The government on Tuesday appointed Shaktikanta Das, member of the fifteenth finance commission, as the governor of the Reserve Bank of India (RBI). His appointment has run into controversy with opposition parties questioning his credential. He was secretary in the department of economic affairs when Prime Minister Narendra Modi announced the disastrous high-value currency ban in November 2016. An MA history degree holder, Das is a Tamil Nadu cadre IAS officer. He replaces Urijit Patel who resigned under controversial circumstances following tussle with the central government over the regulator’s independence and the regulation of banks. Patel’s predecessor, Raghuram Rajan’s term, too, was tumultuous, with the government and RBI failing to see eye to eye on issues such as managing liquidity and regulation of weak banks.
The Modi administration, which believes RBI is not doing enough to ease the liquidity crunch faced by non-bank lenders or to ease lending curbs on banks to finance new projects, has made its displeasure abundantly clear. Also central govt is eyeing cash reserves of RBI. Das joins the central bank at a time when India’s growth has been slowing down, the currency markets are volatile and crude oil prices are set to be less benign, following a production cut by the Organisation of the Petroleum Exporting Countries. He has immediate task of normalizing RBI’s relations with the government and reassuring the financial markets about the direction of the central bank’s policies. There will also be huge pressure on him to protect the autonomy of RBI. Many fears that he will be used by central government to get things done in their favour. Such action will hurt the image of RBI and may make investors worry. With opposition parties as well as critics keeping an eye on his each move, Governor Das has tough days ahead.