Raghuram Rajan in RBI's new Guv list

Finance Minister Pranab Mukherjee is not inclined to extend the tenure of Reserve Bank of India Governor D Subbarao, sources said. Subbarao, who took over as the RBI's 22nd Governor on September 5, 2008, was given a three-year tenure, extendable by another two years.

His three-year tenure ends on September 4, 2011.

Sources said Raghuram Rajan, honorary economic adviser to the Prime Minister since November 2008, is a prospective candidate. A former IMF chief economist, he is a finance professor at the University of Chicago. Others who may make it to the shortlist include Kaushik Basu, chief economic advisor, and R Gopalan, economic affairs secretary, both in the ministry of finance.

Going by convention, the government does not set up a search panel or a selection committee to find a RBI governor. "The decision is taken between the finance minister and the Prime Minister," said a source, who did not wish to be quoted.

When Subbarao was appointed, Prime Minister Manmohan Singh and then Finance Minister P Chidambaram did discuss his candidature with Deputy Chairman Montek Singh Ahlulwalia and PM's Economic Advisory Council chairman C Rangarajan.

A source said that Mukherjee is against extending the tenure of any regulator or bank chairman. The latest instance of a regulator, whose extension was proposed by the ministry, but finally turned down by Mukherjee in favour of a fresh selection process, has been that of C B Bhave. LIC chairman TS Vijayan too did not get an extension.

The source said Mukherjee had earlier indicated that the search process for a new candidate in regulatory bodies may begin not earlier than six months before the incumbent's tenure ends. Names are being discussed now, and Raghuram Rajan, who has advised the PM on the global financial crisis and G20 meetings, is top in the reckoning.

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