Move will boost his chances for extension of tenure as RBI Governor

Raghuram Rajan, Reserve Bank of India (RBI) Governor who has been a vocal votary for increased co-ordination among central banks, has been elected vice-chairman of the Bank of International Settlement (BIS). Mr. Rajan will have a three-year term as vice-chairman of the BIS.

“Rajan joined the BIS Board of Directors in December 2013. Jens Weidmann, Chairman of the BIS Board, welcomed Dr. Rajan in his new role and thanked him for his continued service to the Bank,” the RBI said in a press release.

First such RBI Governor

Mr. Rajan is the first Indian central bank Governor to become the vice-chairman of BIS.

BIS is headquartered in Basel, Switzerland, and acts as a coordinating body among central banks to ensure global monetary and financial stability. The BIS board meets at least six times a year.

The BIS board comprise all central bankers. The board includes U.S. Federal Reserve Chair Janet Yellen, Bank of England Governor Mark Carney and Bank of Japan Governor Haruhiko Kuroda.

Mr. Rajan was appointed Governor of the RBI in September 2013, and was given a three-year term. This new role of Mr. Rajan will surely boost his chances for an extension next year, according to central bank watchers.

Tiding the currency crisis

The former International Monetary Fund chief economist, who is widely credited for predicting the global financial crisis of 2008, was appointed RBI Governor amid a currency crisis in 2013 which he was able to tackle soon after he assumed charge. He was also able to bring down inflation from double digit levels in the last two years and had proposed radical changes in the areas of monetary policy and banking reforms in India.

Mr. Rajan has been a strong critic of unconventional monetary policies such as quantitative easing and keeping interest rates at near-zero level for long, and he also believes that the sooner central banks recognised the importance of coordination, the more sustainable global growth would be.

“The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth and to the financial sector,” Mr. Rajan said in a speech at an event organised by the Institute of Monetary and Economic Studies, Bank of Japan, Tokyo, last year.

Problem of collective action

“It is not an industrial country problem, nor an emerging market problem; it is a problem of collective action,” he added