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Rajan’s proposal on overhaul approved by RBI board

img_0177The board of Reserve Bank of India has given approval for governor Raghuram Rajan’s proposal to overhaul the central bank by streamlining the organization structure and cutting down on overlaps. The proposal also includes creating a position of chief operating officer, who would, besides other administrative functions, will also handle the reforms agenda of the regulator. The board thinks the new position need not be at the level of deputy governor, as suggested by Rajan. Besides creating the new position the governor also wants to reduce the number of departments in the central bank – 27 now – and would like to hire competent personnel from outside to man critical positions in the hierarchy. RBI has already mooted the proposal of creating the position of COO with the government and now that the board has given its approval, it may press the issue as it would need legilative changes. However, there are reports that the finance ministry has ruled out the proposal as the government feels no interim arrangements should be made for such high-profile appointments. While the RBI Act provides for the appointment of four deputy governors, Rajan’s restructuring proposal moots five deputy governors and 11 executive directors, against nine at present. The suggestion is that pending the approval of this proposal, there could be a position of COO as an interim measure. The government nominees on the board of RBI are understood to have opposed the suggestion and clarified that they are in favor of a permanent solution – which would mean amendment of the law and creation of an additional position of deputy governor.

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