Key Highlights A selection committee will shortlistcandidates for RBI governor

The decision that was taken earlier by the PM Modi

Earlier, chiefs of other regulatory bodies like Sebi have been shortlisted by search committees

This will be the first time the RBI governor will be appointed similarly

NEW DELHI: In a break from tradition, the government has tasked a selection committee headed by cabinet secretary P K Sinha with shortlisting candidates for Reserve Bank of India governor — a decision that was taken earlier by the Prime Minister in consultation with the finance minister.

In the past, chiefs of other regulatory bodies — including insurance, pension and Sebi —have been shortlisted by search committees. But this will be the first time the RBI governor will be appointed similarly, signalling a major shift in government stance and ending the special treatment given to central bank chiefs. The decision to route the RBI governor’s appointment through the financial sector regulatory appointment search committee (FSRASC) seems intended to cool speculation over Raghuram Rajan being considered for a second term.

The FSRASC, set up last year, had interviewed candidates for Sebi chief. In February, the government ignored its recommendation and reappointed U K Sinha for a year.

Apart from the cabinet secretary, the committe comprises additional principal secretary to PM P K Mishra, who is a permanent government nominee, and three outside experts - Rajiv Kumar of Centre for Policy Research, Manoj Panda of the Institute of Economic Growth and Bimal N Patel from Gujarat National Law University. A finance ministry representative will be a special invitee. The panel's recommendation will be sent to the appointments committee of cabinet headed by the PM, which will decide on the governor.

Going by the current thinking in official circles, a second term for Rajan could well be on the cards despite occasional reports that put him at cross-purposes with the government over issues like rate cuts or 'Make in India'. At the same time, the government does not seem keen to imbue the appointment with a greater profile of attention. The committee route would be in sync with PM Narendra Modi's remark that the appointment is an "administrative decision" that will be taken closer to September when Rajan's term ends.

The committee's recomendation for RBI deputy governor was a break from past practice as previously, the head of the regulatory body presided over the selection committee. This time around, the RBI governor was a member of the FSRASC.

The process of making top-level appointments to regulatory bodies has been problematic, with the choices often being seen to be politically influenced. Even with the committee-bound process, the choice for sensitive posts will no doubt be vetted by the political authority. But the decision to make FSRASC the recommending body that could well put up a single name instead of a short list for a regulator is aimed at reducing discretion and putting all such bodies on a par.

