“Having served as deputy governor in the past three years, Patel is well-positioned to further institutionalise these policy changes in the period ahead”, Rookmaaker said.
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Economic Affairs Secretary Shaktikanta Das also welcomed the appointment of Patel as the 24th RBI Governor saying, “With his background in monetary economics, policies and other fields, I am sure he will rise up to the occasion and keep in mind the monetary policy and the inflation target that has now been laid out in the RBI Act”.
Springing a surprise, Rajan in a letter to RBI staff in June had announced that he would return to academia and not seek a second term. His appointment is seen by many economy observers as a clear signal of Indian Prime minister Narendra Modi government’s commitment to ensure policy continuity, notably in terms of inflation cap targets. The government is expected to choose its members this month.
“A Central bank governor does not need to have a rock star status to be successful in reigning in inflation or cleaning up the banking sector”, Fitch Ratings director, Asia-Pacific Sovereigns Group, Thomas Rookmaaker said. UBS Securities said, after the establishment of the MPC, the governor’s role will be focussed on non-performing assets and liquidity, according to a Bloomberg TV India tweet.
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. P On Rajan, Jaitley said there were no differences between the outgoing Governor and the government, and the relations were cordial. Also, market is considering it as a hint of policy continuity by the RBI.
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The RBI cut interest rates 150 bps during Rajan’s tenure and the central bank’s pledge to ease cash conditions had also contributed to a rally in bond markets, and investors will be encouraged that one of Rajan’s closest aides will succeed him.
