Five Key Decisions Of Outgoing RBI Governor Shaktikanta Das

Senior bureaucrat Sanjay Malhotra was named as the next governor of the Reserve Bank of India on Monday. He would be replacing Shaktikanta Das, the incumbent RBI Governor whose tenure is scheduled to expire on Tuesday.

Shaktikanta Das on Tuesday will complete six years as Reserve Bank of India Governor, becoming one of the longest-serving chiefs of the Indian central bank.

Das began his tenure as RBI Governor in 2018, initiating a rate-easing cycle to support the economy amid slowing domestic growth. When the pandemic struck in March 2020, the RBI implemented a range of measures to protect the economy from the widespread disruptions.

As part of these efforts, the central bank reduced the repo rate—the rate at which it lends to banks—by 115 basis points, bringing it down to a historic low of 4%.

However, Das would soon face even greater challenges as he was called upon to navigate the economy through a period of intense turbulence, including the Covid lockdowns, the global supply chain crisis, and the Russia-Ukraine war.

Das’s first major challenge as RBI Governor was to mend the rift that had developed between the central bank and the government while safeguarding the institution's credibility and autonomy. Known for his consensus-building approach, Das quickly set to work on normalising relations with the government, successfully restoring cooperation.

In the years that followed, Das focused on collaborating with the government to address key challenges facing India. These included the NPA crisis and significant geopolitical issues such as the Russia-Ukraine conflict and the Israel-Palestine conflict.

In contrast to his predecessor, Das adopted a more conciliatory stance on banking sector regulations. He engaged directly with bankers to understand their concerns, particularly regarding liquidity challenges in the economy, and worked to address these issues.

Das had barely completed a year as the RBI governor when Covid hit the world. He faced challenging times through that year as he had to manage the disruptions that were caused by the lockdown. During this time he made the decision to cut the policy repo rate to a low of 4% and continued with this low-interest rate regime to help the economy that was hit by the pandemic. This move helped with the recovery of GDP.

Throughout the pandemic, India performed comparatively better than many other countries. A similar resilience was demonstrated when the Russia-Ukraine war began. While European nations grappled with the war's repercussions, the sanctions on Russia triggered a sharp rise in oil prices. Despite these global economic headwinds, India managed to navigate the challenges effectively, thanks to Das's adept leadership.

Under Das’s leadership, the Monetary Policy Committee has effectively managed the broader economic impact of high inflation. However, over the past two years, persistently high food inflation has put the MPC’s effectiveness to the test.

In addition to these challenges, Das was also tasked with resolving the Punjab & Maharashtra Cooperative Bank crisis and rescuing Yes Bank.

While the issue surfaced during Patel's tenure, it was under Das’s leadership that a solution for the Punjab & Maharashtra Cooperative Bank crisis was found. The rescue effort culminated in the Centrum Group acquiring the bank and establishing Unity Small Finance Bank.

Another major success under Das's leadership was the rescue of Yes Bank in March 2020. The RBI played a pivotal role in safeguarding depositors, while a coordinated rescue operation led by banking and financial institutions helped stabilize the troubled lender.