Taking markets by surprise, RBI Governor Urjit Patel today kept short term lending rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation.

Patel-led 6-member Monetary Policy Committee, which had in its first policy review cut interest rate by 0.25 per cent in October, belied expectations to keep benchmark repo rate unchanged at 6.25 per cent unanimously.

In view of disruption in economic activities due to demonetisation, RBI lowered growth forecast from 7.6 per cent to 7.1 per cent for the current fiscal.

The headline inflation is projected at 5 per cent by the fourth quarter of 2016-17 with risks tilted to the upside but lower than in the October policy review.

The fuller effects of the house rent allowances under the Seventh Pay Commission award are yet to be assessed, pending implementation, and have not been reckoned in this baseline inflation path, the fifth bi-monthly monthly monetary policy said.

On demonetisation, it said, the withdrawal of old high value currency notes could transiently interrupt some part of industrial activity in November-December due to delays in payments of wages and purchases of inputs, although a fuller assessment is awaited.

&quot;In the services sector, the outlook is mixed with construction, trade, transport, hotels and communication impacted by temporary old currency notes effects, while public administration, defence and other services would continue to be buoyed by the 7th Central Pay Commission (CPC) award and one rank one pension (OROP),&quot; it added.

The central bank also said that almost Rs 12 lakh crore out of total Rs 14.5 lakh crore in scrapped notes have already been deposited in banks.

RBI has also withdraw 100 per cent incremental Cash Reserve Ratio (CRR) from December 10, a move that would allow banks to retain the deposits coming to them as part of demonetisation.

All the six members of Monetary Policy Committee headed by the RBI Governor voted in favour of the today&#39;s decision. 
In the view of the Committee, this bi-monthly review is set against the backdrop of heightened uncertainty.

&quot;Globally, the imminent tightening of monetary policy in the US is triggering bouts of high volatility in financial markets, with the possibility of large spillovers that could have macroeconomic implications for emerging markets,&quot; it said.

While supply disruptions in the backdrop of currency replacement may drag down growth this year in India, it is important to analyse more information and experience before judging their full effects and their persistence, RBI said, adding that short-term developments that influence the outlook disproportionately warrant caution with respect to setting the monetary policy stance.

&quot;On balance, therefore, it is prudent to wait and watch how these factors play out and impinge upon the outlook. Accordingly, the policy repo rate has been kept on hold in this review, while retaining an accommodative policy stance,&quot; it said.&nbsp;

 
Highlights of RBI&#39;s fifth bi-monthly monetary policy statement, 2016-17:

<ul>
	<li>&nbsp;Repo rate unchanged at 6.25%, Reverse Repo at 5.75%</li>
	<li>&nbsp;Cash reserve ratio or CRR unchanged at 4%</li>
	<li>&nbsp;Cuts growth forecast to 7.1%, from 7.6% for this fiscal</li>
	<li>&nbsp;Inflation target remains 5% for March 2017, upside risk</li>
	<li>&nbsp;Demonetisation to lower prices of perishables</li>
	<li>Could reduce inflation by 10-15 basis points by December</li>
	<li>&nbsp;All MPC members voted in favour of status quo in policy</li>
	<li>&nbsp;Demonetisation to result in short-run disruptions in Cash-intensive sectors</li>
	<li>Crude price volatility, surge in financial market</li>
	<li>Turbulence could put March end inflation target at risk</li>
	<li>&nbsp;Foreign exchange reserve rose to all-time high of</li>
	<li>USD 364 billion on December 2</li>
	<li>&nbsp;RBI injected Rs 1.1 lakh crore liquidity through OMO purchases this fiscal</li>
	<li>Next monetary policy on February 8</li>
</ul>

(PTI)

The RBI's monetary policy committee voted 6-0 to leave the repo rate unchanged, after cutting it by 25 basis points (bps) last October

Taking markets by surprise, RBI Governor Urjit Patel today kept short term lending rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation. Patel-led 6-member Monetary Policy Committee, which had in its first policy review cut interest rate by 0.25 per cent in October, belied expectations to keep benchmark repo rate unchanged at 6.25 per cent unanimously. In view of disruption in economic activities due to demonetisation, RBI lowered growth forecast from 7.6 per cent to 7.1 per cent for the current fiscal. The headline inflation is projected at 5 per cent by the fourth quarter of 2016-17 with risks tilted to the upside but lower than in the October policy review. The fuller effects of the house rent allowances under the Seventh Pay Commission award are yet to be assessed, pending implementation, and have not been reckoned in this baseline inflation path, the fifth bi-monthly monthly monetary policy said. On demonetisation, it said, the withdrawal of old high value currency notes could transiently interrupt some part of industrial activity in November-December due to delays in payments of wages and purchases of inputs, although a fuller assessment is awaited. "In the services sector, the outlook is mixed with construction, trade, transport, hotels and communication impacted by temporary old currency notes effects, while public administration, defence and other services would continue to be buoyed by the 7th Central Pay Commission (CPC) award and one rank one pension (OROP)," it added. The central bank also said that almost Rs 12 lakh crore out of total Rs 14.5 lakh crore in scrapped notes have already been deposited in banks. RBI has also withdraw 100 per cent incremental Cash Reserve Ratio (CRR) from December 10, a move that would allow banks to retain the deposits coming to them as part of demonetisation. All the six members of Monetary Policy Committee headed by the RBI Governor voted in favour of the today's decision. In the view of the Committee, this bi-monthly review is set against the backdrop of heightened uncertainty. "Globally, the imminent tightening of monetary policy in the US is triggering bouts of high volatility in financial markets, with the possibility of large spillovers that could have macroeconomic implications for emerging markets," it said. While supply disruptions in the backdrop of currency replacement may drag down growth this year in India, it is important to analyse more information and experience before judging their full effects and their persistence, RBI said, adding that short-term developments that influence the outlook disproportionately warrant caution with respect to setting the monetary policy stance. "On balance, therefore, it is prudent to wait and watch how these factors play out and impinge upon the outlook. Accordingly, the policy repo rate has been kept on hold in this review, while retaining an accommodative policy stance," it said. Highlights of RBI's fifth bi-monthly monetary policy statement, 2016-17: Repo rate unchanged at 6.25%, Reverse Repo at 5.75% Cash reserve ratio or CRR unchanged at 4% Cuts growth forecast to 7.1%, from 7.6% for this fiscal Inflation target remains 5% for March 2017, upside risk Demonetisation to lower prices of perishables Could reduce inflation by 10-15 basis points by December All MPC members voted in favour of status quo in policy Demonetisation to result in short-run disruptions in Cash-intensive sectors Crude price volatility, surge in financial market Turbulence could put March end inflation target at risk Foreign exchange reserve rose to all-time high of USD 364 billion on December 2 RBI injected Rs 1.1 lakh crore liquidity through OMO purchases this fiscal Next monetary policy on February 8 (PTI)

Reserve Bank of India keeps repo rate unchanged at 6.25%

The Reserve Bank of India (RBI) on Monday late night said that the general public has withdrawn Rs 2.16 lakh crore from their accounts since beginning of demonetisation on November 9, 2016.

RBI further said that deposits in bank accounts during this period, amounted to Rs 8.11 lakh crore. Interestingly, Government had told the Supreme Court earlier this month that it expects around Rs 10-11 lakh crore to be deposited in banks till December 30, 2016 &ndash; the last day of depositing the now illegal tender of Rs 500 and Rs 1000 notes.

However, the long queues and frequent running out of cash has ensured that nearly 50% of this total currency (Rs 14 lakh crore) has already been deposited in banks in two weeks.

Moreover, there has been a sudden surge in deposits with Jan Dhan Accounts.

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<h5>As on November 9, the Government claimed that the 25.5 crore accounts opened under Jan-Dhan Yojana (PMJDY) garnered Rs 45,636.61 crore. The number of accounts now stand at 25.68 crore while deposits have risen to Rs 72,834.72 crore.</h5>
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&nbsp;

PM Modi and Finance Minister Arun Jaitley have been pushing citizens towards a more &#39;less-cash&#39; economy. The Government, on Monday, removed excise duty on &#39;point of sale&#39; machines in order to expedite use of digital currency than hard cash.&nbsp;

However, with over Rs 2 lakh crore withdrawn in two weeks from the Rs 8.11 lakh deposited, it is amply clear that Indians are still not ready to go completely cash-less.&nbsp;

On the evening of November 8, Prime Minister Narendra Modi in a televised address said that nearly 86% of Rs 16 lakh crore that oiled the Indian economy by way of Rs 500 and Rs 1000 notes were illegal tender from midnight.

He said that citizens have&nbsp;50 days to deposit this old currency in banks, exchange it with new or withdraw through ATMs, etc.

The RBI on Monday released data that showed nearly 50% of all demonetised currency in Rs 500 and Rs 1000 notes has been deposited with banks

The Reserve Bank of India (RBI) on Monday late night said that the general public has withdrawn Rs 2.16 lakh crore from their accounts since beginning of demonetisation on November 9, 2016. RBI further said that deposits in bank accounts during this period, amounted to Rs 8.11 lakh crore. Interestingly, Government had told the Supreme Court earlier this month that it expects around Rs 10-11 lakh crore to be deposited in banks till December 30, 2016 – the last day of depositing the now illegal tender of Rs 500 and Rs 1000 notes. However, the long queues and frequent running out of cash has ensured that nearly 50% of this total currency (Rs 14 lakh crore) has already been deposited in banks in two weeks. Moreover, there has been a sudden surge in deposits with Jan Dhan Accounts. As on November 9, the Government claimed that the 25.5 crore accounts opened under Jan-Dhan Yojana (PMJDY) garnered Rs 45,636.61 crore. The number of accounts now stand at 25.68 crore while deposits have risen to Rs 72,834.72 crore. × PM Modi and Finance Minister Arun Jaitley have been pushing citizens towards a more 'less-cash' economy. The Government, on Monday, removed excise duty on 'point of sale' machines in order to expedite use of digital currency than hard cash. However, with over Rs 2 lakh crore withdrawn in two weeks from the Rs 8.11 lakh deposited, it is amply clear that Indians are still not ready to go completely cash-less. On the evening of November 8, Prime Minister Narendra Modi in a televised address said that nearly 86% of Rs 16 lakh crore that oiled the Indian economy by way of Rs 500 and Rs 1000 notes were illegal tender from midnight. He said that citizens have 50 days to deposit this old currency in banks, exchange it with new or withdraw through ATMs, etc.

Demonetisation: Indians withdrew over 2 lakh crore since November 9

Breaking his silence over the demonetisation issue, Resrve Bank of India&nbsp;Governor Urjit Patel today said the central bank is monitoring the situation on a daily basis and taking all necessary actions to &quot;ease the genuine pain of citizens&quot; with a clear intent to normalise the things as early as possible.

Patel also said the RBI has announced an incremental CRR (Cash Reserve Ratio) of 100 per cent &quot;because of the large increase in deposits of banks on account of the return of Rs 1,000 and Rs 500 notes&quot; and the decision would be reviewed immediately once the government issues adequate quantum of MSS (Market Stablisation Scheme) bonds which they have promised to do.

In an exclusive interview to PTI, Patel said the situation arising out of the decision to withdraw Rs 500/1,000 notes is being monitored on a daily basis and the printing presses have started to rebalance the production of new notes towards Rs 100 and Rs 500 bills.

He also urged the people to start using cash substitutes like debit cards and digital wallets, saying it will make transactions cheaper and easier and in the long term, it will help India &quot;leapfrog into a less cash-use economy at par with more developed nations.&quot;

&quot;We are also urging banks to make a big push with PoS (Point of Sale) machines with traders so that debit card use becomes more prevalent,&quot; he said.

Giving details of the steps being taken by RBI, he said, &quot;Both RBI and government have been getting the printing presses to work at capacity to get the new notes available to meet demand.

&quot;The RBI is interacting with the banks every day. They are telling us that the situation is gradually easing. The queues in branches and ATMs are shorter and the markets are starting to function, and there are no reported shortages of daily items of consumption.

&quot;Also, about 40-50,000 people were deployed to refit the ATMs. Currency is available and banks are working in a mission mode to lift currency and take them to their branches and ATMs. The staff members of all banks have worked very hard, and we all owe them our gratitude,&quot; Patel said.

&quot;Having said that, it is important to regularly review the situation, and taking the required decisions to ease the genuine pain of citizens who are honest and who have been hurt. There are no precedents on this subject at this scale and we have to be reactive to the situation.

&quot;People have asked why the new currency introduced was different in size and thickness from the old. This is because the new currency has been designed to make it hard to counterfeit. When you are going to make a change of this magnitude, you need to get the best standards in place,&quot; Patel said.

This is the first-ever interview as RBI Governor by Patel, who is known to keep a low profile.&nbsp;

(PTI)

Urjit Patel, governor of India's central bank, also urged people to start using cash substitutes like debit cards and digital wallets

Breaking his silence over the demonetisation issue, Resrve Bank of India Governor Urjit Patel today said the central bank is monitoring the situation on a daily basis and taking all necessary actions to "ease the genuine pain of citizens" with a clear intent to normalise the things as early as possible. Patel also said the RBI has announced an incremental CRR (Cash Reserve Ratio) of 100 per cent "because of the large increase in deposits of banks on account of the return of Rs 1,000 and Rs 500 notes" and the decision would be reviewed immediately once the government issues adequate quantum of MSS (Market Stablisation Scheme) bonds which they have promised to do. In an exclusive interview to PTI, Patel said the situation arising out of the decision to withdraw Rs 500/1,000 notes is being monitored on a daily basis and the printing presses have started to rebalance the production of new notes towards Rs 100 and Rs 500 bills. He also urged the people to start using cash substitutes like debit cards and digital wallets, saying it will make transactions cheaper and easier and in the long term, it will help India "leapfrog into a less cash-use economy at par with more developed nations." "We are also urging banks to make a big push with PoS (Point of Sale) machines with traders so that debit card use becomes more prevalent," he said. Giving details of the steps being taken by RBI, he said, "Both RBI and government have been getting the printing presses to work at capacity to get the new notes available to meet demand. "The RBI is interacting with the banks every day. They are telling us that the situation is gradually easing. The queues in branches and ATMs are shorter and the markets are starting to function, and there are no reported shortages of daily items of consumption. "Also, about 40-50,000 people were deployed to refit the ATMs. Currency is available and banks are working in a mission mode to lift currency and take them to their branches and ATMs. The staff members of all banks have worked very hard, and we all owe them our gratitude," Patel said. "Having said that, it is important to regularly review the situation, and taking the required decisions to ease the genuine pain of citizens who are honest and who have been hurt. There are no precedents on this subject at this scale and we have to be reactive to the situation. "People have asked why the new currency introduced was different in size and thickness from the old. This is because the new currency has been designed to make it hard to counterfeit. When you are going to make a change of this magnitude, you need to get the best standards in place," Patel said. This is the first-ever interview as RBI Governor by Patel, who is known to keep a low profile. (PTI)

Demonetisation: Trying to ease pain of citizens, says RBI chief

India has appointed three independent experts to Reserve Bank of India&rsquo;s (RBI) Monetary Policy Committee (MPC) to set interest rates as the central banking institution gears up for a switch in terms of deciding its new policy.&nbsp; 
 
The three experts -- Chetan Ghate, professor at Indian Statistical Institute, Pami Dua, director at Delhi School of Economics, and Ravindra Dholakia, professor at Indian Institute of Management, Ahmedabad -- will join RBI Governor Urjit Patel and two senior officials from the bank&#39;s monetary policy department. 
 
Deputy governor R Gandhi and executive director Michael Patra are the two other senior officials from RBI.&nbsp; 
 
The commitee will be responsible for setting the key interest rates in the monetary policy review, thereby diluting the power of the RBI governor. It will meet four times in a year to decide on the monetary policy of India by a majority vote. In case of a tie, the RBI governor has the deciding vote.&nbsp; 
 
The three independent experts were recommended by a search committee.&nbsp; 
 
It&#39;s pertinent to mention that the Indian government amended the RBI Act on June 27, 2016 to shift the job of monetary policy-making in India to a newly constituted Monetary Policy Committee (MPC). 
 
Until recently, a technical advisory committee was constituted by the RBI, which consisted of governor, deputy governor and external advisors to give their opinion and suggestions for deciding RBI&#39;s monetary policy.&nbsp; 
 
However, the governor&#39;s word was final on the rates and the recommendations of the technical advisors were not binding on the RBI. 
&nbsp; 
In 2014, it was the Urjit Patel Committee that recommended the setting up of an MPC for determining interest rates and also, move from multiple indicator approach to inflation targeting. Having both Government and RBI members on the MPC was suggested for accountability.&nbsp; 
 
The Indian government would have to keep its deficit under check and RBI would owe an explanation for runaway inflation. 
&nbsp; 
Monetary policy decisions by central banks have far-reaching implications for the economy, investors, savers and borrowers. Hence, with only governor having the decision-making authority raises questions the accountability of the entire process. 
 
Across the world, several countries, including New Zealand, England, Canada, South Africa, Sweden, have tried to make the process transparent by appointing a committee and adopting inflation targeting as a monetary policy objective.&nbsp; 
 
(WION)

Newly-constituted Monetary Policy Committee will make the process for setting key interest rates more transparent

India has appointed three independent experts to Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to set interest rates as the central banking institution gears up for a switch in terms of deciding its new policy. The three experts -- Chetan Ghate, professor at Indian Statistical Institute, Pami Dua, director at Delhi School of Economics, and Ravindra Dholakia, professor at Indian Institute of Management, Ahmedabad -- will join RBI Governor Urjit Patel and two senior officials from the bank's monetary policy department. Deputy governor R Gandhi and executive director Michael Patra are the two other senior officials from RBI. The commitee will be responsible for setting the key interest rates in the monetary policy review, thereby diluting the power of the RBI governor. It will meet four times in a year to decide on the monetary policy of India by a majority vote. In case of a tie, the RBI governor has the deciding vote. The three independent experts were recommended by a search committee. It's pertinent to mention that the Indian government amended the RBI Act on June 27, 2016 to shift the job of monetary policy-making in India to a newly constituted Monetary Policy Committee (MPC). Until recently, a technical advisory committee was constituted by the RBI, which consisted of governor, deputy governor and external advisors to give their opinion and suggestions for deciding RBI's monetary policy. However, the governor's word was final on the rates and the recommendations of the technical advisors were not binding on the RBI. In 2014, it was the Urjit Patel Committee that recommended the setting up of an MPC for determining interest rates and also, move from multiple indicator approach to inflation targeting. Having both Government and RBI members on the MPC was suggested for accountability. The Indian government would have to keep its deficit under check and RBI would owe an explanation for runaway inflation. Monetary policy decisions by central banks have far-reaching implications for the economy, investors, savers and borrowers. Hence, with only governor having the decision-making authority raises questions the accountability of the entire process. Across the world, several countries, including New Zealand, England, Canada, South Africa, Sweden, have tried to make the process transparent by appointing a committee and adopting inflation targeting as a monetary policy objective. (WION)

India appoints three experts for RBI's Monetary Policy Committee

Indian bonds and currency fell on Monday as investors took the appointment of Urjit Patel as the next governor of the Reserve Bank of India as a signal of policy continuity at the central bank, making a near term cut in interest rates unlikely. 
 
The benchmark 10-year bond yield rose 4 basis points to 7.14 percent, while the rupee fell to a near one-month low of 67.17/67.18 to the Dollar, compared with its close of 67.07. 
 
Patel, currently an RBI deputy governor, had been seen as among the more hawkish candidates that had been in the running to take over from Raghuram Rajan, who steps down as governor on Sept. 4. 
 
Traders expect Patel to keep the repo rate on hold at the RBI&#39;s next policy review on Oct. 4 after inflation accelerated to 6.07 percent in July, above the RBI&#39;s near-term target of 5 percent. 
 
The RBI had cut the policy repo rate by 150 bps from January 2015 to April this year but has held them steady since then. 
 
During his time as deputy governor, Patel had headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a committee to set interest rates. 
 
The RBI cut interest rates 150 bps during Rajan&#39;s tenure and the central bank&#39;s pledge to ease cash conditions had also contributed to a rally in bond markets, and investors will be encouraged that one of Rajan&#39;s closest aides will succeed him. 
 
&quot;All investors, both foreign and domestic should take comfort in the fact that there will be policy continuity,&quot; said Kenneth Akintewe, Senior Investment Manager at Aberdeen Asset Management Asia Ltd in Singapore. 
 
&quot;Nevertheless, some of the dovish sentiment that had crept into the market will likely be re-priced given that Dr Patel is viewed as being more hawkish, therefore yields could correct slightly higher in the near term.&quot; 
 
The 10-year bond yield slumped 36 bps, and hit a seven-year low of 7.07 percent earlier this month as some buyers speculated that a more dovish governor would emerge, and there was also strong buying by foreign investors, though that cooled this month. 
 
Prime Minister Narendra Modi&#39;s government this month formally agreed to adopt Rajan&#39;s inflation target of 2 to 6 percent in the medium term. 
 
Analysts said they expect Patel, like Rajan, would steer policy towards keeping inflation at the midpoint of 4 percent, instead of the upper end of the range. 
 
Still, analysts, say they still see scope for an interest rate cut at the end of this year or early in 2017 should food prices moderate in coming months as monsoon rains have been above average. 
 
&quot;The perception is that he is hawkish but he has room to maneuver,&quot; said Radhika Rao, economist, DBS, Singapore.

(Reuters)

Urjit Patel is viewed to be among the more hawkish candidates that had been in the running to take over from Raghuram Rajan

Indian bonds and currency fell on Monday as investors took the appointment of Urjit Patel as the next governor of the Reserve Bank of India as a signal of policy continuity at the central bank, making a near term cut in interest rates unlikely. The benchmark 10-year bond yield rose 4 basis points to 7.14 percent, while the rupee fell to a near one-month low of 67.17/67.18 to the Dollar, compared with its close of 67.07. Patel, currently an RBI deputy governor, had been seen as among the more hawkish candidates that had been in the running to take over from Raghuram Rajan, who steps down as governor on Sept. 4. Traders expect Patel to keep the repo rate on hold at the RBI's next policy review on Oct. 4 after inflation accelerated to 6.07 percent in July, above the RBI's near-term target of 5 percent. The RBI had cut the policy repo rate by 150 bps from January 2015 to April this year but has held them steady since then. During his time as deputy governor, Patel had headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a committee to set interest rates. The RBI cut interest rates 150 bps during Rajan's tenure and the central bank's pledge to ease cash conditions had also contributed to a rally in bond markets, and investors will be encouraged that one of Rajan's closest aides will succeed him. "All investors, both foreign and domestic should take comfort in the fact that there will be policy continuity," said Kenneth Akintewe, Senior Investment Manager at Aberdeen Asset Management Asia Ltd in Singapore. "Nevertheless, some of the dovish sentiment that had crept into the market will likely be re-priced given that Dr Patel is viewed as being more hawkish, therefore yields could correct slightly higher in the near term." The 10-year bond yield slumped 36 bps, and hit a seven-year low of 7.07 percent earlier this month as some buyers speculated that a more dovish governor would emerge, and there was also strong buying by foreign investors, though that cooled this month. Prime Minister Narendra Modi's government this month formally agreed to adopt Rajan's inflation target of 2 to 6 percent in the medium term. Analysts said they expect Patel, like Rajan, would steer policy towards keeping inflation at the midpoint of 4 percent, instead of the upper end of the range. Still, analysts, say they still see scope for an interest rate cut at the end of this year or early in 2017 should food prices moderate in coming months as monsoon rains have been above average. "The perception is that he is hawkish but he has room to maneuver," said Radhika Rao, economist, DBS, Singapore. (Reuters)

Indian bonds, rupee fall as Urjit Patel, Rajan's close aide, chosen to head RBI

India&#39;s former central bank governor Raghuram Rajan&#39;s abrupt announcement of his departure as governor of the Reserve Bank of India (RBI) came as a nasty surprise to many, especially his fans in the investment community, but the way Urjit Patel was chosen as his successor has been anything but. 
 
Aides to Indian Prime Minister Narendra Modi have sought to show that the search and selection process has been deliberate and controlled, that the nation&rsquo;s leader and the finance minister Arun Jaitley were closely involved, and that the government is fully behind the RBI&rsquo;s battle to control inflation. 
 
Critically for the stability of financial markets, Patel lent his name to the panel that drew up the blueprint for formally adopting a consumer inflation target of 4 per cent, as well as creating a new Monetary Policy Committee to steer interest rates and help India hit that goal. 
 
At the same time, the officials have stressed that no single individual should again dominate the RBI in the way that Rajan did over his three-year term. Where Rajan is known for pithy one-liners at news conferences and speeches larded with social criticism, Patel is seen as more of a backroom technocrat who avoids the limelight. 
 
Rajan&#39;s shock announcement on the afternoon of June 18, a Saturday, caught the government off-guard &ndash; Jaitley was watching a movie at home with his family and took more than two hours to issue a public statement. 
 
The recovery of composure was quick, though. A shortlist of potential successors was floated before the evening was out. Patel, the 52-year-old deputy governor who takes over from Rajan on September 4, was on it, along with a clutch of other contenders that included veterans of the RBI. 
 
On Saturday evening, exactly nine weeks later, the choice was made public. And it was done without Modi holding meetings about the job with any of the candidates, according to sources with direct knowledge of the process. 
 
While Modi may have been involved in the final decision on Patel, he wanted to &quot;keep his distance&quot; in the weeks before as the appointment committee ran the process, one aide said. 
 
&quot;Lobbying does not get you such a job - but Modi ji&#39;s confidence in Patel was a big factor,&rdquo; the official said, using the honorific Indian suffix. 
 
Patel has wide international policy experience. He worked at the IMF as an economist from 1990 to 1995, and for Boston Consulting Group and Indian conglomerate Reliance Industries. 
 
Sources said Patel had been vetted and his candidacy blessed by the Hindu-nationalist umbrella group, the Rashtriya Swayamsevak Sangh (RSS), that backs Modi&#39;s nationalist party. 
 
That marks a big change from its attitude to Rajan, who came under fire from the Rashtriya Swayamsevak Sangh&nbsp;(RSS), a right-wing ,Hindu nationalist Party and in particular from lawmaker Subramanian Swamy who demanded he be fired for being &quot;mentally not fully Indian&quot;. Rajan this month denounced the personal attacks he had faced as &quot;abominable&quot;. 
 
Patel is looked on favourably as dependable and low-key, with no ambition to upstage the government. Rajan, by contrast, drew RSS ire by straying into politically sensitive territory in high-profile speeches in which he said social tolerance was vital to a country&rsquo;s economic development. 
 
That was perceived as an implied attack on the Hindu-nationalist agenda of the RSS and other supporters of Modi. Rajan has denied criticising the government. 
 
Getting to know you 
 
Modi warmed to Patel at a face-to-face meeting earlier this year, when the central banker was given an extension to his term as deputy governor in charge of monetary policy, said a second Modi aide. 
 
&quot;Patel has a direct working equation with the Prime Minister,&quot; this aide said, using an Indian-English expression for a personal relationship, adding the Prime Minister valued Patel as a &quot;clear thinker&quot; and appreciated his &quot;direct approach&quot;. 
 
The only sign of nervousness senior officials betrayed was in their initial suggestion that the next governor would be named by the time of Rajan&#39;s final policy meeting on August 9. 
 
But, after financial markets remained calm despite Rajan&#39;s announcement that he would not seek a second term, they reverted to a timeline that would allow just enough time for an orderly handover - as was the case with Rajan&#39;s own appointment three years ago. 
 
Throughout, the Prime Minister&#39;s Office has owned the process - reflecting Modi&#39;s determination to centralise decision-making in India&#39;s sprawling and often recalcitrant bureaucracy - with cabinet secretary PK Sinha heading the selection committee. 
 
In its initial recommendations in July, the panel called for the next RBI governor to be a technocrat, and not a bureaucrat; a macroeconomist; and team player. 
 
The successful candidate needed to be an individual of stature who could also ensure continuity at the RBI, one of the panel&#39;s members said after Patel&rsquo;s appointment. 
 
Jaitley met Modi to discuss the RBI succession on Thursday. A five-strong candidate list was then submitted to the selection panel, with the field led by Patel and also featuring contenders such as India&#39;s IMF executive director Subir Gokarn and World Bank chief economist Kaushik Basu. 
 
The selection committee provided its feedback after a lengthy session on Friday. It did not recommend any name; nor did it formally interview candidates, the member said, adding the final decision to pick Patel was made by Modi and Jaitley. 
 
&nbsp;Inflation hawk 
 
The choice shows that Modi is paying more than just lip-service to the fight against inflation. 
 
Modi endorsed the inflation fight in his Independence Day speech last Monday, and that will shield Patel as he seeks to consolidate the inflation-targeting framework brought in under the leadership of Rajan. 
 
&quot;While we have embraced the idea of the MPC, it has yet to be tested,&quot; said another senior government official. &nbsp;&quot;You need a smooth transition from the current system of decision making. Patel can ensure that there are no hiccoughs.&quot; 
 
&nbsp;Also, with the inflation rate now pushing above 6 per cent, it is vital to send a clear message to investors that the government would not waver in its resolve to keep inflation in check, this official added. 
 
&nbsp;&quot;It is very important that the credibility we have acquired in managing inflation doesn&#39;t get dented,&quot; the official also said. 
 
(Reuters)

Officials stress no single individual to dominate the Reserve Bank of India, the way former governor Raghuram Rajan did

India's former central bank governor Raghuram Rajan's abrupt announcement of his departure as governor of the Reserve Bank of India (RBI) came as a nasty surprise to many, especially his fans in the investment community, but the way Urjit Patel was chosen as his successor has been anything but. Aides to Indian Prime Minister Narendra Modi have sought to show that the search and selection process has been deliberate and controlled, that the nation’s leader and the finance minister Arun Jaitley were closely involved, and that the government is fully behind the RBI’s battle to control inflation. Critically for the stability of financial markets, Patel lent his name to the panel that drew up the blueprint for formally adopting a consumer inflation target of 4 per cent, as well as creating a new Monetary Policy Committee to steer interest rates and help India hit that goal. At the same time, the officials have stressed that no single individual should again dominate the RBI in the way that Rajan did over his three-year term. Where Rajan is known for pithy one-liners at news conferences and speeches larded with social criticism, Patel is seen as more of a backroom technocrat who avoids the limelight. Rajan's shock announcement on the afternoon of June 18, a Saturday, caught the government off-guard – Jaitley was watching a movie at home with his family and took more than two hours to issue a public statement. The recovery of composure was quick, though. A shortlist of potential successors was floated before the evening was out. Patel, the 52-year-old deputy governor who takes over from Rajan on September 4, was on it, along with a clutch of other contenders that included veterans of the RBI. On Saturday evening, exactly nine weeks later, the choice was made public. And it was done without Modi holding meetings about the job with any of the candidates, according to sources with direct knowledge of the process. While Modi may have been involved in the final decision on Patel, he wanted to "keep his distance" in the weeks before as the appointment committee ran the process, one aide said. "Lobbying does not get you such a job - but Modi ji's confidence in Patel was a big factor,” the official said, using the honorific Indian suffix. Patel has wide international policy experience. He worked at the IMF as an economist from 1990 to 1995, and for Boston Consulting Group and Indian conglomerate Reliance Industries. Sources said Patel had been vetted and his candidacy blessed by the Hindu-nationalist umbrella group, the Rashtriya Swayamsevak Sangh (RSS), that backs Modi's nationalist party. That marks a big change from its attitude to Rajan, who came under fire from the Rashtriya Swayamsevak Sangh (RSS), a right-wing ,Hindu nationalist Party and in particular from lawmaker Subramanian Swamy who demanded he be fired for being "mentally not fully Indian". Rajan this month denounced the personal attacks he had faced as "abominable". Patel is looked on favourably as dependable and low-key, with no ambition to upstage the government. Rajan, by contrast, drew RSS ire by straying into politically sensitive territory in high-profile speeches in which he said social tolerance was vital to a country’s economic development. That was perceived as an implied attack on the Hindu-nationalist agenda of the RSS and other supporters of Modi. Rajan has denied criticising the government. Getting to know you Modi warmed to Patel at a face-to-face meeting earlier this year, when the central banker was given an extension to his term as deputy governor in charge of monetary policy, said a second Modi aide. "Patel has a direct working equation with the Prime Minister," this aide said, using an Indian-English expression for a personal relationship, adding the Prime Minister valued Patel as a "clear thinker" and appreciated his "direct approach". The only sign of nervousness senior officials betrayed was in their initial suggestion that the next governor would be named by the time of Rajan's final policy meeting on August 9. But, after financial markets remained calm despite Rajan's announcement that he would not seek a second term, they reverted to a timeline that would allow just enough time for an orderly handover - as was the case with Rajan's own appointment three years ago. Throughout, the Prime Minister's Office has owned the process - reflecting Modi's determination to centralise decision-making in India's sprawling and often recalcitrant bureaucracy - with cabinet secretary PK Sinha heading the selection committee. In its initial recommendations in July, the panel called for the next RBI governor to be a technocrat, and not a bureaucrat; a macroeconomist; and team player. The successful candidate needed to be an individual of stature who could also ensure continuity at the RBI, one of the panel's members said after Patel’s appointment. Jaitley met Modi to discuss the RBI succession on Thursday. A five-strong candidate list was then submitted to the selection panel, with the field led by Patel and also featuring contenders such as India's IMF executive director Subir Gokarn and World Bank chief economist Kaushik Basu. The selection committee provided its feedback after a lengthy session on Friday. It did not recommend any name; nor did it formally interview candidates, the member said, adding the final decision to pick Patel was made by Modi and Jaitley. Inflation hawk The choice shows that Modi is paying more than just lip-service to the fight against inflation. Modi endorsed the inflation fight in his Independence Day speech last Monday, and that will shield Patel as he seeks to consolidate the inflation-targeting framework brought in under the leadership of Rajan. "While we have embraced the idea of the MPC, it has yet to be tested," said another senior government official. "You need a smooth transition from the current system of decision making. Patel can ensure that there are no hiccoughs." Also, with the inflation rate now pushing above 6 per cent, it is vital to send a clear message to investors that the government would not waver in its resolve to keep inflation in check, this official added. "It is very important that the credibility we have acquired in managing inflation doesn't get dented," the official also said. (Reuters)

India: PM Modi regains composure after Rajan shock, visible in naming of new central bank chief

India&#39;s incoming central bank governor&nbsp;Urjit Patel&nbsp;is widely regarded as having the professional and academic credentials he needs to make a success of his new job.

Less well known is whether a man who seems to feel most at ease in his own company commands the communication skills to answer to multiple constituencies and keep a 17,000-strong team on his side.

Patel, deputy governor of the Reserve Bank of India since 2013, demonstrated intellectual heft in overseeing landmark changes to the 81-year old institution, including switching to inflation-targeting and establishing a monetary policy panel to set interest rates.

Now promoted, Patel offers the promise of continuity with most of the policies of the man he will replace, Raghuram Rajan, who was feted by investors for halving inflation and for pulling the country out of its worst currency crisis in over two decades.

Within the RBI, however, Patel is widely viewed as a solitary and at times temperamental figure.

He avoids large meetings and gatherings with colleagues and, in contrast to other deputy governors who had busier public schedules, gives few speeches or media interviews. 
 
That raises questions about how Patel will approach the public aspects of a role that is set to be transformed under changes he largely helped spearhead. 
 
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He will have to seek consensus with five other members of the RBI&#39;s new monetary policy committee.

He must also work closely with heads of state-owned banks as the sector battles to clean up $120 billion of soured loans - a relationship that greatly frustrated Rajan as lenders went only half way towards matching 150 basis points of RBI rate cuts. 
 
Respected by investors

Already known to have a good rapport with government officials, Patel may find his low public profile helps him develop even better ties.

Rajan, by contrast, faced a backlash from hard-right elements in Prime Minister Narendra Modi Bharatiya Janata Party (BJP) for sometimes peppering his public statements with social critiques.

&quot;(Patel) is extremely sensitive and pragmatic about not upsetting the government,&quot; said another senior RBI official who works with him.

&quot;The fact that he was reappointed as a deputy governor ... and now promoted ... shows the strong support he enjoys from the government,&quot; the first official said.

Patel is also likely to share his predecessor&#39;s good reputation among investors.

Both men worked for the International Monetary Fund and studied abroad, in Patel&#39;s case at the London School of Economics and Oxford University before heading across the Atlantic to Yale for his economics doctorate.

Patel has also spent time in the private sector with stints at the Boston Consulting Group and Indian energy conglomerate Reliance Industries&nbsp;and, at the RBI, was seen as the candidate most in tune with Rajan&#39;s policy agenda.

Having beaten off the challenge of, among others, IMF Executive Director Subir Gokarn to get the top job, analysts believe Patel will not kow-tow to the government either.

His reputation suggests he will uphold the independence of the central bank while pushing Modi and his ministers towards fiscal prudence - all welcome traits for investors used to a steady hand at the RBI tiller.

&quot;The new governor needs to reinforce the faith that the external world and Indian markets have in the ... central bank,&quot; said Mihir Vora, Chief Investment Officer of Max life insurance. 
 
(Reuters)

Within the RBI Urjit Patel is widely viewed as a solitary and at times temperamental figure

India's incoming central bank governor Urjit Patel is widely regarded as having the professional and academic credentials he needs to make a success of his new job. Less well known is whether a man who seems to feel most at ease in his own company commands the communication skills to answer to multiple constituencies and keep a 17,000-strong team on his side. Patel, deputy governor of the Reserve Bank of India since 2013, demonstrated intellectual heft in overseeing landmark changes to the 81-year old institution, including switching to inflation-targeting and establishing a monetary policy panel to set interest rates. Now promoted, Patel offers the promise of continuity with most of the policies of the man he will replace, Raghuram Rajan, who was feted by investors for halving inflation and for pulling the country out of its worst currency crisis in over two decades. Within the RBI, however, Patel is widely viewed as a solitary and at times temperamental figure. He avoids large meetings and gatherings with colleagues and, in contrast to other deputy governors who had busier public schedules, gives few speeches or media interviews. That raises questions about how Patel will approach the public aspects of a role that is set to be transformed under changes he largely helped spearhead. The fact that he was reappointed as a deputy governor ... and now promoted ... shows the strong support he enjoys from the government He will have to seek consensus with five other members of the RBI's new monetary policy committee. He must also work closely with heads of state-owned banks as the sector battles to clean up $120 billion of soured loans - a relationship that greatly frustrated Rajan as lenders went only half way towards matching 150 basis points of RBI rate cuts. Respected by investors Already known to have a good rapport with government officials, Patel may find his low public profile helps him develop even better ties. Rajan, by contrast, faced a backlash from hard-right elements in Prime Minister Narendra Modi Bharatiya Janata Party (BJP) for sometimes peppering his public statements with social critiques. "(Patel) is extremely sensitive and pragmatic about not upsetting the government," said another senior RBI official who works with him. "The fact that he was reappointed as a deputy governor ... and now promoted ... shows the strong support he enjoys from the government," the first official said. Patel is also likely to share his predecessor's good reputation among investors. Both men worked for the International Monetary Fund and studied abroad, in Patel's case at the London School of Economics and Oxford University before heading across the Atlantic to Yale for his economics doctorate. Patel has also spent time in the private sector with stints at the Boston Consulting Group and Indian energy conglomerate Reliance Industries and, at the RBI, was seen as the candidate most in tune with Rajan's policy agenda. Having beaten off the challenge of, among others, IMF Executive Director Subir Gokarn to get the top job, analysts believe Patel will not kow-tow to the government either. His reputation suggests he will uphold the independence of the central bank while pushing Modi and his ministers towards fiscal prudence - all welcome traits for investors used to a steady hand at the RBI tiller. "The new governor needs to reinforce the faith that the external world and Indian markets have in the ... central bank," said Mihir Vora, Chief Investment Officer of Max life insurance. (Reuters)

India's new central bank chief: Professional yes but does he have needed communication skills?

India&#39;s government promoted Urjit Patel, a deputy governor in charge of monetary policy at the Reserve Bank of India (RBI), to serve as its next governor for a three-year term, it said on Saturday. 
 
He will replace Raghuram Rajan, a former International Monetary Fund chief economist who stunned financial markets in June by announcing he would step down in September and return to academia after a single three-year term at the RBI. 
 
Patel, 52, headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a panel to set interest rates. He will start his three-year term on September 4. 
 
&quot;The Appointments Committee of Cabinet has approved the appointment of Dr Urjit R Patel as Governor, Reserve Bank of India for a period of three years,&quot; said the statement from the government. 
 
Patel, who has a doctorate from Yale, had widely been seen as ensuring the most continuity among the candidates believed to be in the running to be the next governor.&nbsp;He had been reappointed in January for another three years as deputy governor in charge of monetary policy, a department he has run since 2013. 
 
Seen as a close lieutenant to Rajan, Patel will now get to implement the policies he had helped shape. 
 
The government is soon expected to announce the composition of a six-member monetary policy committee to decide on interest rates. It will be made up of himself and two other RBI officials, along with three members appointed by the government. 
 
Rajan, who succeeded in halving the inflation rate from the double digit levels prevailing when he took over, also persuaded the government to adopt inflation targeting, setting a medium term central target of four per cent, within a range of two to six per cent, another policy endorsed by Patel. 
 
The new governor takes over at a time when inflation has bust out of the top end of that range. Consumer inflation accelerated to 6.07 per cent in July, the fourth consecutive month it has stayed above the RBI&#39;s near-term target of 5 per cent by March. 
 
Aside from controlling inflation, the new governor will have to follow through on efforts to clean-up banks&#39; bad loans, so that they can once again support the investments needed if India is to keep its place as one of the world&#39;s fastest growing economies. 
 
Patel will also have to navigate India&#39;s tricky political scene. Right-wing members of the ruling Bharatiya Janata Party (BJP) had criticised Rajan for some of his speeches on economic matters and for not cutting interest rates faster. 
 
(Reuters)

He will replace Raghuram Rajan, a former IMF chief economist who stunned the world in June by announcing he would step down in September

India's government promoted Urjit Patel, a deputy governor in charge of monetary policy at the Reserve Bank of India (RBI), to serve as its next governor for a three-year term, it said on Saturday. He will replace Raghuram Rajan, a former International Monetary Fund chief economist who stunned financial markets in June by announcing he would step down in September and return to academia after a single three-year term at the RBI. Patel, 52, headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a panel to set interest rates. He will start his three-year term on September 4. "The Appointments Committee of Cabinet has approved the appointment of Dr Urjit R Patel as Governor, Reserve Bank of India for a period of three years," said the statement from the government. Patel, who has a doctorate from Yale, had widely been seen as ensuring the most continuity among the candidates believed to be in the running to be the next governor. He had been reappointed in January for another three years as deputy governor in charge of monetary policy, a department he has run since 2013. Seen as a close lieutenant to Rajan, Patel will now get to implement the policies he had helped shape. The government is soon expected to announce the composition of a six-member monetary policy committee to decide on interest rates. It will be made up of himself and two other RBI officials, along with three members appointed by the government. Rajan, who succeeded in halving the inflation rate from the double digit levels prevailing when he took over, also persuaded the government to adopt inflation targeting, setting a medium term central target of four per cent, within a range of two to six per cent, another policy endorsed by Patel. The new governor takes over at a time when inflation has bust out of the top end of that range. Consumer inflation accelerated to 6.07 per cent in July, the fourth consecutive month it has stayed above the RBI's near-term target of 5 per cent by March. Aside from controlling inflation, the new governor will have to follow through on efforts to clean-up banks' bad loans, so that they can once again support the investments needed if India is to keep its place as one of the world's fastest growing economies. Patel will also have to navigate India's tricky political scene. Right-wing members of the ruling Bharatiya Janata Party (BJP) had criticised Rajan for some of his speeches on economic matters and for not cutting interest rates faster. (Reuters)

Urjit Patel is new Indian central bank governor, will serve 3-year term

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