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Journalism of Courage
Urjit Patel was on Saturday appointed the next Governor after Raghuram Rajan demits office on September 4. He was first appointed Deputy Governor for three years in January 2013 and was given extension this January. Here what lies ahead for Patel at the chair of RBI.
September 4, 2016, Urjit R Patel begins his journey as the new RBI Governor, taking charge from Raghuram Rajan
Patel will become the second Governor to have been directly elevated from the post of deputy governor.
In 1985, Amitav Ghosh was directly elevated to the post but held the office only for 20 days before R N Malhotra took over.
Patel worked with the government and the RBI in the past in various capacities.
January 2014, he headed a committee on the monetary policy reform that submitted its report with critical recommendations on various aspects, including inflation targeting and composition and functioning of the monitory policy committee.
Retail inflation targeting
One of the key recommendations of the committee on monitory policy reform was that the central bank should target retail inflation (CPI) for policy rates. It said that inflation should be set at 4 per cent with a band of +/- 2 per cent around it.
Earlier this month, the government notified 4 per cent inflation target with a range of plus/minus 2 per cent for the next five years under the monetary policy framework agreement with the RBI.
Monitory policy committee
While the Urjit Patel-led committee had suggested a five-member MPC with the RBI Governor having more say on its composition and working, finance minister Arun Jaitley, in his Budget speech on February 29, 2016, said that the RBI Act will be amended to set up the committee consisting of six members and headed by the RBI Governor.
Patel’s report also said that all fixed income financial products should be treated at par with bank deposits for the purposes of taxation and TDS. It further said that with a sharp rise in the ratio of agricultural credit to agricultural GDP, the need for subventions on interest rate for lending to certain sectors would have to be revisited.
