JOIN USWeeks before his tenure comes to an end, Reserve Bank of India Governor Raghuram Rajan on Thursday spoke in favour of a longer term for the central bank head, as practised in other parts of the world.
“A three-year term is too short,” Rajan is understood to have replied to a query from members of the Parliamentary Standing Committee on Finance on the state of the economy, banking reforms and non-performing assets.
According to sources, Rajan also cited the example of the US Federal Reserve where the chair is appointed by the President for a four-year term.
In India, the RBI governor is appointed for a three-year term, but after 1990, almost every governor got a two-year extension, except S Venkitaramanan who served a two-year term from 1990 to 1992.
Rajan’s three-year term ends on September 4 and he has decided not to seek a second term. This makes Rajan only the second RBI governor since 1990 to have a term shorter than five years.
Rajan also met Finance Minister Arun Jaitley on Thursday amid speculation that a monetary policy committee (MPC) will set the policy interest rates from August.
This was Rajan’s first meeting with the finance minister after he announced his decision to quit. “The finance ministry and RBI keep talking all the time,” Rajan told reporters after the meeting.
The finance ministry and the RBI are working together to quickly put in place the MPC in which both the entities will have three members each. The MPC will henceforth decide the interest rates instead of the RBI governor.