“While Patel is new as a Governor, he’s not new for RBI”.
Reserve Bank of India (RBI) Deputy Governor Urjit Patel attends a news conference after the bi-monthly monetary policy review in Mumbai, India, August 9, 2016.
State Bank of Indias chairman Arundhati Bhattacharya, who was speculated to be one of the probable names to replace Rajan, also welcomed the Governments decision.
As one of four deputy governors, Dr Patel is now in charge of monetary policy at the RBI.
Moody’s Investors Service said it would monitor for transmission of monetary policy and the clean-up of bad debt in the banking sector.
Patel, 53, one of RBI’s four deputy governors, was reappointed in January for another three years.
C Rangarajan opened up the markets, YV Reddy strengthened forex reserves and Rajan tied the government in a legal knot with the RBI and historically instituted the Monetary Policy Committee.
“Being the architect of the committee on monetary policy reform, his appointment indicates independent policy making”.
Springing a surprise, Rajan in a letter to RBI staff in June announced that he would return to academia and not seek a second term.
On Finance Minister Arun Jaitley’s statement on former prime minister Jawaharlal Nehru, he said, “I don’t know as to laugh or feel pity on Jaitley and the BJP government for lacking institutional memory”.
As such 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. He was particularly picked for his expertise in inflation-control, which has become the main task of the central bank, ever since the government, under statute, set it a target of 4 percent, plus or minus two percentage points, based on consumer price index. This apart, he has been a non-resident Senior Fellow of The Brookings Institution.
He completed his Bachelor’s Degree in Economics from the London School of Economics, and went on to do an M. Phil from Oxford University in 1986, and PhD from Yale University in 1990.
The good news for Patel is that three major growth drivers are at work profitably – well-constructed fiscal and monetary policies, global fortune of declining oil prices and India’s growth surpassing major economic powers like China.
‘Nevertheless, some of the dovish sentiment that had crept into the market will likely be re-priced given that Dr Patel is viewed as being more hawkish, therefore yields could correct slightly higher in the near term’.