Shaktikanta Das promises to uphold RBI autonomy; will meet PSB heads today

In his first media interaction, Shaktikanta Das stressed the need for free, fair and objective discussions between govt and RBI. Photo: Kamlesh D Pednekar
Hours after assuming charge as governor of the Reserve Bank of India (RBI) on Wednesday, Shaktikanta Das spelt out his priorities, asserting that he would uphold the autonomy, credibility and integrity of the “great institution”. Das also said he would extensively consult various stakeholders, including the government, on key issues.

The former bureaucrat has replaced Urjit Patel, who abruptly resigned on Monday after a long-drawn feud with the government over issues related to governance and the autonomy of the central bank. “I will try to uphold professionalism, core values, credibility and the autonomy of the Reserve Bank as an institution,” Das said in his first media interaction as RBI governor.

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Suggesting his focus on the banking sector, Das said more measures were needed to revive lenders, and that he would meet heads of public sector banks on Thursday. According to banking sources, there is no specific agenda for the meeting, but the concerns over PCA (prompt corrective action) banks, stressed loans and capital adequacy are likely to come up for discussion.

Asked if Deputy Governor Viral Acharya remained in office, Das said, “He is still very much with the RBI. (I) just had tea with him.” There have been rumours about Acharya, whose speech on October 22 had brought the government-RBI stand-off out in open, putting in his papers. 

On queries regarding the relationship between the central bank and the government, he said, “We have to have stakeholder consultation with everybody. The government is not just a stakeholder, it also runs the economy and country. So, there has to be free, fair, objective and very frank discussions between the government and the RBI. I will like to believe that all issues, howsoever contentious, can be resolved through discussions.” 

Rating agencies like Moody’s and Fitch have flagged concerns over the sudden exit of Patel. Fitch Ratings said in a statement that the resignation followed a period of government pressure on the central bank to spur economic growth, and highlighted risks to the RBI’s policy priorities. Increased government influence on the central bank could undermine progress in areas like improving banking sector and stable macro-economic environment, Fitch said.

About accountability of the RBI to its board, Das said every institution has to have its professional integrity and maintain its professional autonomy. “At the same time, every institution must adhere to principles of accountability,” he added.

Elaborating on his communication approach, the governor said decision making had become far more complex in today’s world and consultation with stakeholders was very important. “Consultations with stakeholders add values and depth to our understanding of issues,” he said.

Das’s communication style is in stark contrast to his more reticent predecessor. RBI employees and top commercial bankers had vented frustration over Patel’s way of working. 

“Banking is currently facing several challenges of critical importance that need to be dealt with. I am not implying in any manner that nothing has been done. A lot has been done both by the government and the RBI. Several measures have been taken, but many more measures perhaps need to be taken,” he said.

On the contentious issue of the central bank’s capital (reserves), he said a committee would be constituted shortly and then its terms of reference would be drawn.

Das said, “There are a number of issues ahead. Inflation is broadly as per target and inflation outlook looks fairly benign at this stage, but we have to watchful of developments. The issue of health of PSBs is an important one."

"The issue of liquidity has also come into the focus, especially in public space, from time to time. This will be an area where the RBI will interact with stakeholders and get internal feedback and then take a view on these issues," he added. /> (With input agencies)