In a surprise move that sent ripples across the financial sector, Governor of the Reserve Bank of India Raghuram Rajan announced that he would not continue to head the central bank after his term expires on September 4. Mr. Rajan announced his decision to RBI employees via an email which was published on the central bank’s website for ‘wider dissemination’. This is the first time during Dr Rajan’s tenure that his communication to staffers has been made public.

It is not clear if the search panel had started to look for candidates. This is the first time a formal search panel has been formed to select the RBI governor. In the past, the prime minister and the finance minister have held consultations to select the governor of the central bank.

53-year-old Dr Rajan is the first RBI governor since 1992 not to seek a second term as India’s central bank boss. Former Finance Minister P Chidambaram, instrumental in appointing Dr Rajan as RBI chief in 2013, said he was “disappointed and profoundly saddened” by the decision.

Dr Rajan, a former chief economist at the International Monetary Fund (IMF), has been popular with foreign investors who cheered his efforts to lower inflation and clean up state-run banks’ massive bad loans.