A day after RBI Governor Raghuram Rajan said no to a second term, former Deputy Governor Rakesh Mohan on Sunday said that there must be a stability at the top in the central bank and favoured a minimum five-year tenure to push reforms properly. Mohan, whose name is also doing the rounds as a probable contender to succeed Rajan, however, said it is “premature to discuss” his candidature.
He also said that the proposed six-member monetary policy committee (MPC), tasked with setting the interest rates, would “survive” after the tenure of the current governor Raghuram Rajan ends on September 4.
Rajan yesterday announced that he will not pursue a second term as the RBI chief, a surprise decision the industry and opposition parties termed as nation’s loss.
“I really want to emphasise that it is extremely important to have stability at the top of the central bank and is to be taken something as important. The Governor and Deputy governors should be given at least, may be, a five-year term to run the reforms well,” Mohan told a television channel.
Most central banks across the world have around 5-7 years of tenure for the governor and deputy governors. “I do think it is important for India to also have stability at the top in a similar fashion,” he said.
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He further said that former RBI Governor Y V Reddy had got a five-year term and till that time all deputy governors had similar stints.
“Somehow since then, the subsequent governors and deputy governors have been given three years term and then some extension,” he added.
On his name figuring in the list of contenders for the next RBI governor’s post, Mohan said, “The issue is too premature to discuss.”
He also said, however, the top priority of the new RBI governor would be to “maintain financial and price stability”.
“Given that there has been an unfortunate pressure and controversy in the last two months, the top job really is to reassure both the country as a whole and external watchers…” he said.
The governor’s top priority is to “continue establishing the integrity of the central bank, the reputation of the central and the reputation for probity, the reputation for professionalism at all levels at RBI starting right from the top level”.
Stating that RBI has been one of the institutions in the country that has maintained its discipline and reputation for professionalism all through, Mohan said: “It is somewhat unfortunate the way in which all this (Rajan’s decision against a second term) has happened.”
“Nonetheless, I think the maintaining of financial stability and price stability along with others will remain, as always have, the key task of the central bank governor,” he noted.
On apprehension over survival of the proposed MPC, Mohan said, “I presume there will be the case because that is something that was not just recommended by him. Others have also recommended.”
“Frankly, my whole view is that, not very difference that MPC will make. …I do believe the MPC will survive. I don’t think it will make change to monetary policy,” he added.