The 53-year-old Raman is currently a batting consultant at the National Cricket Academy in Bengaluru. His first assignment is the tour of New Zealand beginning next month.
"Kirsten was the top choice for the BCCI ad-hoc selection committee but Raman got the job as the South African was not keen on giving up his plum job with IPL franchise Royal Challengers Bangalore. He could not be convinced on choosing between IPL and national team," a BCCI official told PTI.
The selection committee comprised former captain Kapil Dev, Anshuman Gaekwad and Shantha Rangaswamy.
The panel recommended three names -- Kirsten, Raman and Venkatesh Prasad (in order of preference) -- to the Board, a reliable source said. Eventually, the BCCI picked Raman for the job.
The appointment was made despite the Committee of Administrators (COA) being divided on the issue with Diana Edulji asking chairman Vinod Rai to put the selection process on hold. BCCI treasurer Anirudh Chaudhry too questioned the process being followed as it had Rai's approval and not Edulji's.
Raman, who played 11 Tests and 27 ODIs, is now one of the most qualified coaches in the country. He has coached big Ranji Trophy teams like Tamil Nadu and Bengal, and has also had a stint with the India U-19 team.
From his playing days, Raman is best remembered for being the first Indian to score a century in South Africa during the 1992-93 tour.
Besides Kirsten, Raman and Prasad, the other shortlisted candidates out of the 28 applicants who were interviewed were Manoj Prabhakar, Trent Johnston, Dimitri Mascarenhas, Brad Hogg and Kalpana Venkatachar.
Kirsten was interviewed via Skype with four others while one interview was conducted over the phone. Raman, Manoj Prabhakar and incumbent Ramesh Powar appeared in person.
Kirsten, who had guided India's men's team to the 2011 World Cup triumph, was the number one choice but needed to step down from his RCB role to avoid a potential conflict of interest. BCCI CEO Rahul Johri even spoke to Kirsten and RCB officials but could not reach an agreement.
"Gary's contention was how can coaching a women's national team be a conflict of interest while being in charge of a men's IPL team. He could not be convinced on that. Having said that, Raman is a good choice as the team needs a batting coach at the moment. Prasad was number three in the pecking order," said the BCCI official.
The ad-hoc panel too made it clear to Kirsten that he would have to part ways with RCB to take up the national team role.
"Practically, there is no conflict of interest but if you go by the book but it would have opened pandora's box. Tomorrow, Ravi Shastri (India men's coach) would demand that he be allowed to do IPL commentary and Rahul Dravid (India A coach) might request that he should be allowed to mentor an IPL franchise," the official added.
Kirsten had been head coach of the Indian team for three years from 2008 to 2011. He then coached South Africa from 2011 to 2013. He is currently the RCB head coach in the Indian Premier League.
The BCCI invited fresh applications for the job after Powar's brief stint as interim coach ended last month, in rather controversial circumstances.
The Supreme Court-appointed COA has been divided over the coach selection process ever since fresh applications were invited.
While Edulji wanted Powar to continue at least till the New Zealand tour starting next month, Rai instructed the BCCI top brass to invite fresh applications.
Powar's controversial interim tenure ended on November 30 after a bitter fallout with ODI captain and senior player Mithali Raj over selection issues during the World Cup.
Powar decided to re-apply after T20 captain Harmanpreet Kaur and her deputy Smriti Mandhana came out in strong support of the former India spinner.