The sudden resignation of Urjit Patel as governor of the Reserve Bank of India, with immediate effect, opens up the question of who will take on the job.
The government has to nominate an official to take over in the interim, said a former central bank veteran. And thereafter, appoint a new governor.
The RBI Act, 1934 says:
“If the governor or a deputy governor by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the central government may, after consideration of the recommendations made by the Central Board in this behalf, appoint another person to officiate for him...”
This could also include an officer or employee of the bank, says the law.
While both the prime minister and finance minister have offered their best wishes to Patel, there is no intimation yet of who will step up to the job.
“The Centre always has a plan B in place,” said Pronob Sen, former chief statistician, in an interview to BloombergQuint.
“There is a backup system. The question is will the backup system be allowed to play its role? If someone is appointed within a week, the fear will be that this person had already been identified. And therefore the appointment will be seen as political. And that may turn out to be more damaging than the resignation itself.”Pronob Sen, Former CSO
There are four deputy governors in the RBI – NS Vishwanathan, Viral Acharya, BP Kanungo, MK Jain, and 12 executive directors.
(This article was first published on BloombergQuint.)