India’s government has promoted Dr Urjit Patel, a deputy governor in charge of monetary policy at the Reserve Bank of India (RBI), to serve as its next governor for a three-year term.
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Patel, deputy governor of the Reserve Bank of India since 2013, demonstrated intellectual heft in overseeing landmark changes to the 81-year old institution, including switching to inflation-targeting and establishing a monetary policy panel to set interest rates. In January 2014, Patel had chaired a Committee on monetary policy reforms in India, which submitted its recommendations, an ICICI research report said.
Patel, who has a doctorate from Yale, will take over on 4 September.
The move, which provides for a margin of plus or minus 2 per cent in this target thus fixing the upper tolerance level at 6 per cent till 2021, is being seen as government putting the seal on outgoing Governor’s inflation-first model of monetary policy. “His appointment signals continuity of policy intent, both on part of RBI and the Government”.
As he takes office, inflation will certainly be on top of his agenda, especially with retail inflation continuing to be a cause of concern.
A version of this article appears in print on August 21, 2016 of The Himalayan Times.
Being the brain behind the inflation-targeting framework, some quarters say it is fair to assume that Patel will continue with the RBI’s focus on managing inflation, which has come under criticism from several quarters because of high rates.
The wish list that “Dr Patel”, as he is commonly referred to as, faces is long and could be hard to fulfil on many fronts – lower the rates, go easy on banks and borrowers, be liberal with grant of banking licences, safeguard foreign reserves and rather beef it up.
He worked on the USA, India, Bahamas and Myanmar desks at the International Monetary Fund until 1995.
Incidentally, Rajan had also made the surprise announcement on a Saturday that he would not take a second term after his current three-year tenure ends on September 4, which interestingly will be a Sunday. He had also served the Ministry of Finance, Department of Economic Affairs between 1998 and 2001, as a consultant. Minister of State for Finance Santosh Kumar Gangwar hoped that Patel will do well as the RBI governor. “He has a clear understanding of what is going on”, said RBI Deputy Governor S S Mundra.
Moody’s Investors Service said it would monitor for transmission of monetary policy and the clean-up of bad debt in the banking sector.
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The Nifty Bank index ended 0.4 per cent lower, with State Bank of India falling 1.7 per cent and Punjab National Bank declining 0.4 per cent. “He has to ensure the committee is in place and taking decisions within one month of taking over as the RBI governor”, said an official in the government, who did not wish to be named.
