Urjit Patel stares at half-empty RBI board

Eight of 16 board positions nominated by Centre vacant

Urjit Patel, the newly appointed governor of the Reserve Bank of India (RBI), faces a problem that doesn’t concern interest rates or the currency and over which he has little control. The central board of the RBI, which provides broad direction to the central bank, currently has eight of the 16 director positions nominated by the Centre lying vacant, with the terms of two more sitting members due to end over the next couple of months.

The government in March appointed three new directors, after seven board-level positions had fallen vacant in September and October last year. Damodar Acharya, one of the 10 directors who are chosen by the government from various fields, is set to complete his term shortly. The Centre also nominates two government officials to the board -- the current nominees are Economic Affairs Secretary Shaktikanta Das, and Anjuly Chib Duggal, Secretary Financial Services.

Local boards

A full RBI board will have members including the Governor and four deputy governors, two government officials as nominees, the 10 directors from varied backgrounds and one member each from the bank’s four local boards, which are also nominated by government.

Of the four directors from the local boards, three positions are vacant. Only one member, Nachiket Mor, representing the Eastern region, is currently on the board, and he will also complete his term shortly. The local boards have been largely dysfunctional for more than a year now due to lack of board members.

“The government needs to fill up the vacancies soon,” said a central banking source. “Earlier this year, in one of the board meetings, the quorum was not fulfilled and one of the board members had to join via video-conferencing at the last minute. Such situations should be avoided,” the source said.

In addition, one of the deputy governor’s positions at the RBI has also become vacant after Dr. Patel was elevated as governor.

The government nominees on the RBI’s central board comprise eminent personalities from various fields and the board’s role is to assist in providing a broader vision for the central bank. The central board is not responsible for the formulation of monetary policy.

CEO posts

Not just the RBI board, but appointments to some of the chief executive officer positions in public sector banks are yet to be made by the government despite the Bank Board Bureau (BBB) recommending the names some months ago.

P. Srinivas, MD & CEO of Kolkata-based United Bank of India (UBI), and R. Koteeswaran, who headed Chennai-based Indian Overseas Bank (IOB), retired on June 30. The top spot at another public sector lender, Bank of Maharashtra, will fall vacant on September 30.

In a move to bring in transparency and fast track appointments at state-run lenders, a Bank Board Bureau was formed in February under the chairmanship of Vinod Rai, the former Comptroller and Auditor General of India. The BBB started functioning in April.

“Selection has been made long time back,” Mr. Rai said last month, on the sidelines of an event, when asked about the appointments. He said the appointments were, however, expected to be announced soon.