Ending days of speculation, deputy RBI Governor Urjit Patel has been appointed as the new Governor of the Central Bank. He will succeed Raghuram Rajan. Patel, the 24th RBI Governor, will serve a three-year term with effect from September 4.
“The Appointments Committee of Cabinet has approved the appointment of Dr. Urjit R. Patel as Governor, Reserve Bank of India for a period of three years,” said the statement from the government.
Dr Rajan`s term ends on September fourth, after he surprised everyone in June with a letter to RBI staff announcing his decision to return to academics and not be available for a second term.
Who is Urjit Patel?
One of the RBI
s four deputy governors, Patel, 52, has been running the central banks monetary policy department since 2013. He was re-appointed in January for another three years as deputy governor in charge of monetary policy. Dr. Patel obtained his BA from the London School of Economics and pursued his Ph.D. from Yale University. He has M Phil from Oxford University.
Seen as a close lieutenant to Rajan, Patel headed a committee that introduced landmark changes including a switch to inflation-targeting and adopting consumer prices as the new benchmark instead of wholesale prices. The changes he helped drive are considered to be among the most significant monetary policy reforms since India opened up its economy in 1991.
Patel, whose remit at the RBI included managing money markets, has faced criticism from market participants however, with some traders and bankers complaining that he kept liquidity tight at a time when the RBI was lowering rates, starving banks of cash.
Patel, according to a Nomura note, is considered a
hawk on his monetary policy stance.He has also worked with the International Monetary Fund and has experience in energy and financial sectors too.
The new governor takes over at a time when inflation has bust out of the top end of that range. Consumer inflation accelerated to 6.07 percent in July, the fourth consecutive month it has stayed above the RBI`s near-term target of 5 percent by March.
Aside from controlling inflation, the new governor will have to follow through on efforts to clean-up banks
bad loans so that they can once again support the investments needed if India is to keep its place as one of the worlds fastest growing economies.
Patel will also have to navigate India`s tricky political scene. Right-wing members of the ruling Bharatiya Janata Party (BJP) had criticised Rajan for some of his speeches on economic matters and for not cutting interest rates faster.