MUMBAI: India's “rock star” central bank governor Raghuram Rajan, feted by foreign investors but under pressure from political opponents at home, stunned government officials and colleagues on Saturday by announcing he would step down after just one three-year term.
Rajan, a former chief economist at the International Monetary Fund, is held in high esteem by policymakers and investors at home and abroad for overhauling the way the Reserve Bank of India (RBI) operates.
But he has faced mounting criticism from a faction within Prime Minister Narendra Modi's ruling party for keeping interest rates high and over a perception that he had begun to stray into politics.
In a letter to RBI staff, Rajan said he planned to return to academia, even as he noted two of his actions - the creation of a monetary policy committee to set interest rates and the clean-up of the heavily indebted banking sector - remained unfinished.
“While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016,” Rajan wrote.
“I will, of course, always be available to serve my country when needed.”
It will be the first time since 1992 that an RBI governor has departed after a single three-year term.
A senior government official told Reuters there were seven candidates on an initial long list to replace Rajan.
While there had been some speculation Rajan might not stay for a second term — dubbed “Rexit” in a nod to Britain's vote on European Union membership — government officials said they were surprised by the timing and manner of the announcement.
“Rajan put this in an open letter. It's his decision and we will do what best can be done,” said one senior aide to Modi.
Hailed as a “rock star” and “James Bond” by India's media when he was appointed by the previous Congress government in September 2013, Rajan won praise for his sure-footed handling of the country's worst currency crisis in more than two decades.
“The government appreciates the good work done by him and respects his decision. A decision on his successor would be announced shortly,” Finance Minister Arun Jaitley said in a tweet on Saturday.
P. Chidambaram, the Congress finance minister who appointed Rajan, said he was profoundly saddened by the decision.
“I am not surprised at all. The government had invited this development through a craftily planned campaign of insinuations, baseless allegation and puerile attacks on a distinguished academic and economist,” he said in a tweet.
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