Ending months of suspense, the government on Tuesday extended RBI Governor D Subbarao's tenure by two years till September 2013, aimed at ensuring continuity in monetary policy during uncertain global scenario.
"The Prime Minister (Manmohan Singh) has approved the extension of the term of D Subbarao as Governor of the Reserve Bank of India for a further period of two years with effect from September 5, 2011 i.e. up to Sept 4, 2013," an official statement said.
Former IAS officer Subbarao, 61, expressed happiness at his appointment.
"I am happy that the Government has reposed its confidence in me at this difficult juncture in the world economy. I look forward to working with a great team in the Reserve Bank to meet the many challenges ahead," he said.
Subbarao was to retire next month following the completion of a three-year term. During the past few months, there had been intense speculations on his extension. Today's announcement ended all that.
Finance Minister Pranab Mukherjee said the extension of the term of the Governor was needed.
"Though there was time till September, we decided (that) we should do it quickly to ensure that there is no uncertainty," Mukherjee said.
Subbarao played a key role in steering the country out of the global financial meltdown following the fall of America's iconic investment banker Lehman Brothers in 2008 and is now steering the response to high inflation rate.
His role will be keenly watched as India battles to control the fallout of financial market turmoil triggered by downgrade of US economy rating by S&P.
"He (Subbarao) is doing good job and he has already earned his reputation as central bank Governor in the various deliberations of the G-20, where Finance Ministers and central bank governors meet and take decisions," Mukherjee said.
A career bureaucrat, Subbarao was Finance Secretary before being appointed the 22nd Governor of the central bank in September, 2008.
The continuation of Subbarao at the helm of RBI assumes significance as it comes at a time when the government and the central bank are gearing up to meet the challenge posed by the economic crisis in several eurozone nations and the downgrade of the US sovereign rating to AA+ from AAA by Standard and Poor's.
The downgrade triggered a steep fall in stock markets throughout the world, including BSE and NSE in India.
Subbarao, who steered the country through the economic crisis of 2008, is credited with taking a tough monetary stance to check inflation.
It was under his leadership that RBI increased key interest rates 11 times in the past 16 months to control the rate of price rise, despite stiff resistance from industry.
Under his governorship, RBI had doubled the frequency of monetary policy reviews from every quarter to eight times a year with a view to decrease the need for off-cycle rate moves.
Subbarao had earlier served under Manmohan Singh in the Finance Ministry as a senior official in the early 1990s, when the latter was Finance Minister.
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