investors will be cautious and wait for him to express his independent views.
“The appointment has been done fast, so that is a positive but people will be neutral as we wait to see what his stance will be on the disputed issues.”
SAURABH JAIN, ASSISTANT VICE PRESIDENT, RESEARCH (RETAIL EQUITIES), SMC GLOBAL SECURITIES, NEW DELHI
“If there is some disagreement in the RBI over Shaktikanta’s appointment or his approach to RBI policies, then I think many other deputy directors may react to it, and that would be the first clue to whether the government has control over the RBI board.”
“Shaktikanta’s appointment is likely to cheer bond and FX markets as we may possibly see better communication between the government and the central bank amid the current rift on variety of issues.”
“Markets will watch for the meeting of the Central Board of the RBI on December 14 (unless rescheduled) to get some cues on Das’s take on conflicting issues between the government and the RBI on PCA framework, NBFC liquidity stress and RBI’s capital.”
“Whatever has happened, I think it was very important to not allow a void to continue. With that perspective I think he is a good and balanced choice. He is seasoned and has a good understanding of the whole of the financial sector both from the ministry and also in his interactions with the RBI.
I believe he can engage with all the stakeholders because to my mind, many of the current issues and situations have come also because of a large gap in communication, which I am sure Mr. Das with his experience and past engagement would be able to fill in.
At the moment there are several issues which are on the table. What would be most important would be to open the line of communication and engagement.”
PRONAB SEN, FORMER CHIEF STATISTICIAN OF INDIA AND FORMER PRINCIPAL ECONOMIC ADVISOR TO THE ERSTWHILE PLANNING COMMISSION
“The person itself doesn’t matter that much. What really matters is the process. So if you have a situation where a position as important as the governor of the RBI is filled within 24 hours of the resignation of the incumbent that will raise eyebrows. People are going to say the government must have already decided that this person is going to take over.
For other positions, the government has taken months to find replacements. RBI governor, you do it in 24 hours. So people are going to say clearly, this guy had already been identified. And, the situation was created where Urjit Patel had to quit. That really is the damage in part, to my mind, not that Mr. Das is a capable person, he is. It’s not whether he will uphold the RBI’s independence, I believe he will but people are not going to believe it.”
V K VIJAYAKUMAR, CHIEF INVESTMENT STRATEGIST AT GEOJIT FINANCIAL SERVICES
“The government should be complimented for deciding on Urjit Patel’s successor so quickly. Now it is upto Mr Shaktikanta Das to prove his credentials. Officers like Subbarao and YV Reddy have proved themselves as great RBI governors who refused to toe the government’s line. Shaktikanta Das with his rich experience in finance and economic management and expertise in team management has the competence to heal the wounds that have risen from the friction between the central bank and the government.”
GAURANG SHAH, SENIOR VICE PRESIDENT, GEOJIT FINANCIAL, MUMBAI
“Firstly, appointment of the new RBI Governor just a day after the previous governor put in his paper is a huge pleasant surprise. More importantly, a name like Shaktikanta Das carries track record, experience, credentials, credibility and respect along with him.
“The only thing is - he will have to walk the talk and more importantly maintain the credibility of the Reserve Bank of India, which in the last month or two had got damaged, especially the way Urijit Patel’s resignation came in last night. A lot of questions were raised, but I think the vacuum that was created since last evening up until this evening, most of that has disappeared.
“He has worked with the government so people will definitely look at it like that and especially some political party leaders will have a trumpet to play about this also. If he is working with the government, he has to be government’s man, but now that he has taken charge of the RBI, I think he will have a totally different role to play and I guess he knows where to draw the line given the kind of experience and credibility.”
“It should now be a good balance of growth and inflation, and growth is always liked by the markets.”
SUDHAKAR PATTABIRAMAN, HEAD OF RESEARCH OPERATIONS, WILLIAM O’NEIL INDIA,BANGALORE
“It is too early to comment but we know that historically he has been pro-all the steps BJP has taken, he was pro- demonetisation, but again, the government and RBI on the same side is not a healthy sign, his view has been the same as BJP. It is a difficult time to take over, it will be challenging for him and interesting to see how things will shape up.”
“I don’t see a fall in the markets, if RBI governor is resigning then it is a concern, people will speculate but the fundamentals won’t change.”
“Most likely the appointment will be taken positively, I don’t see market taking it as a big concern, this is a person who has vouched for demonetisation so maybe the government will find working with him a bit easier than his predecessors.”
“But then again, once a person comes on board he/she has to think about what is correct for the economy and RBI has its own role, that’s the whole idea about having RBI independent of the government.”
SUJAN HAJRA, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR, ANAND RATHI SHARES AND STOCK BROKERS, MUMBAI
“After the experience of the government with two economist governors, it was pretty much expected that a bureaucrat will fill in the slot.
“With Shaktikanta having been in the ministry of finance, I think the co-ordination between the government and the RBI will be smoother.
“Appointment of a bureaucrat at this juncture may be read as a blow on RBI’s independence, but my feeling is that this is nothing new, this has happened earlier. In that sense, it doesn’t signify a major departure from the RBI’s practices.
“Past track records suggest that even people who have come from the ministry of finance do not necessarily toe the line of the ministry.
“Markets might be slightly disappointed, but at the same time, uncertainty would have been worse if the post was not filled for long.”
A. PRASANNA, HEAD OF RESEARCH, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI
“As someone who has been part of the government ecosystem, Mr. Das will be expected to ensure a smoother working relationship between RBI and the government.
“With monetary policy entrusted to (the RBI’s monetary policy committee), the Governor plays a bigger role in banking regulations than in monetary policy. In the initial months the new Governor’s actions on this front will be closely scrutinised.”
ARUN KEJRIWAL, FOUNDER, KEJRIWAL RESEARCH AND INVESTMENT SERVICES, MUMBAI
“(Shaktikanta Das) has a decent track record and has done well, he has been in the administrative services for sometime, so I don’t think this will be viewed as negative.”
“The fact that they have got a new guy in less than 24 hours is I think what needs to be commended. They did not allow this issue to linger on.”
“He coming from an active government bureaucrat position, he is aware of the government’s agenda, so I won’t say he is a government nominee being sent there to carry out functions but fact remains that he certainly knows the need of the hour, so the issues on hand will get resolved, if not in this board meeting then the subsequent one.”
“Everybody will wait and watch the first few steps to see if RBI continues to be as independent as it has always been. I feel everything will work out very well as the incoming governor is also very experienced with a strong background.”
Reporting by Krishna V Kurup, Chris Thomas, Chandini Monnappa in BENGALURU and Neha Dasgupta in NEW DELHI; Editing by Sanjeev Miglani and Sai Sachin Ravikumar