He has been appointed on the recommendation of the Financial Sector Regulatory Appointments Search Committee headed by Cabinet Secretary.
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The promotion of deputy governor Patel ends weeks of feverish speculation by the Indian media since Rajan caught investors off guard in June by announcing he was leaving to return to academia.
Kenya-born Patel undertook his academic pursuits from leading global institutions of learning-Bachelor’s Degree in Economics from the London School of Economics (LSE) in 1963, an M. Phil from Oxford University (Great Britain) in 1986, and a doctorate from Yale University (US) in 1990. “He has a clear understanding of what is going on”, said RBI Deputy Governor S S Mundra.
Urjit Patel’s appointment as the next RBI governor signals a strong likelihood of policy continuity, Thomas Rookmaaker, director, Asia-Pacific Sovereigns Group at Fitch Ratings said in a note.
He worked on the USA, India, Bahamas and Myanmar desks at the International Monetary Fund until 1995. Just as Patel’s announcement was made, Swamy took pot-shots at Rajan for allegedly continuing to hold US Green Card. RBI also considers views of stakeholders in the economy such as the finance ministry and advice of the Technical Advisory Committee (TAC) in deciding the repo rate – the rate at which the central bank lends to banks. “So, it would be reasonable to expect that there would a continuity”, he said.
Named as 24th Governor of the Reserve Bank, Patel will take over as head of the central bank from Raghuram Rajan on September 4. “There could be some knee-jerk sell-off in bond markets as the euphoria of extensive monetary easing moderates”, Samiran Chakraborty, chief economist Citi India, said, commenting on the appointment of the new governor. In the past, Dr. Patel has also worked with several high level committees at state and Central government level. 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.
Mr Rookmaaker added Fitch did not drive ratings based on personalities but policies.
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Mr Patel’s selection comes against the backdrop of efforts by the Centre and the RBI to contain inflation at the minimum levels possible and it is here that his well-earned sobriquet of “inflation warrior” may come in handy. Also, he is in charge of the monetary policy department and advocating the more relevant consumer price index (CPI) and not the wholesale price index (WPI) as the inflation targetting benchmark.
