MUMBAI -- Shaktikanta Das, the new governor of the Reserve Bank of India, promised on Wednesday to uphold the autonomy of the central bank, even as Indian stock markets cheered his appointment in hopes of relaxed policies.
The Bombay Stock Exchange benchmark Sensex, which had rallied all day, ended higher by nearly 2% at 35,779.07. The Nifty Bank index, too, closed up nearly 2%, with public sector banks and non-bank finance companies marking the strongest performance.
"I will try and uphold the professionalism, core values, credibility and autonomy of Reserve Bank as an institution," Das told reporters. "Decision-making in the modern times have become very complex ... Consultation with all the stakeholders is very important, it adds value to issues ... All issues can be resolved through discussions."
Das pointed out that while it is the mandate of the central bank and the monetary policy committee to target inflation, growth considerations cannot be ignored. He said the inflation outlook looks fairly benign at this stage, but he will watch developments.
As a first step toward consultation, Das will be meeting managing directors and chief executives of Mumbai-based public-sector banks on Thursday, ahead of Friday's board meeting.
The new governor did not comment on the fractious relationship between the central bank and the government. He is seen to be close to the government but is expected to keep a neutral stance. History has shown that most Indian central bank governors tend to keep their independence.
Investors, though, are hopeful that he will ease lending restrictions at weak banks and call for transferring the central bank's surplus reserves to New Delhi's coffers for spending before next year's general elections.
The market is also hopeful that liquidity will be increased to India's shadow banks after the Infrastructure Leasing & Financial Services default, which threatened a systemic crisis.
Brokerage company Edelweiss Securities anticipated that Das' appointment will boost bond and foreign exchange markets, as communication between the government and the central bank could improve.
"We will, however, closely watch for the meeting of the Central Board of the RBI on Dec. 14 to get some cues on his take on conflicting issues between the government and the RBI," the company said in a note. Edelweiss also said it will examine previous RBI measures to make banks healthier, among other issues.
Modi's government named the central bank's new governor just one day after the abrupt exit of former Gov. Urjit Patel.
Das was approved for a three-year term, the Appointments Committee of the Cabinet said in a brief statement. The new governor, who served as economic affairs secretary from 2015 to 2017, is a member of the Finance Commission of India. He played a role in Modi's controversial demonetization of high-value bank notes in November 2016.
A career bureaucrat, Das' name had cropped up for governor's job in 2016, soon after former 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.
However, Edelweiss warned that the outcome of Tuesday's election would either move the government to shed complacency and focus on delivery of its reforms, or force it into a more populist policy.
The latter, Edelweiss pointed out, "could add upside risk to the otherwise benign inflation outlook." It would raise the possibility of higher fiscal revenue spending in the form of loan waivers, increase food purchases to support a minimum price floor, boost rural spending in general, and possibly reduce taxes on petroleum products.
Patel resigned as central bank governor on Monday, having presided over a clash with the Modi government involving the easing of credit for small businesses and clearing up of bad loans. Patel left nearly one year ahead of the completion of his three-year tenure, which began in September 2016.