Revenue Secretary Sanjay Malhotra succeeds Shaktikanta Das as RBI governor

Malhotra takes over the reins of the RBI at a time when growth in the domestic economy has fallen to a seven-quarter low

Ending weeks of speculation, the government on Monday appointed Sanjay Malhotra, currently serving as secretary in the Ministry of Finance, the 26th governor of the Reserve Bank of India (RBI) for a three-year term, effective December 11.

  Malhotra, 56, succeeds Shaktikanta Das, who will demit office on Tuesday after successfully shielding the country’s financial system from numerous challenges during his six-year tenure, the second longest in RBI’s history.

  “The Appointments Committee of the Cabinet has approved the appointment of Sanjay Malhotra, Secretary, Department of Revenue, as Governor, Reserve Bank of India, for a period of three years from 11.12.2024,” the government notification said.

 

  Malhotra is taking over the reins of the country’s central bank at a time when growth in the domestic economy has fallen to a seven-quarter low of 5.4 per cent, with increasing clamour from various quarters to cut interest rates to spur economic growth. In its recently concluded monetary policy meeting, the RBI lowered its projection for gross domestic product (GDP) growth in 2024-25 from 7.2 per cent to 6.6 per cent, with Q3 growth forecast at 6.8 per cent and Q4 at 7.2 per cent.

  Inflation remains a major concern for the central bank as headline inflation in September and October remained uncomfortably high, primarily due to food prices. While food inflation is likely to soften with the seasonal easing of vegetable prices and kharif harvest arrivals, adverse weather events and rising international agricultural commodity prices pose upside risks. The RBI has projected the Consumer Price Index-based inflation at 4.8 per cent for 2024-25, an increase of 30 basis points from the previous projection.

  External factors, such as geopolitical risks, policy uncertainty regarding trade, and their impact on the domestic currency, are going to be major concerns for the central bank.

  The new RBI governor will also need to address the rupee hitting new lows, as the domestic currency is expected to remain under pressure due to disappointing domestic economic data and ongoing selling by foreign portfolio investors.

Malhotra, a seasoned bureaucrat, is a 1990-batch Indian Administrative Service (IAS) officer from the Rajasthan cadre. He holds a degree in Computer Science Engineering from IIT Kanpur and a master’s in Public Policy from Princeton University, USA. Before his appointment as the revenue secretary, Malhotra served as secretary in the Department of Financial Services under the Ministry of Finance.

 

In a career spanning over three decades, Malhotra has worked across various sectors, including power, finance and taxation, information technology, and mines.

 

Malhotra succeeds Das, another seasoned bureaucrat, who was appointed on December 12, 2018, after Urjit Patel stepped down, citing personal reasons. Das’s six-year tenure, extended by three years in December 2021, makes him the second-longest-serving governor in the RBI history, after Benegal Rama Rau, who held the position for seven and a half years in the 1950s. For weeks, there was speculation about whether Das would continue for a third term, which would have made him the longest-serving RBI governor.

 

Malhotra will chair his first monetary policy meeting as chair of the Monetary Policy Committee (MPC) in February 2025, following the Union Budget announcement. Most market watchers expect the much-awaited interest rate cut to begin from the February policy review, as the worst of the quarterly growth slowdown and peak inflation is likely to be over.

 

In its recent monetary policy meeting, the RBI’s six-member MPC kept the policy repo rate unchanged at 6.5 per cent – the status quo for the 11th consecutive time -- maintaining a “neutral” stance. However, it reduced the cash reserve ratio (CRR) by 50 basis points to 4 per cent to boost system liquidity.

 

Among other impending tasks that await Malhotra at Mint Road are finalising draft norms on key subjects, such as project finance, liquidity coverage ratio, expected credit loss, and bank investment in subsidiaries in the same line of business. Malhotra’s Computer Science Engineering background should also come in handy while tackling the issue of rising cyber security threats to the Indian financial system.