Prime Minister Narendra Modi ended two months of ensuing uncertainty by picking Mr Patel, Mr Rajan’s 52-year-old deputy and a driving force behind the RBI’s transformation into an inflation-targeting central bank.
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The idea of setting up an MPC was mooted by an RBI-appointed committee led by deputy governor Urjit Patel in February 2014. Patel, a graduate from Yale and Oxford universities, had earlier worked with the International Monetary Fund, the Boston Consulting Group, Reliance Industries and the Infrastructure Development Finance Corp.
Patel, who is now serving as the Deputy RBI Governor, will succeed Raghuram Rajan after his term comes to an end on September 3. During 1998-2001, he served as a consultant to the ministry of finance.
Rajan took the charge of the central bank on September 4, 2013, and is set to return to the United States (US) to continue with his academics after his tenure ends of September 4.
In June 2016, Japanese brokerage house Nomura, examining seven possible successors to Rajan, classified Patel as a “hawk” – Patel was the only successor classified as a “hawk”. Patel, who turns 53 in October, will also be among the youngest governors in RBI.
The other three members will be appointed by the government on the recommendations of a search-cum-selection committee, which will be headed by the cabinet secretary.
The RBI had cut the policy repo rate by 150 bps from January 2015 to April this year but has held them steady since then due to rising inflation.
Outgoing governor Raghuram Rajan was one of the world’s most well-known central bankers.
Swamy, who has been extremely critical of Rajan’s policy of not lowering interest rate to check inflation, hoped that Patel will not be as “hawkish”. Under Rajan’s watch, RBI took on a slew of initiatives such as controlling inflation, mandated the balance sheet clean up of banks, as well as new regulatory guidelines for peer-to-peer lending and payment banks.
The government has attributed rise in bad loans to a host of factors such as domestic growth sluggishness in the recent past, slowdown in recovery in global economy and continuing uncertainty in global markets, leading to lower exports of various products like textiles, engineering goods, leather and gems. Before that, he was the adviser in charge of the monetary policy.
The government recently accepted the RBI’s inflation target of 4%. “Investors don’t want any change in policy direction”, said Devendra Kumar Pant, chief economist at India Ratings & Research.
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Echoing the SBI chief’s views, ICICI Bank MD and CEO Chanda Kochhar said Urjit Patel has played a key role in developing the new monetary policy framework that has focused on reigning in inflation and has imparted stability to the currency.
