A tale of four reserve bank governors and their idiosyncrasies

by Manoj Rane

As Urjit Patel says his goodbyes as RBI Governor, it’s time to take a trip down memory lane on four Governors with whom I can claim to have had more than a nodding acquaintance. Besides their decisions, which often come back to haunt them and sometimes win them plaudits, direct interactions also help form a reasonably accurate opinion about these gentlemen who could be said to hold the second most important job in the country (at least in the economic sense and at the risk of contradicting an erstwhile editor of the Times of India!).

YV Reddy: He came to the Mint Street from bureaucracy, but proved to be a surprisingly effective Governor.

Probably a result of having cut his teeth as a deputy governor for several years and his experience of handling bosses in the government. He had his ear to the ground and did respect views of market participants like us, unlike some of his successors. Several regulator market partnerships, like the first technical advisory committee (where I was a member), were introduced during his reign. Interactions with him were always pleasant (may be too pleasant to the advantage of my media colleagues). What he said on the sidelines was far more explosive than what he said in formal briefings. It kept all of us busy dealing with the resultant market volatility! His one defining personal trait was his sense of humour, made all the more piquant by certain dour worthies who were the rule rather than the exception in that high office. Unfortunately, his health was probably a casualty of the tough challenges that he had to handle during his long career.

PV Subbarao: He was really an outsider sourced from the bureaucracy. His great strength was his proximity to the bosses in government, having worked closely with both the PM and the FM in the past. Despite being parachuted into RBI, the evident respect he conferred upon his deputy governors and other support staff at RBI led to a great partnership. His term benefitted tremendously due to the ear he lent to his team, which arguably consisted of the best deputy governors and executive directors I have had the pleasure of interacting with. To use a cricketing metaphor, it was like MS Dhoni’s captaincy with Sachin, Dravid, et al, which took

India to the No 1 team in the world. To continue with the sports analogy, with Subbarao’s ascension, the health profile of the gubernatorial office transformed itself. I have run into this Governor more often at the Race Course in the midst of his evening run, than at RBI headquarters. His term was also noted for the increased interaction with market players and their representative bodies that he initiated. This resulted in a much more orderly market, where central bank’s direction was clear and market players felt that their views counted.

Unfortunately, much of this has been dismantled over the last few years.

Raghuram Rajan: His first notable act was the introduction of the FCNR deposit scheme that helped India pull its coals out of the fire during a trying period. However, to give credit where it is due, it was Subbarao and his three musketeers (as we called them then) who worked closely with us in the market to design and have this scheme approved. Just like this scheme, where Rajan took a big leaf out of Subbarao’s book, he also took his predecessor’s fitness mantra to the next level, by running marathons, both literally and sometimes around the market. Being a career academic and economist (and have you ever wondered why only bureaucrats, economists and academics ascend to this exalted position with not a single market participant ever having been considered suitable?), sometimes his views were at odds with the market, but he did make up by being a great communicator who always mobilised his inner professor to explain his position. He also added the unheard of “heart-throb and rock-star” dimensions to this staid office. He did introduce discipline and structure to monetary policy, which will be regarded as his greatest contribution.

Urjit Patel: The one notable feature, unfortunately, of Patel’s term has been the much reduced access that market players and even bank chiefs have had, not just to the Governor but also to key RBI executives. If Reddy and Subbarao can credibly claim to have had their ear to the ground during a long period of close interaction with market players and influencers, both Rajan and even more Patel, steadily choked this access. This indeed hurt the market because opportunities to transmit the views and conditions of the market became rare, and undoubtedly, the input from the market into RBI’s decision-making shrunk substantially. As a result, we can see that the huge popular groundswell of support that followed Rajan’s departure is slightly muted following Patel’s. Unfortunately several measures on the anvil to improve the structure and depths of our market also fell by the wayside during this term. By resigning, Patel has restored to himself and his office, a high degree of dignity.

The last two Governors have unfortunately had successively shorter terms. Let’s hope the next one stays longer!

So in conclusion, who was the best Governor amongst the last four? After reading what I have written above, smart readers would already have guessed where my vote lies.

The author is a Market expert