RBI chief faces long to-do list in new job

Bloomberg

India’s new central bank governor has a list of challenges to face as he takes office: from fixing a banking crisis to convincing investors of the institution’s autonomy.
Shaktikanta Das, 61, a former economic affairs secretary at the Finance Ministry, took charge at the Reserve Bank of India for a three-year term on Wednesday, two days after Urjit Patel quit amid worries that the government was encroaching on the central bank’s turf. Das, a career bureaucrat, is seen as someone who can ease tensions with the state, prompting a mixed reaction from markets.
Sovereign bonds rallied on optimism he may shift the monetary policy stance to a less hawkish one. The rupee, Asia’s worst-performer among major currencies this year, dropped as much as 0.4 percent against the dollar, amid concern over the central bank’s independence and recent state election results.
“Mr Das will be initially considered more as a Finance Ministry insider, and only time
will tell whether he preserves the RBI’s independence,” said Sonal Varma, an economist at Nomura Plc in Singapore. “Our analysis of his views suggests that he has a neutral-to-dovish bent on monetary policy. We expect regulatory policies under his governorship to
be more sympathetic to the government’s arguments.”
Das’s first test comes on Friday when the central bank’s board is due to meet. The government is expected to push for tighter supervision of the RBI, including setting up committees to have oversight of various functions, from forei-gn exchange management to
financial stability.
A former economic affairs secretary from 2015 to 2017, Das worked closely with the central bank and oversaw Prime Minister Narendra Modi’s controversial plan to ban high-value notes in late 2016, an exercise that hurt the economy and led to thousands of job losses. He is currently a member of the Finance Commission of India, and serves as the government’s representative at the Group of 20 summits.
He will also need to win over colleagues at the RBI. Speculation is rife that Viral Acharya, the deputy governor in charge of monetary policy and Patel’s messenger in the public showdown with the government, may step down.
It was Acharya who delivered a hard-hitting speech in October warning the government against undermining the central bank’s independence.