Media undermining mature process: Rajan on reappointment

Amid mounting speculation over a possible second term for the Reserve Bank of India (RBI) governor Raghuram Rajan, the governor himself is said to be concerned about currency and bond markets’ reactions to various media reports said a story in the Business Standard.

Rajan is said to have informally written to select policy-makers and experts, to curb 'unnecessary' speculation over his future at the Reserve Bank of India (RBI) and its impact on these markets, it is learnt.

In the letter, Rajan has stated the selection of a central bank governor is an institutional process, undertaken by the government with due consideration. As such, the media reports and the rumours give the impression of it being a personality-driven contest, untrue and unfair on all concerned, he is believed to have stated. 

“Essentially, the media reports and the gossip undermine an established and mature process. It is not about personalities or whether someone likes someone or not. When a decision regarding an appointment as important as that of the RBI governor is made, a number of candidates are considered, including the incumbent,” said an official aware of the contents of Rajan’s missive.

“It is not that the decisions and the reforms which Rajan or any governor before him have ushered in will be dumped once the next person comes in. So, to reduce it to a popularity contest subverts the process,” the person said, when asked about the contents. An RBI spokesperson declined to comment for this report. On Wednesday, the rupee reversed gains and bonds declined after Anandabazar Patrika, a Bangla newspaper, reported Rajan did not want an extension, despite the prime minister wanting to give one. Rajan’s three-year tenure ends on September 3.

The rupee has declined 1.4 per cent in May, its biggest monthly loss since January, as foreign funds exited local bonds amid an emerging-market selloff sparked by growing speculation that a US interest rate increase was imminent. Indian sovereign bonds also fell on Wednesday, with the yield on notes due January 2026 rising two basis points to 7.49 per cent, its highest close since March 30, according to prices from RBI's trading system.