Urjit Patel becomes RBI's 24th Governor Urjit Patel
Urjit Patel becomes RBI's 24th Governor Urjit Patel, who has an M.Phil degree from Oxford University, was an advisor with Boston Consulting Group before his appointment as the deputy governor at RBI in 2013.
Deputy Governor Urjit Patel will take charge as the 24th Governor of the Reserve Bank of India when incumbent Raghuram Rajan demits office in the first week of September.
Patel, who has an M.Phil degree from Oxford University, was an advisor with Boston Consulting Group before his appointment as the deputy governor at RBI in 2013.
He was also with the International Monetary Fund (IMF) between 1990 and 1995 where he covered the US, India, Bahamas and Myanmar desks.
He was on deputation to the Reserve Bank from the IMF between 1996 and 1997 after which he was a consultant (1998-2001) to the Department of Economic Affairs in the finance ministry.
Patel’s appointment assumes significance given the controversial departure of Rajan, who was publicly targeted by senior BJP leader Subramanian Swamy, and chose not to seek a second term in office.
The government’s image too took a knock, with industry captains and institutional investors criticizing the handling of the issue.
Former RBI Deputy Governors Rakesh Mohan, Subir Gokarn, Vice Chairman of the NITI Aayog Arvind Panagariya and SBI Chairperson Arundhati Bhattacharya were said to be the other contenders to the post. And while the economy is far more stable than it was when Rajan had taken charge, Patel has a tough act to follow, given the high standards sets by his outgoing predecessor.
Focus to be on inflation, NPAs Patel’s handling of inflation, interest rates bad loan clean-up at banks, and the upcoming NRI deposit redemptions will be closely watched by the market.
He led the committee that, in 2014, suggested that RBI adopt a formal inflation targetting method and formulate a monetary policy committee (MPC) to take interest rate decisions to achieve its inflation targets. Recently, the government agreed to both clauses, adopting a 4 percent long-term inflation target (+/- 2 percent) and formed a six member MPC -- comprising three nominees each from government and RBI -- in which the Governor would have a casting vote. "It is a strong indication from the government that it believes in policy continuity.
We have seen a very big change in the monetary policy framework and Patel was the author of the report that triggered the change. It sends a very positive message to investors around the world," said JPMorgan Economist Sajjid Chinoy. But even more closely watched will be his ability to maintain the RBI’s autonomy and extract tough promises from the government on fiscal discipline, something that Rajan excelled at.
“The market will quickly try to suss out if the new person has the spine to stand up to New Delhi, and if he doesn’t, the rupee will bear the consequence," Ambit’s Saurabh Mukherjea had said in an interview to CNBC-TV18 last month when Rajan announced that he would quit in September.
There is talk that one of the reasons the government was not too keen on retaining Rajan was that it would need a governor sympathetic to its vision of a monetary policy in the run-up to the 2019 general elections.
Rajan has often been criticized for keeping interest rates high and giving priority to low inflation over growth. Hopes of interest rate cuts have risen in the days following Rajan’s announcement to quit. However, the renewed spike in consumer and wholesale inflation has somewhat tempered the expectations. Patel has also had stints in Reliance Industries and Infrastructure Development Finance Company (IDFC).
