Urjit Patel’s name was picked after interviews were conducted with shortlisted candidates at the office of Prime Minister Narendra Modi at his residence on Race Course Road, in a marathon session involving top officials, including the Finance Secretary.
Much like Raghuram Rajan, Urjit patel is also expected to maintain the inflation rate. As the NDA government has signed up to extend the agreement with the RBI for the next five years, the four percent target for Consumer Price Index (CPI) inflation (plus or minus two percent) is now set in stone.
However, it is not new to Patel working on inflation. It was his committee, headed literally by him during January 2014, 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.
The decision is much supported and will assure international and domestic investors that the flexible inflation targeting framework will be taken to its logical end which is absolutely essential for India’s monetary policy credibility.
How Is The Decision Beneficial for Home Loan Industry.
Urjit Patil, being the second one ever in history to raise directly from Deputy Governor to Governor’s post. First one being Amitav Gosh for 20 days during 1985. If Rajan had taken necessary steps and measures for Indian financial stability and betterment, as a governor, it was through Dr.Patil’s headed monetary policy committee. This decision, Urjit Patel as the RBI Governor would surely give a sense of policy continuity.
Under Rajan’s rule, the home loan interest rates had come down from 14% to 9.5%. There is a stability in the loan market. The repo rate cut, though many a times, was ensured that it reached the end customers – borrowers. There is an implementation of borrower-friendly way of calculating the home loan interest rate, MCLR method.
Since all these had been implemented with Urjit Patel’s awareness and recommendations, no doubt the stability, policy continuity and sustainability can be assured.
The choice of Urjit Patel ensures various factors, monetary policy framework, inflation target range, systemic liquidity and continuation of existing policies, are taken care of. However, what is challenging for him is how he manages banking as a sector like Arundathi Battacharya, bringing out issues into light and resolving them.