New Delhi: Sanjay Malhotra, a low-profile career civil servant, has been appointed as India's new central bank governor, succeeding Shaktikanta Das after his six-year tenure. The 56-year-old, who holds a Princeton education, will now lead the Reserve Bank of India (RBI) amid slowing economic growth and ongoing inflation, issues that have caused a divergence in views between Prime Minister Modi's government and the RBI regarding the need for interest rate cuts.
Following Malhotra's appointment, bond yields dropped, and the rupee weakened as traders increased bets on a potential rate reduction during the central bank's policy review in February. The six-member rate-setting panel recently decided to keep interest rates unchanged but reduced the cash reserve ratio to bolster liquidity and economic growth.
Capital Economics’ Shilan Shah, initially predicting repo rate cuts would start in April under Das, now expects the first 25 basis point cut to occur in Malhotra’s first meeting in February. Although Malhotra, who is currently India’s revenue secretary, has not publicly addressed inflation or growth, he told reporters that understanding various perspectives and making decisions in the economy's best interest is key. He will take over his new role on Wednesday.
Malhotra, a 1990 Indian Administrative Service (IAS) officer, is seen as a government insider, continuing the trend of appointing career bureaucrats to the RBI's top post. His appointment is seen as a step toward stronger coordination between fiscal and monetary policies. The government’s preference for bureaucrats contrasts with a previous phase (2013-2018) when external economists, like Raghuram Rajan and Urjit Patel, held the position.
Known for his focus on data and predictive models for tax revenue, Malhotra is described as a meticulous and demanding leader, with a keen eye for detail and a solid relationship with Finance Minister Nirmala Sitharaman. He has been involved in significant decisions, such as taxing online gaming companies and addressing long-standing taxation issues. Malhotra also led India’s evaluation by the global anti-money laundering watchdog, FATF, which resulted in favorable ratings for the country.