Portfolio reshuffle of four RBI deputy governors likely before April

A Reserve Bank of India (RBI) logo is seen at the gate of its office in New Delhi. Photo: Reuters
A reshuffle of portfolios held by the four deputy governors (DGs) of the Reserve Bank of India (RBI) is seen as part of efforts to find a solution to the vexed issue of bringing 12 state-run banks out of the Prompt Corrective Action (PCA) framework and the controversial February 12 circular.

Of particular import is the portfolio of the highly sensitive Department of Banking Regulation (DBR) under the charge of N S Vishwanathan, now the senior-most of the four DGs. A key irritant between Mint Road and North Block is PCA and the February circular, on which he has refused to budge and been vocal about, most recently in a speech on October 29 at XLRI (Jamshedpur).

Vishwanathan is also vice-chairman of the powerful Board for Financial Supervision (BFS), headed by the RBI governor. In effect, he stands at the intersection of the PCA, the February circular, and the BFS.

It’s been gathered that tradition will also be kept alive if the DBR is given to the other DG from within the RBI, B P Kanungo, after Vishwanathan retires.

“Regulation precedes supervision. In the immediate case, the key areas of concern are PCA and the February 12 circular,” said a source.

Vishwanathan will be the first among the DGs to retire, having taken charge on April 4, 2016; the other three have some time to go. Given the pressure from India Inc and the banking fraternity, it is surmised that the portfolio rejig will take place before April, by when electioneering for the Lok Sabha polls will be in full swing.

As for Viral V Acharya, who also has a heavy portfolio under him, especially the key Monetary Policy Department (including Forecasting and Modelling Unit), another close Mint Road watcher said “the Monetary Policy Committee and the tie-break vote of Das acts as a checkmate and North Block can breathe easy”.

Acharya’s now infamous “wrath of the markets” statement had invited a comment from Economic Affairs Secretary Subhash Chandra Garg that “vital economic indicators are showing improvement”.

DG portfolio rejigs were effected on June 22, 2018; January 23, 2017; and July 4, 2016.

A look at reshuffles even in the distant past shows they have put through only when the three-year term of an incumbent DG ended and a new person came in, but there is nothing in the RBI Act (1934) that stipulates that this will always be the case. 

“It is up to the governor to take a call on these matters, which is entirely administrative. It may take a different colour in the context of discussions between the RBI and North Block, but if Das feels the need to go ahead with it, he can do so,” said a source in the know of the operational aspects of the RBI.