I was surprised  in the last week of March, 2014, when I read the news about Dr K C Chakrabarty, Deputy Governor has resigned with merely 3 months left for completion of his tenure.   Dr Chakrabarty was elevated  as Deputy Governor of RBI (prior to his appointment as DG of RBI, he was the CMD of PNB) in June 2009 for a period of three years amidst lot of speculations.     Later on in 2012, he got an extension of two years.   He is said to be the first RBI top official to quit before retirement in the last two decades.   With resignation of Chakrabarty, out of four posts, two posts of deputy governor will fall vacant as the government has not yet brought in any replacement for Anand Sinha, who retired two months ago.

Soon a new DG is likely to join RBI from banking sector.    Let us go thrugh the flashback of  Chakbrabarty's tenure as RBI DG.   This will help our viewers to read his tenure in the right perspective.   A number of commentarers have given their view - some of which are required to write what their editors what to do so.   I will try to analyse frankly and from the view as I have observed during this period closely.    Some of our readers and even my close friends are likely to put question marks about my ability to analyse the tenure of DG of RBI.    They are free to hold their views and criticise my views.  

Right from his days when Chakbrabarty was heading PS Banks, he was known for his outspoken manner on various issues.   It was almost impossible to reign him once you have provoked him.    In the meetings, even the EDs, GMs faced dressing down frequently.  Thus, when he was elevated to DG, RBI, I heard my senior colleagues talking in hushed tones, what will happen in RBI,  if he continued his style of working and  outbrusts on many important but controversial issues.     They used to wonder how he will be reigned in RBI.   These bankers did not have to wait for long and he failed to check his habit of crossing, what we Indians like to call Laxman Rekha.        A huge controversy surfaced when he reportedly told journalists off-the-record in New Delhi that RBI should have been more aggressive in combating inflation.    Then  RBI Governor took strong  exception of such a statement which was against his stance and without his concurrence.   Chakrabarty was immediately  stripped of key portfolios and it was considered as the biggest snub to this DG.  Thus, he was reigned by a person who is well known for his knowledge and integrity.   After this episode he was never able to come out of the shadow of Mr Subbarao and remained subdued. 

Another major controversy for which he will be remembered is with SBI Chairman, who wanted CRR to be abolished.   The spat between these veterans was put to rest only by  Dr Subbarao when during a public speech, Subbarao said he had appointed a committee to debate whether to do away with the cash reserve ratio (CRR) requirement.   He further told that the members of that committee are Dr Chakrabarty and Pratip Chaudhuri,   The rooom brust into laughter when Dr Subbarao elaborated  “Both of them will be locked up in a room, will not be released until they have reached a conclusion, and the timeframe is that they will not submit their report before my term as governor is over.”

During his tenure he is known for some of his pro-customer decisions like to bar the pre-payment penalty that banks impose on home loan borrowers.   He also seems to have played a critial role in stopping banks to lend below their base rate and exposing the mis-selling by banks through so called zero interest loans.   However, mostly he remained glued to his pet subject of financial inclusion, as it was also close to heart of Finance Ministers for vote bank.   However, financial inclusion  has still to take deep roots inspite of Chakrabarty being incharge of this portfolio for long time.  Banks have only done lip service to please the outspoken DG.      Although Chakbrabarty  had headed two PS Banks, he never realised the pitiable condition of their employees.  As and when he got a chance,  he showed his outbursts against PS bank officers and blamed them for the rising NPAs and other ills.   He also felt strongly that PS bank employees are over-paid and better paid than private sector banks.    This has done the biggest damage to the credibility of PS Bank staff, who are still struggling with IBA for wage revision which is already over 17 months overdue.     Although Chakbrabarty had vast experience as a banker, but it seems he had no branch experience and thus was far away from practical field knowledge.    Some of the links to support his view about salaries in PS banks are : State-run banks’ average salary overtakes that of private peers.  

Personally speaking I feel the nadir of his tenure was when he gave clean chit to three private after the expose of Cobrapost and he announced that there were no irregularities by these banks inspite of the fact that there was sufficient evidence.  Read the following links ( (a) Money laundering: RBI gives clean chit to private banks, says there were no irregularities;    (b) K C Chakrabarty Wants to Keep Penalties at "Peanut" Level - Advocates only Naming and Shaming of Shameless People. (c)  "Fines on banks should be only for naming and shaming: RBI Deputy Governor K C Chakrabarty".  

Immediately after the above clean chit, RBI  had to issue statement that RBI has not given clean chit though  Chakbrabarty had issued such a statement.   The DG RBI had to cut a sorry figure when later on these banks were penalised by RBI.   Such hurried clean chit by a person with such vast experience exposed his immaturity,  and love for the private sector banks and bias against PS Banks.   (See links below : (i) Cobrapost sting: No clean chit to banks, says RBI ;  (ii)  Cobrapost expose: RBI penalises Axis, HDFC, ICICI banks.

The reasons for his resignation are still not known and speculations are rife.   

The first speculation for his sudden resignation is his differences with present (and also with previous incumbent) RBI Governor on policy matters.   However, Dr Chakrabarty himself has denied any such differences.   Another theory going around is that this is the indirect fall out of the episode of United Bank of India where the CMD, Ms Archana Bhargava had to suddenly take VRS.   It is a known fact that Mr Chakrabarty was close to her and had certainly played a role in helping her rise to top post.  Another theory going around is about the impact of the likely change in Central Government in about 2 months time.   Newspapers have also reported that he wants to be relieved by 25th April, 2014 on personal grounds.  Another news item reports that he is likely to take up an overseas assignment.   Joining the dots, people are concluding that he wishes to be out of picture by the time new Government takes over.   I am sure the truth will be soon out as Chakrabarty is the type of person who will speak his mind if he is suitably provoked by an interviewer !  

With the exit of Dr Chakrabarty,  the above controversies will be laid to rest.   However,  people will keep on discussions about his contribution to Indian banking sector inspite of his  academic knowledge and vast experience in the the banking sector.     Is it sufficient to remain in limelight and in headlines by raising controversies?   What reforms were brought by him in RBI and banking sector during this long tenure of 5 years at the central bank.     What was his contribution as CMD of two PS Banks  - whether  the foundation of those bankers were strengthened or building was raised too fast on the fast deteriorating foundations.     These will always remain as controversial as the man himself.    Thus, I am forced to conclude that his tenure was lack luster and he failed to bring new energy to RBI or its policies inspite of his high academic qualifications and vast experience of working in the largest banks in India.  Banking sector has gone from bad to worse position in last 5 years with rising NPA and all around pessimism among the bankers.   He has to share equally the blame for this mess in banking sector as he was the DG who had the best knowledge about practical banking and its ills.

Although I took VRS at a much junior level as compared to CMDs,  yet as a keen observer of the things around and my personal experience in the banking, I am of the view that next RBI Deputy Governor (to be selected from the banking sector)  must have certain qualities and enjoy the confidence of RBI Governor for his abilities.  The qualities he requires are strong academic background, a vision for the nation and Indian economy, practical knowledge about banking.    

During last 10 days  newspapers have floated various names, some of them are from the same block to which Dr Chakrabarty belonged.    The name appearing in newspapers are chiefs of:  (a) Punjab National Bank (KR Kamath),  (b)  Bank of Baroda (SS Mundra),  (c) Bank of India (Vijayalakshmi Iyer),  (d) Canara Bank (RK Dubey) (e) Arun Kaul of UCO bank and  (f) Indian Overseas Bank (M Narendra).   As each one of them lobbied for self, newspapers headlines have given different names for the likely new DG.    Some of these names are pathetic as any banker who had worked with them will tell you.   Some of them are poor in field experience whereas others do not have vision and have reached the top through luck and / or their connections in the right place.   If one such person is picked up, it will be again a waste for RBI.   Now it is a well know fact that  RBI had favoured relaxation in the eligibility criteria to include private sector bankers as well, but  government was not open to the idea and thus now the race has been restricted to the same coterie who have become CMDs by lobbying at the right places.

The latest news which is in making rounds in the banking circle  (on 2nd March, 2014) is that Chairman and MD of Bank of Baroda, SS Mundra, is likely to be named as one of RBI's deputy governors in place of KC Chakrabarty  (Earlier names floating strongly were KR Kamath, RK Dubey etc.)      The panel, had interviewed the candidates last week and is reported to have  recommended Mundra's name to finance minister P Chidambaram.    Let our readers comment here whom they would prefer as the next DG of RBI from banking sector based on the parameters of Honesty (no corruption); Good Academic Qualification;  Depth in banking (specially topics of FEX, Risk Management, Financial Inclusion, Effects of Policy and Policy Rates )  and above all a Vision for banking industry which will be beneficial to the Nation and Growth of Economy.