Shaktikanta Das appointed RBI Governor

Shaktikanta Das appointed RBI Governor

The government on 11 Dec appointed Shaktikanta Das, member of the fifteenth finance commission, as the governor of the Reserve Bank of India (RBI).

A day before pervious governor Urjit Patel resigned on 10 Dec over the alleged tussle between government and RBI’s independence.

Who is Shaktikanta Das?

He was a former secretary at the department of economic affairs. He retired as the Economic Affairs Secretary in May 2017.

He is a 1980 batch IAS officer from Tamil Nadu cadre.

RBI and Government: Challenges

1. Interest Rates:

The spat began with the government unhappy with the inflation-focused RBI for not cutting interest rates – and even raising them. However, it spilled over into regulation, something the central bank believes is its exclusive domain.

2. NPA Classification:

RBI’s February 12 circular on classification of non-performing assets (NPAs) and norms of loan restructuring was the next flashpoint. The government saw it as overly harsh, and indeed it drove all but two state-run lenders into the red. 

3. NBFC:

The government has been insisting that RBI step in to provide relief to non-banking finance companies (NBFCs), which are grappling with a cash crunch after IL&FS defaulted on repayments. 

4. Prompt corrective action or PCA framework:

The government wants the RBI to exempt power companies under the prompt corrective action or PCA framework, which outlines triggers for declaring a loan account as stressed or non-performing asset (NPA).

The RBI uses the PCA framework -- based on three parameters -- as an early-warning tool to check danger signs in the health of lenders. The PCA framework is applicable only to commercial banks.