Incoming RBI Governor, Urjit Patel's Policy Views

Dr. Patel’s appointment signals continuity to his processor’s policies. Dr. Patel believes in aggressively fighting inflation and to continue a policy of a stable rupee and cash injections into the financial system. However, compared to Dr. Rajan, Dr. Patel is viewed as someone who is less outspoken and one who tries to refrain from going on the lecture circuit and making major policy speeches. Dr. Patel’s past working relationship (Board Member of Gujarat State Petroleum Corporation) with Prime Minister Modi when he was the Chief Minister of Gujarat will help in his dealings with the Government and should reduce disagreements between the RBI and Government from coming out in the public.

The market sees Dr. Patel as a hawk and someone who is not particularly generous with liquidity. Until recently, he had maintained that liquidity should be in deficit mode in order to meet the RBI’s inflation goals.

Indian Public Sector Bank Clean-up
Dr. Patel’s appointment ensures that the bank balance sheet clean-up reaches will continue on its current course.

In Dr. Patel’s Own Words
On Quantitative Easing
“We are in the midst of the age of competitive depreciation and of beggar-thy-neighbor monetary policy. It brings to mind an old African saying that when elephants fight, the grass suffers. While the ECB and the Bank of Japan are printing money and devaluing their currencies on one hand, the U.S. economy is reviving on the other. Anyone in the middle is getting crushed.” — Monetary Policy press conference, Feb. 2014.

On Financial Inclusion
The government’s push to help more people open bank accounts “implemented almost wholly by our public-sector banks, whereby 100 million bank accounts have been opened for those who were unbanked, is unequivocally a game-changer. It provides an unprecedented scaffolding and a spring board for meaningful financial inclusion and, concomitantly, substantial financial deepening of our economy.” –Speech at the Business Standard Best B-School Project Awards event, Feb. 2015.

On the Importance of Stability 
“The hard earned macroeconomic stability provides an important backdrop for optimal decisions by all stakeholders. We have to preserve this.” –Speech at the Business Standard Best B-School Project Awards event, Feb. 2015.

On the Timing of Infrastructure Spending
“Starting a publicly-driven infrastructure cycle when interest rates are going up does not sound terribly responsible. It will raise the costs for such projects. If this was done five-six years ago when the interest rate was low and expected to be low, then it may have been an idea worth pursuing.”–Financial Express interview, Oct. 2014.

On Banking Risk
“Banks may have to revisit at an opportune time (not now) in due course (that is, in the future) the individual company/group credit exposure limits, as well as sector exposures as part of their learning for the future for better risk management practices over the business cycle.”–Speech at the Business Standard Best B-School Project Awards event, Feb. 2015.

Ketan Thakkar; Sukanya Sen