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Urjit Patel resigns as RBI Governor: How Indian Economy fared under Urjit Patel?

With his resignation, Patel became the first RBI governor since 1990 to resign before the completion of the term. Patel’s three-year term was scheduled to end in September 2019.

Dec 10, 2018 19:05 IST
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Urjit Patel on December 10, 2018 resigned as the Governor of the Reserve Bank of India (RBI) with immediate effect, citing personal reasons.

Here is his statement:

Patel: First RBI governor to resign before completion of term

With his resignation, Patel became the first RBI governor since 1990 to resign before the completion of the term. Patel’s three-year term was to end in September 2019.

How the Indian Economy fared under Urjit Patel?

Urjit Patel completed two years as the Governor of the RBI in September 2018. During these two years, Patel dealt with the aftermath of demonetisation, oversaw a turn in the monetary policy cycle and undertook various major initiatives to boost the Indian economy. Have a look at some of them:

Demonetisation

  • During the first year of his tenure, Patel had to face the biggest disruptive move of the Narendra Modi Government, that is, ‘Demonetisation’.
  • Prime Minister Modi on November 8, 2016 demonetised Rs 500 and Rs 1,000 notes to counter black money, fake currency and curb terrorism funding. It was the time when Patel had just assumed the office.
  • After the note ban, the RBI had to deal with immense cash shortage in the system, thus, facing criticism of the public.

Turns in Monetary Policy stance

  • During his first year, Patel had cut the Repo Rate twice by a cumulative 50 bps, first from 6.50 percent to 6.25 percent in October 2016 and then in August 2017 from 6.25 percent to 6 percent, the lowest in about seven years.
  • However, during his second-year, the Repo Rate was hiked twice by cumulative 50 bps, bringing back the Repo Rate to 6.50 percent. On June 6, 2018, the RBI raised the repo rate by 25 bps from 6 percent to 6.25 percent and on August 1, 2018, the policy rate was hiked by 25 bps to 6.50 percent.

Battle against NPAs through bankruptcy code

  • In June 2018, the total gross Non-Performing Assets (NPAs) of the banking industry surged by Rs 2.98 lakh crore to Rs 10.03 lakh crore from Rs 7.06 lakh crore in September 2016. Nearly 90 percent of the NPAs are contributed by the public sector banks.
  • After the bankruptcy code came into existence, the RBI began pushing banks to initiate recovery procedures against a bunch of loan defaulters. This battle against the defaulters is still on.

Decline in Rupee

  • When Patel assumed office in September 2016, the rupee was around the 67-mark against the US dollar and began to strengthen, touching a high of 63.38 on January 5, 2018.
  • However, the rupee began to fall from March 2018 onwards in the wake of rise in crude prices, crossing 71-mark on August 31, 2018. Latest on December 10, 2018 morning, Indian rupee was traded at Rs 71.41 against a US dollar.

About Urjit Patel

Urjit R Patel was appointed as the 24th Governor of Reserve Bank of India (RBI) on August 20, 2016 and took charge on September 4, 2016 for tenure of three years. He succeeded Raghuram Rajan.

He was previously serving as the Deputy Governor of RBI. He mainly looked after monetary policy, economic policy research, statistics and information management, deposit insurance, communication and Right to Information.

He started working initially with the RBI as an advisor, following which he was appointed as a consultant in the Department of Economic Affairs, Ministry of Finance.

He headed a panel that recommended landmark changes to monetary policy in India, which included a switch to inflation-targeting and the creation of a panel to set interest rates.

He has previously been a non-resident Senior Fellow at the Brookings Institution since 2009.

He served at IMF India desk during the 1991–94 transition period. He was posted to IMF country mission in India between 1992 and 95.

Patel, who completed his Bachelor's in Economics from the London School of Economics, received his doctorate in Economics from Yale University in 1990.

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