In fact, the real battle for the RBI with the GOI should have been the pursuit of unfettered autonomy in punishing these willful violators of its guidelines in the credit approval process. As a regulator,this is its legitimate turf, and to pick a fight with the government or politicians is perfectly par for the course. Unfortunately, that did not happen.
Urjit Patel as well as many of his predecessors,including Raghuram Rajan are guilty of not choosing to fight for legitimate autonomy vis-à-vis regulating banks. The consequence, over the years, is the huge pool of bad loans that is now hanging like an albatross around India’s neck.
The government of India needs to be complimented on the swift decision to appoint a new governor. This must signal the markets and the world at large that the government is conscious and recognizes the importance of the central bank.
The government certainly has access to a large talent pool in the public and private sector within India as well as abroad. One would have expected the government to choose an incumbent who is distinguished in public service, and who carries an enviable track record. However, it is uncertain if the choice of the current incumbent matches the expectations of the banking and financial system in India.
It must be mentioned here though, that the governor of the RBI need not be an economist, since it already has a large pool of eminent economists who can render the necessary expert advice. In the past,many administrators have occupied the high office and have requited themselves well.