Finance ministry prefers amendment to RBI Act for appointing a COO
August, 19th 2014
The finance ministry will firm up its view on Reserve Bank of India governor Raghuram Rajan's move to appoint a chief operating officer (COO) only after the latter initiates a formal proposal seeking an amendment to the RBI Act toward this end.
The finance ministry is not in favour of any ad hoc arrangement for a lateral hire, which essentially means that the COO appointment cannot be made in a hurry as changing the RBI Act could take a while. "An amendment to the Act can't be done just like that. It will be a political decision and require wider stakeholder consultation," said a ministry official, who added that the internal disquiet over the issue would also have to be taken into account.
Some RBI employees have written to board members opposing lateral hiring at the central bank. The finance ministry feels there is no point appointing a COO if the person doesn't have the rank of deputy governor (DG) and is unable to attend board meetings.
The current RBI Act provides for a full-time governor and not more than four deputy governors. The Act will have to be amended if one more deputy governor-level post needs to be created.
"No point creating a post if you cannot give him DG rank. Otherwise, he cannot come to the board," said a senior finance ministry official, adding however that the government doesn't have a problem with the proposal in principle.
Without having the rank, "Will he serve a purpose? What will he do?" the official said. Even RBI agrees that under the current law the COO cannot be a deputy governor-level officer, he said. "The governor has to write a proposal to amend the Act to create a post," he added. The RBI had on August 14 issued a statement, four days after a board meeting on August 10, regarding human resource restructuring issues that had been discussed.
"One of the proposals envisaged the creation of an additional position of a chief operating officer of the rank of deputy governor to head one of the five functional clusters. The proposals were discussed in the Reserve Bank's board meeting. The board approved the broad contours of the proposals," the central bank statement said. However, as ET reported earlier, a finance ministry official disputed this, saying the government had said the issue needed to be discussed further.
Even on the issue of HR restructuring, the board had advised RBI to proceed only after taking all stakeholders into consideration, the official said.
"RBI has had a harmonious existence so far and the board was concerned about that," the official said. However, the proposal on restructuring was under discussion for a year and is based on recommendations made by an internal panel. The revamp proposals had been posted on the RBI intranet to elicit feedback from employees and is being discussed with them.
When contacted RBI spokeswoman said, as stated in the official statement issued on the decisions taken by the board, the Reserve Bank will proceed further in the matter keeping such (Board's) advice in view.