India appoints insider Urjit Patel as new RBI governor

NEW DELHI/MUMBAI, August 20 (Reuters) - India's government promoted Urjit Patel, a deputy governor in charge of monetary policy at the Reserve Bank of India, to serve as its next governor for a three-year term, it said on Saturday.   He will replace Raghuram Rajan, a former International Monetary Fund chief economist who stunned financial markets in June by announcing he would step down in September and return to academia after a single three-year term at the RBI.   Patel, 52, headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a panel to set interest rates. He will start his three-year term on Sept. 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.   Patel, who has a doctorate from Yale, had widely been seen as ensuring the most continuity among the candidates believed to be in the running to be the next governor.   He had been reappointed in January for another three years as deputy governor in charge of monetary policy, a department he has run since 2013.   Seen as a close lieutenant to Rajan, Patel will now get to implement the policies he had helped shape.   The government is soon expected to announce the composition of a six-member monetary policy committee to decide on interest rates. It will be made up of himself and two other RBI officials, along with three members appointed by the government.   Rajan, who succeeded in halving the inflation rate from the double digit levels prevailing when he took over, also persuaded the government to adopt inflation targeting, setting a medium term central target of 4 percent, within a range of 2 to 6 percent - another policy endorsed by Patel.   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 world's 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.  

Expert Views: Insider Urjit Patel named next RBI governor

[caption id="attachment_213056" align="aligncenter" width="655"] Reserve Bank of India (RBI) Deputy Governor Urjit Patel (R) attends a news conference after the bi-monthly monetary policy review in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/File Photo[/caption] REUTERS - Insider Urjit Patel was named on Saturday as the next governor of the Reserve Bank of India for a three-year term, succeeding Raghuram Rajan who dropped a bombshell in June by announcing he did not want to stay on.   Patel, 52, is currently a deputy governor and headed a committee on monetary policy reforms whose recommendations to set a inflation and create a new Monetary Policy Committee were backed by Prime Minister Narendra Modi's government.   Here are comments from analysts and officials on Patel's appointment.   DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS & RESEARCH   "Continuation in monetary policy will remain. He is the architect of inflation targeting approach. Investors don't want any change in policy direction.   "He has worked with IMF, he has worked with the corporate sector and he was with the Brookings Institution. So, coming from different areas, he knows how things are and what kind of action is required.   "The market will welcome it (his appointment). Maybe you will see a strengthening of rupee vis-à-vis dollar if globally there is no turmoil. You may also see bond yields responding."   ANANTH NARAYAN, REGIONAL HEAD OF FINANCIAL MARKETS, ASEAN AND SOUTH ASIA, STANDARD CHARTERED BANK, MUMBAI   "It's good to have the uncertainty and suspense out of the way; we can focus on the way forward now. Given the monetary policy framework was envisaged by the eponymous Dr. Urjit Patel committee, there should be continuity in this critical aspect. To that extent, global investors and other stakeholders will welcome this appointment.   RITIKA MANKAR, ECONOMIST, AMBIT CAPITAL, MUMBAI   "Choice of Urjit Patel is in line with our expectations as he was one among the top two candidates we were working with.   "What we like about him is: One, he's seen RBI change from being a loosely inflation-focused central bank to one that formally targets CPI inflation.   "And second, his experience as a deputy governor in charge of monetary policy under the governorship of Rajan will hold him in good stead. However, what remains to be seen is how he handles banking as a sector, he probably lacks what a candidate like Arundhati Bhattacharya, would have brought to the table."