A seasoned economist, Patel will have to appoint a member on the Monetary Policy Committee (MPC), deal with the problem of mounting non-performing assets (NPAs) of banking sector sand most importantly maintain the legacy of Raghuram Rajan.
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“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. It will be made up of Dr Patel and two other RBI officials, along with three members appointed by the government.
“It was Patel” s idea adopted by the RBI to tackle inflation by moving towards a flexible inflation-targeting regime with a target of 4 within a band of ±2 percent.
Urjit Patel holds a BA degree from the London School of Economics and an M. Phil degree from Oxford University.
Ashutosh Khajuria, executive director, Federal Bank, said, “Markets may have reacted to a lot of global events as the yields on the US Treasuries also rose by 0.06%”.
She also said his appointment would ensure a smooth transition and continuity in monetary policy, as India puts in place major structural reforms to transition to a higher growth path.
The promotion of Patel, now the RBI’s deputy governor, ends weeks of feverish speculation by the Indian media since Rajan caught investors off guard in June by announcing he was stepping down to return to academia. This is an acknowledgement of the fact that the government has recognised the importance of “institutional RBI Governor” and Patel is a far sighted person and an economist. “He has a clear understanding of what is going on”, said RBI Deputy Governor S S Mundra.
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.
So Patel was aptly suited for the top post at the Central Bank given his academic and professional credentials. Congratulating Patel, Finance Minister Arun Jaitley in a tweet said, “I’m sure he will successfully lead the Reserve Bank and contribute to India’s economic development”.
The six-member monetary policy committee will decide on interest rates based on this inflation target.
Swamy had earlier alleged Rajan is “not appropriate for the country” and alleged that he has “hiked interest rates in the garb of controlling inflation which has damaged the country”.
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A Ghosh was the Deputy Governor since 1982 when he was appointed Governor for a brief period of 15 days in 1985 till RN Malhotra could take over.
