Successor of Raghuram Rajan
Dr. Patel (24th Governor) will take up the top job for a three-year term on September 4, the day Dr. Rajan’s three-year term expires.
Intention of Government
The choice of Dr. Patel reflects the government’s preference for continuity to the Rajan tradition. Dr. Patel, working closely with Dr. Rajan, is piloting India’s transition to a new monetary policy regime. The 52-year-old macro-economist was appointed deputy governor in 2013. Since then, he has been a key player in the RBI’s war on inflation.
According to a press note announcing the appointment, Dr. Patel was picked in a new, two-step selection process. “For the first time, a systematic approach and an objective mechanism have been put in place,’ it said.
In the first step, the Financial Sector Regulatory Appointments Search Committee (FSRASC) headed by the Cabinet Secretary P. K. Sinha made a shortlist for the consideration of the ACC. “It undertook an extensive exercise to suggest a panel of names to the ACC,” the note said.
Thereafter, the ACC comprising Prime Minister Narendra Modi and Home Minister Rajnath Singh, settled for Dr. Patel from a list of five names received from the FSRASC.
The New Governor is expected to complete the pending tasks. These included the setting up of the Monetary Policy Committee and the bad loan clean-up process in the banking sector.
Dr. Patel was Hand-picked by Rajan
Dr. Patel, the senior-most Deputy Governor at the RBI, is the architect of the new monetary policy framework and is working closely with the Cabinet Secretariat and the Finance Ministry to ensure a smooth transition.
The responsibility for setting interest rates is being transferred from the Governor to a six-member Monetary Policy Committee (MPC), three of whose members are being appointed by the government. The main mandate of the central bank is being formally defined as targeting inflation to bring it under the four per cent level (+/-2 per cent).
Dr. Patel was picked by Dr. Rajan to head the RBI committee that had made these recommendations and suggested that the central bank abandon its focus on the wholesale price index for its inflation management and adopt in its place the consumer price index.