Urjit Patel takes the helm at Indian central bank

By on 27/09/2016 | Updated on 24/09/2020
Urjit Patel, the 24th governor of the Reserve Bank of India (RBI)

Urjit Patel has taken over as the 24th governor of the Reserve Bank of India (RBI), after Raghuram Rajan wrapped up his rocky three-year term in early September.

The former deputy governor faces the challenge of pushing inflation down whilst protecting India’s economic growth.

Patel, who was selected by Prime Minister Narendra Modi, has served as deputy governor for three years. The 52-year-old, who holds a doctorate from Yale University, attracted attention in the deputy’s role for his work leading a committee overseeing the RBI’s monetary policy framework.

The new governor’s litmus test will come on 4 October, when a monetary policy review is scheduled to take place. The government appears keen to cut interest rates as economic growth falters, but in August India’s inflation rate stood at 5% – higher than RBI’s target.

Patel is widely expected to walk the path set by his predecessor in completing what Rajan called “deep surgery” on India’s banking institutions. Experts point to Patel’s paper, which he co-authored earlier this year, as evidence of his hawkish instincts on monetary policy. The paper dissects the role of the RBI in curbing inflation, arguing that in some situations a cut in interest rates can actually dampen economic growth.

The governor may, however, come under stronger political pressure when Modi makes more appointments to the RBI’s board – in which half of the 16 seats sit empty. The appointments are likely to prove crucial in shaping the bank’s relationship with the government, following some tense moments under Rajan’s tenure.

Patel is well known in international banking circles, having served at the International Monetary Fund and represented India during the negotiations leading to the agreement of the Inter-Central Bank Agreement (ICBA) among the BRICS nations. This led to the establishment of the Contingent Reserve Arrangement (CRA), a swap line framework among the central banks of these countries.

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See also:

Report urges sweeping reforms to reinvigorate India’s ‘stagnant’ civil service

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The remarkable rise of India’s think tanks

India on track to electrify every village by 2018

About Vasudevan Sridharan

This article was written by Vasudevan Sridharan. Global Government Forum works with a network of contributors who are experts in their field. If you would like to contribute a piece to Global Government Forum, please contact [email protected]

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