The government on Saturday appointed Deputy Governor Patel as the 24th head of the Reserve Bank. He will replace Raghuram Rajan who demits office on September 4. “He (Patel) will keep mind the inflation target and the monetary policy. He will also keep in mind the requirements of growth which is a mandate of the Reserve Bank of India Act,” Economic Affairs Secretary Shaktikanta Das told reporters here. “In particular, he has to ensure flow of credit to various sectors of economy, in particular agriculture and the MSME (Micro, Small and Medium Enterprises) sectors,” he said.
Patel has been holding charge of the monetary policy decisions of the central bank. “The job of RBI governor is not only the monetary policy, RBI governor also looks into the regulations of banks, and non banking financing companies. In that role he has to ensure the smooth running of the financial sector,” Das added.
The government has notified monetary policy framework agreement under which RBI will target to contain inflation at 4 per cent with an upper and lower tolerance band of 2 per cent. The six-member monetary policy committee will decide on interest rates based on this inflation target. Meanwhile, the selection panel to appoint three government nominees for the monetary policy committee (MPC) held its first meeting recently to consider the candidates, a top Finance Ministry official said.
“The committee had its first meeting recently. Let’s see if they can suggest a name before October 4 policy,” the official said. Once formed, the 6-member MPC will decide on interest rates based on the inflation target under the monetary policy framework agreement. The three government nominees will be short-listed by the search-cum-selection committee headed by the cabinet secretary. The other three members are RBI governor, deputy governor in-charge of monetary policy and an RBI executive director. The governor will have a casting vote once the country shifts to the panel system for setting rates. With Urjit Patel being elevated as the RBI chief, the post of RBI deputy governor in charge of monetary policy has fallen vacant.
MPC will set interest rates based on inflation target of 4 per cent within an upper and lower tolerance band of 2 per cent. The next bi-monthly policy review of RBI is scheduled for October 4.
RBI launches Sept round of inflation expectation survey
The Reserve Bank on Monday announced the launch of the September round of inflation expectations survey of households covering 18 cities across the country. Inflation is a key factor which the central bank factors in monetary policy. RBI announces monetary policy review every two months and next is scheduled on October 4. Inflation expectations are subjective assessments of households covered in the survey and are based on households’ individual consumption baskets.