Deputy governor appointment may trigger finance ministry, RBI tussle; ignoring G Gopalakrishna irks North Block

MUMBAI: The Reserve Bank of India (RBI) has landed itself on tricky terrain over the choice of its next deputy governor.

The central bank's decision to exclude G Gopalakrishna, the senior most RBI executive director, from the shortlist has not gone down well with the finance ministry, which has the last word on appointment of deputy governors. Besides his seniority, what may have influenced the ministry's stand is Gopalakrishna's scheduled tribe background.

RBI faces a situation similar to that in 2006, when the then executive director RB Barman was initially elevated to the rank of deputy governor, only to be demoted to his previous post within weeks. Barman belongs to a scheduled caste. Even though the flip-flop then had not snowballed into a larger issue, the central bank faced flak from the media as well as politicians.

"The RBI search committee headed by Governor Raghuram Rajan had identified three executive directors for the deputy governor's post. It recommended the names of B Mahapatra, R Gandhi and P Vijaya Bhaskar," said a senior RBI official in the know of the development. "But the finance ministry has raised objections to the decision to ignore seniority and recom-mend the names of junior EDs for the post," he said.

First Face-Off After Rajan

Since the search committee is headed by Rajan, the matter could turn out to be the first instance of a face-off between the finance ministry and Mint Street. Sections within RBI perceive that with elections around the corner, New Delhi may choose to steer clear of possible controversies over a senior-level appointment. After Barman lost out in the race for deputy governorship in 2006, some parliamentarians and MLAs had raised the issue with the PMO.

RBI and the finance ministry will have to sort out the matter quickly with Anand Sinha, one of the four deputy governors, retiring on January 18. If Gopalakrishna, currently in charge of the secretary's department, department of banking supervision and financial stability unit - is finally picked for the post, he would be the first member of the ST/SC community to become a RBI deputy governor.