“It was absurd to name me in the race for RBI governorship,” sources quoted Ahluwalia as saying, while reacting to reports in a section of the media. “If at all, one likes or aspires to be the deputy chairman of Planning Commission after having been the RBI governor. Not the other way round,” a source close to Ahluwalia told The Indian Express.

The deputy chairman of Planning Commission carries the rank of a Cabinet minister in India. He is a special invitee to the Cabinet. The RBI governor, on the other hand, carries the rank of a minister of state, which is a notch lower. Technicalities do not allow the RBI governor’s status to be upgraded since he is accountable to the Parliament through the finance ministry, government sources said.

Reddy, sources said, had written to the government in the beginning of 2008 to take the necessary steps to find a new governor since his term ended in September. “Since it is, at the end of the day, a political appointment, a last-minute decision cannot be ruled out,” a senior government functionary said. The decision to appoint the RBI governor is taken by the Prime Minister in consultation with the finance minister.

Rakesh Mohan, deputy governor of RBI, and finance secretary D Subbarao seem to be the top two contenders for the post, besides Reddy himself, who The Indian Express first reported on June 20, may get an extension.

Mohan was called to New Delhi today to meet Finance Minister P Chidambaram. He cut short his visit to the US for the meeting. He refused to answer any questions after the meeting and finance ministry sources could not confirm if the discussion centred around RBI governorship. Rakesh Mohan was economic affairs secretary in the finance ministry before his second and current stint at the RBI as deputy governor.

Subbarao, the sources said, was strongly backed by C Rangarajan who quit office as the chairman of the Prime Minister’s Economic Advisory Council earlier this month after being nominated to the Rajya Sabha. Subbarao is a 1972-batch IAS officer and was secretary to the EAC before his current appointment.

Reddy, who holds a doctorate from Osmania University in Hyderabad, was appointed by the previous NDA government as the governor. He joined the central bank midway through his stint as IMF executive director. He too has had two stints at the central bank, previously serving as a deputy governor from 1996 to 2001.