India Reserve Bank Gets CFO, More Powers

Urjit Patel, India’s central bank govenor

For the first time ever, India’s 82-year-old central bank, the Reserve Bank of India (RBI), will have a chief financial officer with domain expertise to oversee sweeping reforms.

Having a CFO is expected to trigger major changes in the central bank. Current RBI governor Urjit Patel seems to have taken the lead in implementing the reforms blueprint readied by predecessor Raghuram Rajan in 2015.

Rajan’s move to bring in a chief operating officer at the rank of deputy governor, which required approval of parliament, was shot down by the Indian government. The Narendra Modi government lacks the requisite numbers in the upper house of parliament to get the legislation through.

Nevertheless, Rajan had hired a slew of specialists from outside, a practice being continued by Patel. In a 2,500-word letter to RBI staff in December 2015, Rajan said, “While we will look for homegrown talent where possible, we need lateral entry in some areas.” Rajan then, and Patel now, have spoken of maintaining vibrancy within the 17,000-employee institution, making efforts “to come out of complacency and self-satisfaction, where lies [a] slow descent into mediocrity.”

Not only will RBI have a CFO, but it has also advised India’s banks to likewise hire full-time dedicated CFOs—and chief technology officers (CTOs)—as well, in order to manage their transition in a rapidly changing sector that “calls for better risk governance in rapid innovations, finance and technology.”

RBI’s move to appoint a CFO comes close on the heels of the government’s giving it more tools to deal with stressed assets of banks, which crossed a whopping $100 billion, leading to rampant defaults.

“We have got the elephant [RBI and banks] moving. [The] CFO appointment at RBI, more teeth and powers to RBI on stressed assets, and full-time CFOs and CTOs in banks are positive moves to resurrect the banking sector,” says Sanjay Mehta, leader of risk and advisory at independent consultancy BMR Advisors. “We can see the change gradually.”