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Economy

India names key figure in bank-note ban as central bank chief

Government moves fast to tap Shaktikanta Das as successor to Urjit Patel

MUMBAI -- Prime Minister Narendra Modi's government has named former economic affairs secretary Shaktikanta Das as the Reserve Bank of India's new governor, just one day after the abrupt exit of Urjit Patel.

Das was approved for a three-year term, the Appointments Committee of the Cabinet said in a brief statement.

Das, who served as economic affairs secretary from 2015 to 2017, is a member of the Finance Commission of India. He played a role in handling Modi's controversial demonetization of high-value bank notes in November 2016.

Patel resigned as central bank governor on Monday, having presided over a clash with the Modi government involving easing credit for small businesses and cleaning up bad loans. Patel left nearly one year ahead of the completion of his three-year tenure, which began in September 2016.

"I have decided to step down from my current position effective immediately. It has been my privilege and honor to serve in the Reserve Bank of India in various capacities over the years," Patel said in a statement, citing "personal reasons" for his decision.

Markets will watch keenly for whether Das continues Patel's stance in matters of monetary policy and central bank autonomy.

The appointment comes ahead of an RBI board meeting Friday, at which committees are expected to address issues related to lending restrictions at weak banks, the central bank's surplus reserves and increasing the liquidity to India's shadow banks after the Infrastructure Leasing & Financial Services payment default that threatened a systemic crisis.

A career bureaucrat, Das' name had cropped up for the RBI top job in 2016, soon after "rock star" Gov. Raghuram Rajan announced he would not serve a second term.

Das, who belongs to the Tamil Nadu cadre of Indian civil services officers, often acted as a bridge between the central bank and the government during his tenure as economic affairs secretary. He would be the third bureaucrat to take up the post, after Yaga Venugopal Reddy and Duvvuri Subbarao, who were the 21st and 22nd governors -- Rajan's two predecessors.

 The Federation of Indian Chambers of Commerce and Industry welcomed Das' appointment, saying his "wide-ranging experience in handling economic matters will certainly help Mr. Das in dealing with the critical issues facing the economy."

"We need to bring down real interest rates, improve liquidity and promote growth and employment," the federation said in a statement. "India’s long-term growth story is strong, and the potential for sustained GDP growth of 8%-plus is achievable by continuing the reform agenda and improving credit availability to industry."

Japan's Nomura says the central bank's next policy meeting will involve governance reform, encompassing the level of engagement between the RBI and its central board as well as the functioning of the board's subcommittees.

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