Vivek Dehejia, Resident Senior Fellow at IDFC Institute speaks to the Open Magazine, on the appointment of Dr. Urjit Patel as Governor of the Reserve Bank of India (RBI) and the challenges that lie ahead for him.
Dehejia commends the departure from traditional ad-hoc appointments of the Governer of RBI and welcomes the fact that a due process is put in place. He opines "Candidates were vetted, a long-list prepared, followed by a short-list. This is how central bank governors are selected and appointed in advanced countries. There is no reason why India should not have followed this practice. In the long-run, this process of selection will enhance the credibility of the RBI Governor.”
The MPC is a six-member committee that includes the Governor of the RBI, the deputy governor in charge of monetary policy, and one RBI official. The three other members are to be nominated by the Government. At the moment, only two are in place: Patel (who will now be a member in his capacity as Governor) and the RBI official nominee, Michael Patra. There are four vacant positions to be filled before the MPC can start deliberations.
His words are echoed by Singh, who adds that, “the need for continuity and making the MPC and the inflation target work in harmony with the overall fiscal stance of the government” is one among the immediate challenges facing Patel. Singh adds another issue that the incoming Governor will have to face: “The tight rope balancing between disclosure of NPAs while not giving a shock to the system, followed by orchestrating the repair of bank balance sheets [in accordance] with international norms.”
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