Gold Silver Reports — Exit Rajan, Enter Patel — Prime Minister Narendra Modi appointed Urjit R Patel as the 24th governor of the Reserve Bank of India, ending months of speculation about the successor to the high-profile Raghuram Rajan, signalling that prudent monetary policy will continue to be the norm, calming investors .
Like Rajan, the 52-year-old deputy governor, will have a three-year term beginning Septem ber, and the government said that for the first time a “systematic approach and an objective mechanism“ was put in place for the appoint ment of the governor.
“The appointments committee of the cabinet (ACC) has approved the appointment of Dr Urjit R Patel as Governor, Reserve Bank of India (RBI) for a period of three years w.e.f 04.9.2016,“ the government said in a statement.
Patel rose to fame with the recommendation of inflation targeting for the monetary policy to have any credibility. He headed the committee appointed by Rajan to suggest a monetary poli cy framework. It recommended that the RBI should aim to contain inflation as measured by the Consumer Price Index at 4% in a band of 2 percentage points on either side. The govern ment accepted those recommendations and recently gave it a legal backing too.
“Appointment of Urjit Patel comes as a wel come move,“ says Arundhati Bhattacharya, chairman of State Bank of India. “Dr Patel has been at the helm of institutionalising the infla tion targeting regime in the monetary policy framework. His appointment signals continuity of policy intent, both on part of the government and the RBI.” Patel has been guiding the monetary policy as a deputy governor for the past three and a half years after succeeding Subir Gokarn. In fact, he had been critical of the previous governor D Sub barao’s policy on interest rates that led to prices rising at double digits.
The government, which has institutionalised monetary policy with the consent to set up the monetary policy committee (MPC) of six mem bers instead of just the governor, has been regu larising appointments on the basis of the recommendations of the Financial Sector Legislative Reforms Committee headed by Justice BN Srikrishna.
“For the first time, a systematic approach and an objective mechanism has been put in place,“ the statement said, while adding that the appointment was made on the basis of the recommendation of the six-member Financial Sector Regulatory Appointments Search Committee (FSRASC).
The shortlist of names considered by the committee included department of economic affairs secretary Shaktikanta Das, chief economic advisor Arvind Sub ramanian, former deputy governor Subir Gokarn, former World Bank chief economist Kaushik Basu and Patel, a person privy to the developments told ET.
The committee had met twice to discuss all the possible names that can be considered for this assignment and had submitted a short panel of names to the ACC, the statement said.
The government is also in the process of selecting three of is representatives on the six-member MPC that will set interest rates going ahead.
Now, the search for a deputy governor to replace Patel will be on. — Neal Bhai Reports