Patel will succeed Raghuram Rajan, and will become the 24th Governor of the RBI.
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Traders expect Patel to keep the repo rate on hold at the RBI’s next policy review on October 4 after inflation accelerated to 6.07 percent in July, above the RBI’s near-term target of 5 percent. “A central bank governor doesn’t need to have a rock star status to be successful in reining in inflation or cleaning up the banking sector”, Rookmaaker added.
ICICI Bank MD and CEO Chanda Kochhar said, “As the Deputy Governor of RBI, Urjit Patel has played a key role in developing the new monetary policy framework that has focused on reigning in inflation and has imparted stability to the currency”.
The chief of the Reserve Bank of India is typically chosen by the prime minister in consultation with the finance ministry, making Mr. Patel the first governor to be chosen by the right-wing prime minister, Narendra Modi.
“Apart from continuity, what worked in Patel’s favour is his knowledge of monetary policy”. He has worked with the International Monetary Fund (IMF) between 1990 and 1995 covering the US, India, Bahamas and Myanmar desks.
He holds an M. Phil in economics from Oxford University and a PhD in economics from Yale University. The government has earlier notified 4 per cent inflation target for the next five years, based on which the MPC would take its monetary policy decisions going forward.
Hardcore economists are looking for his assessment of the global markets and his prognosis for the Indian economy.
Market experts feel Patel is unlikely to dilute his own commitment to rein in inflation – that is, he will not cut rates in a hurry.
“Institutional investors both domestic and foreign would welcome the appointment of Patel as successor to Rajan”.
“Broadly this is a message of continuity”.
The Nifty Bank index dropped 0.61 percent, with State Bank of India SBI.NS and Punjab National Bank PNBK.NS falling 1 percent each. “We are looking for great continuity and that provides great comfort”, he said.
Subramanian Swamy, a famouly combative BJP official, had accused Rajan of “wrecking the economy” and being “mentally not fully Indian”.
He will replace Raghuram Rajan, a former International Monetary Fund chief economist who stunned financial markets in June by announcing he would step down in September and return to academia after a single three-year term at the RBI.
According to the Wall Street Journal, Rajan, who took the helm of the RBI in 2013, is credited with helping arrest the rupee’s decline against the dollar and helped to bring down the country’s inflation rate.
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“Now the central bank has to be more prompt in taking action against non-performing assets”.
