The Centre may set up a new panel to identify candidates for the post of the next Governor of the Reserve Bank of India instead of asking the Financial Sector Regulatory Appointment Search Committee (FSRASC) to do so due to issues of propriety.
Official sources said the FSRASC, which was set up last year, has not been tasked with shortlisting candidates for RBI Governorship as that post is of the rank of the Cabinet Secretary, who heads the Committee.
“It would have been improper. The original mandate of the FSRASC was to recommend names for all members and chiefs of all regulatory bodies. However, in this case, though it was informally sounded out, there was no formal mandate from the government,” said a person familiar with the development.
The move comes after RBI Governor Raghuram Rajan announced his intention to return to academia on the completion of his three-year term in September.
Sources close to the hunt for an RBI chief said the new committee is likely to be set up through the Prime Minister’s Office.
The next Governor is expected to be named by August.
Last year, the FSRASC was tasked with recommending candidates for appointment as the head the Securities and Exchange Board of India. However, the government later decided to re-appoint UK Sinha for a third term.
Documents accessed by BusinessLine through a Right to Information request reveal that the FSRASC was set up based on the recommendation of the Financial Sector Legislative Reforms Commission as a “standing committee” to “recommend suitable persons for selection of Chairperson and Whole Time and Part Time Members of the financial sector regulators.”
Uniform process The Finance Ministry’s objective was to adopt a uniform selection process for all financial sector regulators without going into the related issues of tenure, age and qualification.
The Ministry had also suggested that the FSRASC be used for the selection of Chairpersons, Chief Executive Officers and members of other proposed institutions such as the Public Debt Management Authority, the Monetary Policy Committee and the Financial Data Management Centre.
The Appointments Committee of the Cabinet had approved the composition of the FSRASC in November last year. Apart from the Cabinet Secretary, who would head it, it would include Additional Principal Secretary to the Prime Minister; Secretary, Department of Economic Affairs or Department of Financial Services (depending on the administrative role); Chairperson of the regulatory authority concerned, and three outside experts.
It was originally proposed that the NITI Aayog Vice-Chairman would also be a member of the committee, but this plan was nixed as this post ranks senior to the Cabinet Secretary.