RBI New Governor Live News: Sanjay Malhotra to be new RBI Governor, will replace Shaktikanta Das

Another Finance Ministry insider takes helm at the RBI

Path cleared for more and urgent easing

Not a whole lot is known about Mr Malhotra’s views on current economic issues

His experience has given him an acute appreciation of government’s revenue generation and the importance of growth

There are three potential changes that could occur under the new RBI Governor

First, a likely shift towards more accommodative monetary policy

Second, the RBI Governor and his team also decide on the direction of macroprudential policies

Third, the RBI Governor plays an important role in driving the central bank’s currency management strategy

Sanjay Malhotra will be taking chare of the RBI at a tricky period

He faces immediate challenge of dealing with sharper than expected slowdown in growth coupled with the near-term volatility in inflation while also ensuring a stable currency

He has not had any strong statements except on tax policy in recent months, making his policy bias unclear as things stands

With a new governor being selected, the risks of an intermeeting rate cut even if inflation comes off sharply have declined materially

After a period of fevered speculation, the GoI announced the appointment of Sanjay Malhotra, presently the Revenue Secretary in the Ministry of Finance, as the next RBI Governor from 11-December, for a three-year term. The decision came down to the wire, with Governor Shaktikanta Das’s tenure ending on 10-December, and the GoI has now appointed two career bureaucrats as RBI Governor in a row. In his bureaucratic career of 33 years, Malhotra served in sectors spanning power, finance, taxation, IT, and mining. He is a 1990 batch IAS officer from the Rajasthan cadre, with an engineering degree in computer science from IIT Kanpur, and a Master’s in Public Policy from Princeton University. Prior to his appointment as Revenue Secretary, he was Secretary in the Department of Financial Services (DFS); his other prominent prior roles include CMD of REC, and ex-officio Secretary to the GST Council.

■ This appointment indicates GoI comfort on having a bureaucrat rather than a technocrat at the RBI’s helm. However, this also means that the post of Revenue Secretary has been vacated at a pivotal time, just as discussions for the FY26 Union Budget have begun, wherein the Revenue Secretary plays a major role. The GoI will thus need to fill that position imminently, to ensure minimal disruption to the planning and execution of the Budget.

■ Our initial discussions with some senior bankers indicate that Sanjay Malhotra is straightforward in policy communication, and in his past role at the DFS, he would push banks to adopt and focus on technology. That said, we also note he has taken tough taxation decisions relating to capital markets. The changes/harmonization in capital gains tax treatment, with removal of indexation benefit for real estate and debt MF gains, among others, were all implemented during his tenure as Revenue Secretary. However, interestingly, he has taken cognizance recently of the negative impact of excessive tax compliance/notices on business activity.

■ Besides all this, new year 2025 is going to see a new MPC composition, with three newly appointed external MPC members in Oct-24, who will now be joined by the new Governor and possibly a new Deputy Governor in Jan-25 (with Dr Patra’s tenure nearing its end).

■ Interestingly, the new Governor and MPC will also have substantially different policy challenges as well as macro and global landscape while stepping into CY25 vs what the Das-led regime faced at beginning-CY24. The policy trade-offs are getting acute: 1) entrenched state of India’s stagflation, 2) tricky timings and small window of conventional rate cuts as global dynamics turn more fluid, 3) mounting FX pressures and increasing cost of FX intervention – none of these were challenging in the same period last year.

■ We do not, for now, rule out a cut in Feb-25, but would be more comfortable taking a firm call closer to the policy window. We also keep a watch on unconventional easing measures, specifically the gradual easing of regulatory lending norms ahead, in order to re-spur the waning credit offtake.

Shaktikanta Das will end his six-year innings at the helm of RBI on Tuesday with a lot of satisfaction, having adroitly steered the financial system and the economy through the Covid-19 pandemic, ensuring there is an “Arjuna’s eye” kind of focus on bringing down inflation, building forex reserves for a “rainy day”, and encouraging regulated entities to strengthen capital buffers, among others.

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A most remarkable period of stewardship of the Reserve Bank of India (RBI) ends today as Shaktikanta Das steps down as Governor. Das assumed charge at a most difficult time for the financial markets and for the regulator. And when he hands over charge to his successor, Sanjay Malhotra, it will be with a justifiable sense of pride for what he has been able to achieve in the last six years at the helm of the central bank.

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Ending months of suspense, the Government on Monday appointed Revenue Secretary Sanjay Malhotra as the new Governor of the Reserve Bank of India (RBI). Malhotra will succeed Shaktikanta Das, whose six-year term is ending on Tuesday. 

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