The government, therefore, has done well to maintain continuity and appoint Urjit Patel – who was deputy governor of RBI and worked closely with Rajan, as well as shares many of his ideas – as the new governor.
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Urjit Patel was officially declared the next governor of the Indian central bank by the government on Saturday.
Reserve Bank Deputy Governor Urjit Patel is unlikely to pursue policies that are different from those of his boss Raghuram Rajan, whom he will replace as the central bank’s chief next month.
Notably, as a deputy governor Patel has only occasionally aired his views in public.
Mr. Patel’s appointment will also “convince the market about the government’s resolve to fight inflation”, a market analyst said. It was finally set up by amending the Reserve Bank of India Act, 1934, through the Finance Bill 2016.
The RBI governor will be the chairman of this committee.
The Governor will have a casting vote once the country shifts to the panel system.
One of four RBI deputies, Mr Patel, 52, now runs the central bank’s monetary policy department, working closely with Mr Rajan, who is credited with taming inflation and tackling India’s mountain of soured bank loans.
Patel’s appointment is for a duration of three years based on the financial sector regulatory appointments search committee (FSRASC)’s recommendations. Economic Affairs Secretary Shaktikanta Das, who himself was said to be in fray for the top post at the apex bank, welcomed the appointment of Patel as the 24th RBI Governor.
He will assume office at a time when inflation – excluding food and fuel – may trend upwards; repayment of Foreign Currency Non-Resident (B) deposits will begin next month; balance-sheet clean-up of banks’ is still ongoing; and worldwide developments such as Brexit may pose some risks in the short term. He had also worked with several High Level Committees at both Central and State Government level. RBI has already nominated executive director Michael Patra on the MPC.
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The work of the MPC is to decide the interest rate that banks can charge keeping in mind the inflation target fixed by the government. He changed the inflationary focus to retail inflation instead of wholesale inflation, started the clean up of banks, set things in motion and saw through the formation of the monetary policy committee, and made inflation his target. That looks very much on the cards.
