Will Arundhati Bhattacharya break the RBI Governor glass ceiling?

State Bank of India’s Chairperson Arundhati Bhattacharya is the only female in the shortlist. The other three are current RBI Deputy Governor Urjit Patel, former deputy governors Rakesh Mohan and Subir Gokarn, said a top official. A new Monetary Policy Committee (MPC) will be appointed soon, he added. 

The moves seek to ensure policy continuity and reassure domestic and global investors after RBI chief Raghuram Rajan shocked markets 10 days ago by saying he would not seek reappointment in September. Rajan, a former IMF chief economist, had been accorded rock-star status by markets for defusing a currency crisis, lowering inflation and winning parliament’s approval to set up the policy committee which will set interest rates.

None of the shortlisted candidates have commented, though media have reported Bhattacharya may get a one-year extension in her current job. Analysts said a lack of transparency over the selection process was a worry, and it would be important to ensure Rajan’s successor is strong enough to uphold the RBI’s autonomy.

“For the continued credibility of a strong and autonomous institution like the RBI, I hope the next governor is someone independent like Rajan, and not more pliable to the government,” said Shumita Sharma Deveshwar, co-head of India research at Trusted Sources, a macro advisory firm.

The official, and another from Prime Minister Narendra Modi’s office, said Rajan was expected to join the search committee to appoint three external members of a new six-member RBI MPC. The objective was to ensure that the MPC is constituted as soon as possible, before the appointment of Rajan’s successor, both officials said. If all goes well the new panel would be formed by August 1. If that timetable holds, it would mean the MPC will be in place for the last policy meeting chaired by Rajan in August. 

Rajan’s decision to stand down followed weeks of attacks from the far right of Modi’s ruling party, led by maverick politician and Harvard-educated economist Subrama

nian Swamy. Swamy memorably described Rajan as “mentally not fully Indian” in an open letter to Modi, demanding the governor’s immediate termination. He was venting views widely held in the Hindu-nationalist umbrella group, the Rashtriya Swayamsevak Sangh (RSS), to which Modi’s ruling party is affiliated. 

A senior RSS source expressed support for the slate of candidates, however, indicating the group would prefer a more low-profile, Indian-educated governor than the outspoken Rajan but is not bent on forcing a more radical policy shift. 

Under the finance bill passed this year, three members of the MPC would be RBI insiders, headed by the governor. Three external members would be chosen by a search committee comprising Modi’s cabinet secretary, the RBI governor, the secretary of the finance ministry’s department of economic affairs and three outside experts chosen by the government. The governor would have the casting vote in the event of a 3-3 split. Deputy finance minister Jayant Sinha said he expected a new governor to be named within weeks. The RBI said it was not in a position to comment.