NEW RBI GOVERNOR

On 20 August 2016, the government announced that Mr. Urjit Patel will succeed Mr. Raghuram G. Rajan as the new RBI Governor. Appointment of Mr. Patel, who performed an instrumental role in the inflation targeting regime of Central Bank, is likely to ensure that the current policy framework and working structure may continue in the upcoming term of the new governor as well. A PhD in Economics from Yale and M. Phil from Oxford, Mr. Patel has good academic credentials and has a rich experience of working across government and non-government projects. Prior to appointment as deputy governor at RBI, he stayed advisor at BCG, worked as non-resident Senior Fellow at The Brooking Institution, associated with IMF, and handled several tasks with central and state governments in India. With such credentials and knowledge, Mr. Patel’s appointment as RBI governor is likely to have the following impacts on certain matters: • Continuation of policy framework – Neutral • Clear and Transparent Communication from RBI – Neutral • India’s image to stay intact – Neutral • Stability in bond markets to stay – Positive • First governor to work under Monetary Policy Committee (MPC) mechanism – Neutral • Firm policy stance and cleaning up of Banks’ Balance Sheets – Neutral • Smooth transition from Mr. Rajan – Positive As discussed above, the appointment of Mr. Patel is likely to stay neutral in most of the cases. However, for yield hungry foreign investors, the appointment may come as a welcome step as the rate cuts hopes may fade away for near term. In addition, stable yields may result in healthy performance for the Indian banking sector in future.