Sanjay Malhotra named new RBI governor in unexpected move

Malhotra's appointment, announced on Monday, comes as term of current governor, Shaktikanta Das, set to end on Tuesday

India has appointed career civil servant Sanjay Malhotra as the new governor of the Reserve Bank of India (RBI), in a surprise move that has left financial markets speculating on the future direction of the country's monetary policy, Al Jazeera reported.

Malhotra's appointment, announced on Monday, comes as the term of the current governor, Shaktikanta Das, is set to end on Tuesday. Financial markets had anticipated an extension for Das, who has overseen significant economic recovery during his tenure.

Malhotra, who is currently the revenue secretary in the Ministry of Finance, has had a three-decade career spanning financial services, power, taxation, and information technology.

His appointment to the RBI for a three-year term marks a critical moment for India's economy, which is grappling with slowing growth and rising inflation.

“We are dealing with a sharp growth-inflation trade-off, a changing global environment, and a new set of monetary policymakers at the helm,” said Madhavi Arora, chief economist at Emkay Global.

“This transition, coupled with an expected change in the deputy governor in charge of monetary policy, will create significant uncertainty for the markets,” she added.

The new governor's first challenge will be to navigate a slowing economy and inflation that has recently breached the RBI's six percent tolerance band, prompting analysts to forecast potential changes in monetary policy.

The RBI's six-member Monetary Policy Committee (MPC), which also includes the governor and deputy governor, plays a key role in setting interest rates and managing inflation.

Malhotra’s appointment comes amid growing uncertainty. The country’s economic growth slowed to its weakest pace in seven quarters during the September quarter, and inflation has been creeping upwards.

While Das had been known for his interventionist approach, stabilising relationships between the central bank and the government, Malhotra's stance on inflation and growth remains to be seen.

Malhotra has a reputation as a consensus builder, and officials familiar with his work say he is focused on growth and believes central bank policy must align with government policies on inflation management.

His tenure as revenue secretary has already seen him clash with the RBI, particularly in his push for cryptocurrency platforms to register with the Financial Intelligence Unit, despite the central bank’s stance against cryptocurrency.

He has also led key financial decisions, including the privatisation of Life Insurance Corp of India and the sale of the government’s stake in IDBI Bank.

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