Vault Matters | How I would remember Shaktikanta Das

Approachable, patient and pragmatic are the words bankers used for him, and Das was a combination of them.

As an ardent Rajinikanth fan, a dialogue that crossed my head when I recall the six years of former RBI governor Shaktikanta Das is – ‘En vazhi thani vazhi, seendadai.’ In English it would mean – my path is a different path, don’t mess with it.

Whether it was about handling extremely tough liquidity situations when he took charge in December 2018, or three successive bank failures from 2019 to 2020, or shielding the country, from the pandemic, to the latest monetary policy decision of keeping rates unchanged, Das has his unique style.

Not often confined to text book solutions, the actions were difficult to second-guess, but logically sound and it wasn’t easy to counter-argue. Possibly this makes Das stand out among India’s central bankers in the last 30 years.

His personality traits are also quite distinctive; he wore a smile on his face and was optimistic in his thinking on most occasions when he met journalists. Approachable, patient and pragmatic are the words bankers used for him – traits normally difficult to spot in a central banker, and Das was a combination of them.

There are many firsts under his leadership.

Big hits

For instance, in his six-year tenure, RBI retuned the highest of dividend of over Rs 6.6 lakh crore to the government. One would also want to appreciate that forex and gold reserves have grown to a comfortable $685 billion and $67 billion respectively as on November 29, 2024, according to Bloomberg data. These numbers leave little room for one to find fault with the former governor, who has comfortably lifted the perception of the RBI which was at its rock bottom when he took charge. Coming from the ranks of bureaucracy it did set tongues wagging, but not for too long.

Another critical decision under his leadership was to include non-banks for resolution under the bankruptcy code. This ended the logjam in tackling the then bankrupt Dewan Housing Finance in 2019. Following this was three back-to-back bank failures, PMC Bank, Yes Bank and Lakshmi Vilas Bank. It would be fair to include even North East Small Finance Bank to the list. What is interesting is that the resolution sorted for these banks was unique and no two banks had even a shred of similarity in the rescue process. Then came the pandemic, where just the right amounts of money were doled out to the public and banking system liquidity was maintained quite perfectly. With avenues of deployment shrinking, balances in bank deposits swelled leading to a favourable position of surplus liquidity, which came as a blessing in disguise to the central bank.

Yet another time where Das exhibited his unique way of handling things was on May 4, 2022. Just a few weeks after April’s monetary policy, RBI decided to increase repo rate unconventionally by 45 basis points. Within a year, India’s central bank rates rose from 4 percent to 6.5 percent and India was also the first to take a pause in the rate hike cycle, ahead of most economies. This has played a crucial role in ensuring that GDP growth was ahead of expectations, except for July-September FY25 print.

Some missed

Many believe the wide gap between growth expectations and actual at 5.4 percent may have disrupted Das’s runway into a third term, which seemed almost a given till about two weeks ago. When a few corridors of the government including the chief economic advisor were cautioning that growth has visibly slowed down from September this year, was the 60 bps reduction in GDP estimates carried out in December policy too late? Did the MPC take its feet off the ground?

Another point to ponder is a slew of curbs imposed on banks and non-banks from 2020 – 2024. Fourteen entities, not sparing even the biggies such as HDFC Bank, Kotak Mahindra Bank, MasterCard to the three smaller NBFCs still barred from doing business, was unprecedented by the RBI. Many believe the harsh action is an outcome of the recent bank failures, memories of which is still fresh for any supervisory officer at RBI, including Das. In hindsight, it would have been prudent if each of these issues were considered in isolation without being clouded by the past. A ten minute chat with bankers would tempt one to think if the RBI’s continued stance on unsecured loans is warranted given how the urban consumption works on leverage, thanks to personal loans.

But in the larger scheme of things one may opt to overlook these blemishes given that the intent was to cleanse the system and stick to the rule book. If former Prime Minister Narasimha Rao would be remembered for quietly reforming the country in 1991, Das will be remembered as RBI’s very own Narasimha Rao. There weren’t much hopes built around him when he took charge on December 12, 2018. But, as he left office on December 10, 2024, he left a lump in our throat, especially the journalists who were part of his farewell press conference. Bidding goodbye wasn’t easy!