The new RBI Governor Urjit Patel, who replaced Raghuram Rajan, has finally come out of his shell to take the centrestage.
In his maiden monetary policy review in Mumbai on Tuesday, the 52-year-old Governor, who also coincidentally chaired the first meeting of the new six-member monetary policy committee (MPC), announced the decision to slash the repo rate by 25 basis points to 6.25 per cent.
Patel has certainly met expectations of the people, government and the industry to spur growth.
The committee was surprisingly unanimous in its decision to cut the rates by 25 basis points even though economists and experts were expecting a status quo. The committee seems to have taken a very optimistic view of the inflation outlook.
"The committee expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook," states the monetary policy document.
At his first media interaction, Patel looked at ease even though it was a short interaction lasting only about 15 minutes.
For almost three and half years, Patel used to be part of the press and analysts interaction which Rajan as Governor used to address for half an hour to 45 minutes.
"We are on a tight schedule today," excused Patel. The new RBI governor also allowed other colleagues to speak within the 15-minutes window about the banking, supervision, cyber security, financial inclusion and consumer protection. The media didn't get enough time to probe the Governor on the inflation-interest-growth dynamics. It could be a good strategy to underplay the big historic event.
Patel has always kept a low profile - spoke when asked to by his boss Raghuram Rajan in the policy conferences. The media actually missed his one liners during conferences as a deputy governor. Since he took over, Patel had also stayed away from addressing media on assuming the new role. But many say Patel by nature is shy and believes in communicating when required.
In his opening remarks, Patel was all praise for the government-appointed three members.
"We have a great MPC. The three members of MPC are of outstanding pedigree. They all are well known academicians. They bring value and dispersion of opinions," said Patel.
Kenya-born Patel, who has studied in Yale and Oxford, and worked at the International Monetary Fund is purely a practicing economist unlike previous governors like D Subbarao, YV Reddy, Bimal Jalan and C Rangarajan.
Rajan was an economist, but also did a whole lot of work in the field of banking and finance. On the growing NPAs situation, Patel said,"We will deal with NPAs with firmness and pragmatism".
That's one area where the 24th RBI Governor Patel would have to rely on his colleagues a lot. Two of the deputy governors -- SS Mundra (a banker) and R Gandhi (a RBI veteran) -- are from the old team.
Patel will certainly miss the wisdom of HR Khan, a deputy governor and expert in foreign exchange matters, as he retired in July this year. NS Vishwanathan has replaced him as the third deputy governor. The post of the fourth deputy governor is still vacant, which is to be filled by an economist -- an area which Patel himself looked after as a deputy governor.
Patel who represents continuity at RBI, said transmission of interest rate is an issue.
"Transmission to the money market has been swift and decisive. I agree that bank lending rates have been less than any of of us would like to," said Patel.
Clearly, Patel is not in the Rajan's mold of speaking more or speaking his mind on broader economic issues beyond monetary policy.
In the months to come, Patel would certainly be under tremendous pressure as he has to fill big shoes of Rajan. There are challenges emnating from international market where his mantle would be tested.
At home, Patel will not only have to manage the political masters, but also carry forward Rajan's unfinished agenda especially new banking models, cleaning up of banks' balance sheets and remaking the RBI itself as a knowledge institution. At the 18th floor visitors' room of RBI Governor, the list of illustrious governors with large portraits, would itself be intimidating for the new young governor.
It would be interesting to see how a low-profile Patel leaves his marks on the most respected and independent institution in the country.
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