RBI Governor Shaktikanta Das stresses on consultative approach to solve issues

shaktikanta-das-pti Newly appointed RBI governor Shaktikanta Das | Janak D. Bhat

Shaktikanta Das, who took charge as the new governor of the Reserve Bank of India on Wednesday, said he would uphold the central bank's autonomy and feels a consultative approach will help address all issues.

Das' comments come in the backdrop of a long-drawn tussle between the government and the central bank. On Monday, his predecessor Urjit Patel had resigned citing “personal reasons,” nine-months before his tenure was to end.

The appointment of Das, a former economic affairs secretary, who was seen as a face of the Narendra Modi-government during demonetisation, has also not gone down well among many, who feel he is a government man.

In his first interaction with the media as RBI governor, Das was upfront in his views on autonomy of the institution.

“The RBI is a great institution; it has got a very long legacy, a very rich legacy and I will do everything that is possible, try and uphold the professionalism, the core values, the credibility and the autonomy of the Reserve Bank,” he said.

The Centre and RBI have been at loggerheads over various issues including the transfer of excess reserves, easing liquidity to non-banking finance companies and relaxation of some of the prompt corrective action (PCA) norms for ailing banks, which would help them boost their lending.

While Das didn't specifically discuss individual issues, the man who is known to take a non-confrontist path in critical issues, believes all issues can be sorted through a dialogue.

“Consultation with stakeholders is very important. Consultation with all the stakeholders always adds value to our understanding of issues...so therefore, I propose to undertake consultations where ever necessary, as per requirement in a need-based manner on various issues,” said Das.

He added that there needed to be a free, fair, objective and frank discussion between the RBI and the government, who he feels is not just a stakeholder, but it also manages major policy decisions.

The governor said the immediate focus will be on the banking sector and he has called a meeting of managing directors and chief executives of Mumbai-based state-owned banks on Thursday. A few days later, he proposes to meet CEOs of other public sector banks and will also hold a dialogue with the private bankers later.

“Banking is an important segment of our economy and is currently facing several challenges, which are of critical importance and they need to be dealt with. 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,” said Das.

Urjit Patel was the key architect behind the shaping of the central bank's inflation targeting framework, which the new governor said continues to be important.

He pointed that the inflation level was broadly within the target and the outlook too looked “fairly benign,” although one needs to be watchful on developments. Maintenance of the growth trajectory of the Indian economy was also important, he added.

On the issue of addressing liquidity concerns, Das said interaction with stakeholders would be needed to get a feedback and then take views.

The central board of the RBI is scheduled to meet on December 14 and contrary to some speculation that it may be postponed, Das said the meeting will take place as scheduled. Various issues including governance reforms are likely to be discussed in the meeting.

The swift appointment of a new governor calmed nervous investors, who also seemed to have shrugged off the election losses suffered by the ruling BJP government in Rajasthan, Madhya Pradesh and Chattisgarh.

The BSE Sensex closed up 629 points or 1.8 per cent at 35,779.07 points and the wider NSE Nifty 50 surged 188 points or 1.8 per cent to 10,737.60 on Wednesday.

Analysts at JM Financial Institutional Securities said that with the appointment of the new governor, the uncertainty around RBI had subsided.

“In our view, the appointment of the new RBI governor means that easy liquidity (open market operations) would continue,” said the analysts.