Former RBI Governor S Venkitaramanan has passed away. He was 92 years old. He was the Governor of RBI from December 1990 to December 1992. During this period the country had to go through a huge economic crisis. The situation had become such that the country had to pledge its gold to avoid default. After this the country was also going through an exchange rate crisis. During his tenure, India adopted the IMF’s stabilization programme, where the rupee was devalued and economic reform programs were initiated. With his efficient management, he was successful in getting the country out of the balance of payments crisis. During his tenure, RBI made Indian exports competitive by devaluing the rupee and reduced the burden of imports.
S Venkitaramanan was born in 1931 in Nagercoil which was then part of the princely state of Travancore. When he took charge of the RBI in December 1992, the country was facing a serious balance of payments crisis. According to C Rangarajan, who became the Governor of RBI after Venkitaramanan, the situation at that time had become so bad that devaluation of the rupee had become inevitable. There was discussion as to how to do this. Governor Venkitaramanan implemented it after getting approval from the political leadership. External imbalances were adjusted afresh due to the devaluation of the rupee. This was followed by a number of reforms, including reform of the regulation rate system.
risk of default
According to former RBI Governor YV Reddy, most of the people in the government were not even thinking about default, but Governor Venkitaramanan secretly ordered the RBI to do technical work on disaster management so that if things go out of hand. There should be complete preparation for that. When current account convertibility was being debated, Venkitaramanan was in favor of exercising caution in allowing imports of capital goods. He believed that doing so could lead to a sudden increase in demand for the US dollar.
Venkitaramanan was known for taking fast decisions. During his tenure, many small steps were taken to reform the money markets. Banks started money market mutual funds in the same period. He also expanded the role of IDBI and NABARD. For the first time, 364 day treasury bills were auctioned without the support of RBI. The country’s biggest stock market scam also came to light in 1992 during his tenure. Stock broker Harshad Mehta and many others were accused of manipulating share prices. The bond market also got affected by this and RBI made reforms in it.
differences with SEBI chief
This led to differences between Venkitaramanan and the then SEBI chief GV Ramakrishna. The situation had reached such a stage that both of them were not even ready to meet. Reddy, then a SEBI board member, formed a committee under the leadership of the governor to discuss financial markets issues. “I felt that if anyone had shown extraordinary leadership in managing the balance of payments crisis, it was Venkitaramanan as RBI governor,” says Reddy.