“The Appointments Committee of Cabinet has approved the appointment of Dr. Urjit R. Patel as Governor, Reserve Bank of India (RBI) for a period of three years”, a press note seen by AFP said.
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Not many market participants expect a rate cut in the October policy meeting as retail inflation is higher than the central bank’s March 2017 target of 5 per cent.
Instead of bringing in anyone from outside, the Government on Saturday chose to promote RBI’s Deputy Governor Urjit Patel (52) as the new Governor to take over on September 4 after the 3-year term of Raghuram Rajan (53) ends.
Rajan, whose term ends on 4 September, decided not to seek another term and opted to return to academics, which he found the better choice.
“We assume continuity of the RBI’s policies under the new Governor, Dr Urjit Patel”, Marie Diron, Senior Vice President, Sovereign Risk Group, Moody’s, said. “His appointment signals continuity of policy intent, both on part of RBI and the government”.
Urijit Patel, current deputy governor, was expected as the only hawkish candidate for Governor chair. It is no longer the onus of the RBI governor to announce policy rates unilaterally.
With the name of executive director Michael Patra doing the rounds as Patel’s replacement to be the deputy governor in-charge of monetary policy, the Reserve Bank of India board will have to suggest a new person who becomes the third member of the MPC.
“Patel is more of an inflation-focused guy and effectively with the inflation rate going up, expectations of a deep rate easing have diminished”, said Dhananjay Sinha, head of research at Emkay Global Financial Services. Infosys founder and IT doyen N R Narayana Murthy, who had earlier pitched for a second term for Rajan, said Patel is the “right man” to succeed the incumbent Governor.
He was first appointed as Deputy Governor for three years in January 2013 and was given an extension this January. Patel did his M Phil.in Economics from Oxford University in 1986 and B.Sc. (Economics) from University of London in 1984.
“The clean-up of banks’ balance sheet has started and it would be credit positive from a sovereign perspective, if it led to improved bank capitalisation levels, renewed loan growth and robust risk processes”.
Prime Minister Narendra Modi’s government this month formally agreed to adopt Rajan’s inflation target of 2 to 6 percent in the medium term.
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Patel has also served the government in various positions during the NDA-I regime.
