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India’s new central bank chief more dovish, promises to consult

Published: Updated:

New Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday he would adopt a consultative approach and move quickly to meet the heads of state-run banks to tackle issues facing the banking sector.

“I propose to undertake consultations with stakeholders wherever necessary,” Das said at his first news conference.

Das' more communicative approach is in contrast to his more reticent predecessor, Urjit Patel, who resigned on Monday following a drawn out public dispute with the government.

Das said the banking sector would be his key focus area and more measures were needed to revive lenders. A meeting with the heads of a number of state banks would be held on Thursday, he said.

Analysts said the move to open up a dialogue was positive.

“He is trying to give comfort to the banking industry against the backdrop of continued concerns on the financial stability front,” said Rupa Rege Nitsure, chief economist at L&T Financial Holdings.

Das' open style of communication is likely to be the way business will be conducted within the RBI as well as with outsiders, a marked departure from the previous regime.

At the news conference, Das answered questions from at least a dozen journalists, unlike his predecessor who only answered questions from a select few at bi-monthly monetary policy meetings.

While assuring that he would defend the central bank's autonomy at a time when the government has put pressure on it to ease regulatory curbs and boost growth, Das, a veteran government bureaucrat, also highlighted the need to take the government's views on board.

“Government is not just a stakeholder, but the government of the day runs the economy and manages major policy decisions,” Das said, responding to a question on the breakdown of communication lines between the two sides.

“So there has to be free, fair, objective and very frank discussions between the government and the RBI,” he said.

Eye on growth

A seasoned bureaucrat who has worked under two successive finance ministers from two opposing political parties, Das is known for his preference towards pro-growth policies.

That will be key to Prime Minister Narendra Modi as he tries to woo voters ahead of general elections due by May, after facing defeat in five recent state polls.

Modi also needs the RBI's support in getting additional funds from the central bank's capital reserves to help pay for any populist measures ahead of the general elections.

While Das declined to elaborate on steps he had in mind to boost the economy, he sounded dovish on inflation and growth, which could mean a relaxation of some regulatory rules for banks.

“Inflation targeting is an important function which the RBI Act has mandated. It's a mandatory part of RBI's functioning. So that will remain very important,” Das said, adding that the Act also mentions the importance of economic growth.

“Maintenance of the growth trajectory of the Indian economy is also important,” Das said.

India's retail inflation rate on Wednesday fell to a 17-month low at 2.33 percent in November, lower than an expected 2.8 percent, driven by weaker food inflation.