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11
December 2018
 |
The Indian government has appointed former
finance ministry official Shaktikanta Das as new governor of the Reserve Bank
of India (RBI) in a move that could help to end a rift with Prime Minister
Narendra Modi’s administration as it seeks to ease lending curbs ahead of a
general election.
The announcement came a day after Urjit Patel
resigned from the post following months of fighting between the central bank
and the government over restrictions on lending and the bank’s surplus
reserves.
A loss in three key states for Modi’s ruling
Bharatiya Janata Party (BJP) on Tuesday could raise pressure on the RBI to take
immediate steps to boost the economy, including a transfer of the excess
reserves to the government.
Das, a seasoned civil servant who retired
last year as secretary of the department of economic affairs, will have a
three-year term as governor of the Reserve Bank of India (RBI), effective
immediately.
RBI watchers expect the 61-year-old, a key
backer of Modi’s controversial 2016 move to scrap high-value currency notes,
known as demonetisation, to improve communication between the finance ministry
in New Delhi and Mumbai-based RBI.
“Bonds and rupee should react positively
following this news,” said Ashish Vaidya, executive director and head of
trading at DBS Bank in Mumbai.
“He is a bureaucrat and will help in
improving the RBI-government relationship. We expect the RBI to take a
pragmatic approach under him, be pro-growth and change its stance going ahead
given that inflation has come off sharply.”
Patel resigned following
tension over the government’s demand for the central bank to allow some
bad-debt-laden public sector banks to lend more easily. The government has also
pushed the RBI to hand over some of its surplus reserves to help fund the
fiscal deficit.The
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