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Reserve Bank of India Announces New Central Bank Governor

Introducing Urjit Patel

After months of speculation, the long-awaited decision as to who will replace Raghuram Rajan as central bank Governor has finally been made. On August 20, 2016, Urjit Patel was appointed new chief of the Reserve Bank of India.

A long-time colleague of Prime Minister Narendra Modi, Mr. Patel is viewed as a market-friendly successor, that will augment the government’s macroeconomic policies. While Mr. Rajan was unquestionably an astute central banker that helped to boost India’s economy to becoming the world’s fastest growing, he was often seen as outspoken and his methods were sometimes opposed by key political figures. Mr. Patel, in contrast is described as a ‘quiet technocrat’ that is much more aligned with the current administration. He is an internal promotion, having previously served as Deputy Governor of the RBI, since January, 2013.

For investors that are unfamiliar with Mr. Patel’s background, they should know that he is equally as pedigreed as his predecessor, having completed his first two degrees in the UK at the London School of Economics and Oxford University, before receiving his doctorate in Economics from Yale University. After completing his PhD, Mr. Patel worked for the International Monetary Fund in the early 1990s and has also held important corporate positions at top institutions around the world, including the Boston Consulting Group and Indian conglomerate, Reliance Industries Limited.

Mr. Patel is known as an inflation hawk. He headed up the RBI panel which recommended that the central bank use a target range of inflation to make monetary policy decisions. The bank’s current inflation target is 4 percent, with a plus-or-minus band of 2 percentage points. This framework did a lot to affirm investors’ confidence in the Indian central bank and is expected to remain intact under Mr. Patel.

While the RBI is saying goodbye to a renowned figurehead in Mr. Rajan, who announced earlier this summer that he would be returning to academia in September, Mr. Patel largely represents continuity for the central bank, having worked side-by-side with Mr. Rajan for the past 3 years. Though not as public a figure up until now, Mr. Patel is sure to see his global reputation build over time.

Markets reacted positively to the news with the BSE Sensex Index opening higher following the announcement. Under Mr. Patel, international investors can expect the same inflation-fighting policies, with growth also expected to remain strong in Asia’s third-largest economy.


Bloomberg Business, Modi Swaps Rock-Star Rajan for Quiet Technocrat at India RBI, August 20, 2016.
Wall Street Journal, Who Is India’s New Central Bank Governor, Urjit Patel?, August 20, 2016.
Wall Street Journal, India Names Urjit Patel as Central Bank Governor, August 20, 2016.

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