According to highly placed RBI sources, the move to appoint the Cabinet Secretary as head of the panel did not go down well with Governor Raghuram Rajan. The RBI communicated its reservations, following which a compromise has been worked out.
The term of H.R. Khan — one of the four Deputy Governors — will end in the first week of July. This necessitated the formation of the search panel. All the 11 executive directors have been called for interviews on Monday. Mr. Khan has not been called, though he will be eligible for an extension as he completes 62 years in late July.
While Mr. Sinha is the head of the panel by virtue of being the Cabinet Secretary, the RBI Governor’s post is that of a Cabinet Secretary rank as well. Mr. Rajan is the senior, having been appointed in 2013, before Mr. Sinha took charge in 2015.
Under the compromise, the RBI Governor will have a greater say in the short-listing of the names. However, technically, the Cabinet Secretary remains the head of the panel, sources said.
The government set up the Financial Sector Search and Recruitment Committee — headed by the Cabinet Secretary — to choose the members and heads of the RBI, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority.
The committee will also have a permanent member from the Prime Minister’s Office (PMO), representatives from the Finance Ministry, an economist, and the head of the regulatory body, whose members are to be selected, will be special invitees.
The search committee can only recommend names, while the government makes the appointment.
Out of the four Deputy Governors, two are appointed from outside — of which one is an economist and the other a commercial banker. The remaining two Deputy Governors are appointed from within the RBI ranks. Mr. Khan, who was promoted from within the ranks, was appointed as Deputy Governor in July 2011 and reappointed in 2014 for two years.