Reserve Bank of India Governor Raghuram Rajan will be stepping down from his post as the central bank governor on Sunday, making way for Deputy RBI Governor Dr Urjit Patel to take over.
Rajan served as the RBI governor for three years, taking over from Dr Duvvuri Subbarao on September 4, 2013.
Rajan’s three-year term will go down as the shortest since 1991. The last four central bank governors served nearly five-year terms.
Speculation was rife as Rajan’s term came to a close, about his successor, but the government was mum for nearly two months after the Governor announced his exit from the central bank in a surprise letter to his colleagues at the RBI. Rajan wrote a letter explaining that he would not be seeking a second term at the central bank and would return back to academia after his term comes to an end. Rajan is on leave as a professor of finance from the Chicago Booth School of Business.
However, Rajan, said he will always be available for India. “I will, of course, always be available to serve my country when needed,” he said, a sentiment Prime Minister Narendra Modi reiterated in a television interview recently.
Breaking its silence, the Finance Ministry announced Deputy Governor Urjit Patel as the 24th RBI Governor, who will take office the day Rajan steps down. Looked upon as Rajan’s inflation lieutenant, Patel was incharge of the monetary policy as the dy governor. His three-year term was renewed for another three years starting January 2016.
Under Patel, major policies of the RBI are unlikely to change much, as it was the Patel Committee that recommended an inflation target, the monetary policy committee, and more, all of which have been recently adopted by the government. An inflation target of 4%, plus or minus 2% has been set for the next five years, while a monetary policy with three RBI and government appointees, will decide the key policy rates now on, reducing the power of a governor.