IAS Sanjay Malhotra to be 26th RBI Governor; here's what economists say

IAS Sanjay Malhotra, 56, has been named the 26th Governor of the Reserve Bank of India (RBI). His appointment will take effect on Wednesday, December 11, for a period of three years. Malhotra replaces Shaktikanta Das, who is set to demit office on Tuesday, December 10.

Foreign brokerages have highlighted a number of challenges facing the economy following the crucial change at the central bank's top helm. 

Citi expects a smooth transition at the RBI with the strong fiscal and monetary policy coordination observed under Das continuing under Malhotra. 

"The market focus would be on whether the MPC’s assessment of the relative balance between growth and inflation will undergo any significant change under the new-look MPC at the next meeting in February," according to the brokerage.

In the next bi-monthly policy review, due in February, Citi expects a 25-basis-point reduction in the repo rate—the key interest rate at which the RBI lends short-term funds to commercial banks, with a potential reassessment of the terminal repo rate target of 6 per cent after February.

The market will closely track the 26th RBI Governor's take on macroprudential policies and the forex market, with broad continuity expected in the near term, according to Citi. 

What are the challenges for IAS Sanjay Malhotra?

According to BofA Securities, another foreign brokerage, Malhotra's appointment comes amid a tricky period.

"He faces the immediate challenge of dealing with a sharper-than-expected slowdown in growth coupled with the near-term volatility in inflation while also ensuring a stable currency," according to the brokerage.

At this stage, Malhotra's policy bias remains unclear given that he has not made any strong statement recently except on tax policy.

With a new governor being selected, the risks of an inter-meeting rate cut even have declined materially in case inflation comes off sharply.  

Who is Sanjay Malhotra?

Sanjay Malhotra is a 1990 batch Rajasthan Cadre IAS Officer.

He graduated in engineering in computer science from the Indian Institute of Technology, Kanpur, and later, he earned a Master's in Public Policy from Princeton University, USA.

IAS Sanjay Malhotra has a career spanning more than 33 years. He has served key roles in a number of sectors including power, finance, taxation and IT. Read more on who Sanjay Malhotra is