RBI's New Era: Sanjay Malhotra Assumes Office As New Governor

Das, who took over as RBI governor in 2018, highlighted on Tuesday that the relationship between the RBI and the finance ministry had been at its best during his tenure

Sanjay Malhotra is a seasoned bureaucrat, having joined the Indian Administrative Service (IAS) in 1990

Source : GOI

Sanjay Malhotra took office as the 26th Governor of the Reserve Bank of India on Wednesday. He previously served as the Revenue Secretary and will serve a three-year term at the helm of India's central bank. Malhotra succeeds Shaktikanta Das, whose term as RBI Governor concluded on Tuesday.

Malhotra has stepped into the role at a time when India's economy faces slowing growth and persistent inflation, with differing views emerging between the central government and the RBI on the necessity of lowering interest rates.

Bond yields dropped, and the rupee weakened after Malhotra's appointment, as traders increased their expectations for an interest rate cut during the Reserve Bank of India's policy review in February. The six-member rate-setting committee kept interest rates unchanged last week but reduced the cash reserve ratio for banks to support liquidity and stimulate growth.

Sanjay Malhotra is a seasoned bureaucrat, having joined the Indian Administrative Service (IAS) in 1990. His appointment reflects the government's preference for public servants to lead the Reserve Bank of India (RBI), fostering better coordination between fiscal and monetary policies.

The government's renewed focus on bureaucrats for the RBI's top post follows a period between 2013 and 2018 when external economists, such as Raghuram Rajan and Urjit Patel, headed the central bank. Rajan, former chief economist of the IMF, served from 2013 to 2016, while Patel resigned abruptly in 2018 following a dispute with the government.

Das, who took over as RBI governor in 2018, highlighted on Tuesday that the relationship between the RBI and the finance ministry had been at its best during his tenure.

An engineering graduate, Malhotra was well-regarded within the federal finance ministry for his data-driven approach and efforts to develop predictive models for government tax revenue. According to a The Economic Times report, Malhotra maintained a cordial working relationship with Finance Minister Nirmala Sitharaman and played a key role in resolving long-pending taxation issues, including the contentious decision to tax online gaming companies.

He also led the global anti-money laundering watchdog, the Financial Action Task Force (FATF), in evaluating India, contributing to the country's strong ratings. Additionally, while the RBI took a hard stance on cryptocurrencies, the finance ministry under Malhotra sought to bring virtual digital assets into the mainstream by requiring service providers to register with the Financial Intelligence Unit.