Facing a tough task of maintaining the legacy of his predecessor Raghuram Rajan, Urjit Patel has assumed charge as the 24th Governor of Reserve Bank with several immediate priorities, including clean up of banks and containing inflation without hurting growth.
Patel assumed charge effective September 4, 2016, after serving as deputy governor since January 2013, RBI said in a statement today.
He was reappointed as deputy governor on January 11, 2016, after completion of his first three-year term in office.
His immediate task cut out — finishing the ‘unfinished agenda’ of his predecessor on completing ‘deep surgery’ of banks and winning the war on inflation.
Ensuring undisruptive redemption totalling USD 20-25 billion, getting used to the idea of Monetary Policy Committee and bank cleanup are the main challenges before the new Governor.
According to Rajiv Kumar, Senior Fellow at Centre for Policy Research, the first task before him is to get used to the idea of working with the Monetary Policy Committee (MPC).
“He has to devise a way of working with the committee and getting to the objective of meeting inflation target. Besides, containing food inflation is another challenge before him,” Kumar said.
If food inflation raises its head again then what strategy he will employ to contain it, he asked.
Incidentally, it was Patel — often referred to as ‘Dr Patel’ by Rajan — who scripted a new framework for fighting price rise.
Besides, Patel should work in a manner that RBI versus Finance Ministry situation is avoided as all the components are working towards inflation control and employment generation and finally what approach he will adopt to clean balance sheet of the bank or strengthen banks.
A number of corporate leaders and bankers who have previously worked with Patel, including during his tenure as RBI’s Deputy Governor and earlier on boards of some companies, said he is expected to show “much better understanding” of the problems the companies and banks are facing due to the central bank’s AQR (Asset Quality Review) directive.
Some are even hopeful that the AQR regime may actually see some change, though Rajan kept on repeatedly saying in his last days at RBI that the process should be completed by March 2017, a target he had set for cleaning up of the banks’ balance sheets.
With public sector banks accounting for a large portion of the bad loans, the clean-up exercise has raised heckles of many in the government as well, though not many have been public with their views, fearing adverse commentary.
Among his assignments as deputy governor, Patel chaired the Expert Committee to Revise and Strengthen the Monetary Policy Framework.
“Representing India, he actively participated in steering the signing into force of the inter-governmental treaty and the Inter-Central Bank Agreement (ICBA) among the BRICS nations, which led to the establishment of the Contingent Reserve Arrangement (CRA), a swap line framework among the central banks of these countries,” RBI said.
Patel has also served at the International Monetary Fund (IMF). He was on deputation from the IMF to RBI during 1996-1997, and in that capacity he provided advice on development of the debt market, banking reforms, pension reforms, and evolution of the foreign exchange market.
He was a Consultant to the Ministry of Finance from 1998 to 2001. He also had other assignments in public and private sectors, including with Reliance Industries, IDFC Ltd, MCX Ltd and Gujarat State Petroleum Corporation.