– Urjit Patel has been appointed as the next governor of Reserve Bank of India (RBI) for a three-year term, the government said in a statement on August 20.
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Patel, who is now Deputy Governor at the Reserve Bank of India (RBI), will take over the top job at the central bank when incumbent Raghuram Rajan demits office on September 4 after completing his term.
Patel, now an RBI deputy governor, had been seen as among the more hawkish candidates that had been in the running to take over from Raghuram Rajan, who steps down as governor on September 4.
Indian shares fell on Monday as state-owned lenders retreated after Urjit Patel was named as the next central bank governor, which was seen as reducing the prospect of rate cuts in the near term and as continuing a push to aggressively clean up bad debt.
The government nominees to the MPC have been shortlisted by a Search-cum-Selection Committee headed by the Cabinet Secretary with RBI Governor and Economic Affairs Secretary and three experts in the field of economics or banking or finance or monetary policy as its members. “He also contribute to country’s economic progress”, Jaitley told TV news channel “Aaj Tak”.
“The government’s decision to promote the existing RBI deputy governor signals its preference for policy continuity and commitment to low inflation, and it is a move that will be seen as protecting the RBI’s independence”, it said.
Patel is said to have been particularly picked for his expertise in inflation-control, which has become the main task of the central bank, ever since the government, under statute, set it a target of 4 percent, plus or minus two percentage points, based on the consumer price index. Outgoing governor Rajan has already said Michael Patra, who is being tipped to take over as deputy governor, would be one of the nominees from the central bank. “The shift to inflation targeting at the beginning of past year has contributed to enhance the credibility and transparency of India’s monetary policy”, she said.
Urijit Patel, current deputy governor, was expected as the only hawkish candidate for Governor chair. He was also a consultant (1998-2001) to the Ministry of Finance.
“Apart from continuity, what worked in Patel’s favour is his knowledge of monetary policy”. It was this report that led to the signing of an agreement on inflation targeting between the Government and the Central bank.
The new governor takes over at a time when inflation has risen above that range. Like Rajan, Patel will likely stand up to the clamour to cut interest rates every time inflation edges lower.
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“The government can not afford a radical change, but the thing of priority for them would be inflation, because inflation is showing its ugly head again at 6.05 percent in the last round”.
