Urjit Patel has assumed charge as the 24th Governor of Reserve Bank, succeeding Raghuram Rajan whose three-year term ended yesterday.
Mr Patel has assumed charge effective September 4, 2016, after serving as deputy governor since January 2013, RBI said in a statement today.
Mr Patel has his immediate task cut out: finishing the “unfinished agenda” of his predecessor on completing a “deep surgery” of banks and winning the war on inflation.
Incidentally, it was Mr Patel who scripted a new framework for fighting price rise, which earned him the informal title of ‘inflation warrior’.
However, it is the “deep surgery” ordered by Mr Rajan to cleanse the balance sheets of the banks from bad loans that may pose greater challenges for Patel, as a number of banks, corporates and others have been lobbying hard against what they call “unwarranted urgency” shown by the RBI in this regard at the cost of hurting investment climate.
Unlike Mr Rajan, who took charge at a time when global markets were volatile and concerns were being raised about the rupee, the Gujarati-origin and once Kenyan citizen Mr Patel has come in when financial markets are much more stable and concerns have also subsided about any potential dollar flight due to impending redemption of NRI bonds.
A number of corporate leaders and bankers who have previously worked with Mr Patel, including during his tenure as the 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 asset quality review (AQR) directive.
Some are even hopeful that the AQR regime may actually see some change, though Mr Rajan kept on saying repeatedly in his last days at the 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 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.
Besides having worked with the International Monetary Fund (IMF) and the Finance Ministry, Mr Patel also has corporate experience – probably the first for any RBI governor – including with the country’s biggest corporate house, Mukesh Ambani-led Reliance Industries.
Besides, he was associated with Gujarat State Petroleum Corporation, IDFC and MCX, among others, as member on their boards and other roles.
Many industry leaders, top bankers and influential marketmen said they are hopeful that his corporate and finance background would help taper down the RBI’s “hawk-eye fixation” on checking inflation and the “deep surgery” to remove bad loans.
The wish-list that Mr Patel faces is long and could be difficult to fulfill on many fronts: lower the rates, go easy on banks and borrowers, be liberal with grant of banking licences, safeguard foreign reserves and further beef them up.
Born on October 28, 1963, Mr Patel is a PhD (Economics) from Yale University (1990) and M Phil from Oxford (1986). He has been a non-resident Senior Fellow at The Brookings Institution since 2009.
He was with the IMF between 1990 and 1995 and worked on the US, India, Bahamas and Myanmar desks. He was on deputation (1996-1997) from the International Monetary Fund to the RBI.
In 1996-97, he had nearly two years of association with the RBI, when he was sent on deputation from the IMF to advice on development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the forex market.
This was followed by a three-year stint as a consultant with the Department of Economic Affairs in the Finance Ministry.