Rupee falls against dollar after Urjit Patel named RBI governor

New RBI guv Urjit Patel is Rajan's trusted lieutenant against inflation

Patel will be the 24th Governor of RBI and succeed Raghuram Rajan, who will demit office on September 4.

“It remains to be seen how the new Governor and committee interpret the 2 per cent target band around 4 per cent, where we assume a glide path of 5 per cent this year and 4 per cent thereafter will be preferred”, said DBS. “Institutional investors, both domestic and foreign, would welcome the appointment of Patel as successor to Rajan, ” said Ajay Bodke, CEO Chief Portfolio Manager – PMS, Prabhudas Lilladher. PM Narendra Modi had a hard task of picking the right fit for the position, someone who could step into Rajan’s boots with the right mix of intellectual credentials and global acceptability.

The newly named Reserve Bank of India (RBI) Governor Urjit Patel has a tough act to follow. Indeed, his name had been doing the rounds as one of the probables likely to replace Rajan.

Patel’s appointment signalled that Prime Minister Narendra Modi is in favour of a smooth transition at the RBI and continuation of Rajan’s unfinished agenda to contain inflation as well as boost growth, economic analysts and finance ministry officials said.

The interesting fact is that Swamy has even better reasons to target Patel if high interest rates are the point of contention.

Later, he was on deputation (1996-1997) from the International Monetary Fund to the Reserve Bank of India, before becoming a Consultant (1998-2001) to the Ministry of Finance. This is because it was Patel’s proposal that laid the foundation of Rajan’s inflation battle in 2013-14. A committee that introduced a switch to inflation-targeting and adopting consumer prices as the new benchmark instead of wholesale prices among other paramount changes has also been headed by him, as per Indian Express. He has run the central bank’s monetary policy department since 2013 and is viewed as a leading contender for the governor’s job.

Global credit rating agencies on Sunday welcomed the appointment of Urjit Patel as the next Governor of the Reserve Bank of India and hoped for continuity of the existing monetary policies. However, following feedback that tight liquidity was preventing transmission of policy rates, the RBI changed its stance to move money markets from a liquidity-deficit to a liquidity-neutral state.

According to Diron, future inflation developments will provide further indications of monetary policy credibility. 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.

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