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No major policy rejig expected with Urjit Patel as RBI chair

Patel, currently the deputy governor of the RBI, will take over as the governor on September 4, once incumbent Raghuram Rajan steps down.

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Major brokerages expect that there will be no major rejig in the policies laid down by incumbent Raghuram Rajan at the Reserve Bank of India, once his successor takes the governor's chair on September 4. 

Urjit Patel was picked as the 24th RBI governor to take the baton from Rajan when he steps down at the end of his three-year term.

Patel, currently the deputy governor at the central bank, has been called Rajan's right hand and even his inflation lieutenant. 

Rajan brought about major changes in the RBI, despite his term being the shortest for any governor since 1991. He changed the inflationary focus to retail inflation instead of wholesale inflation, started the clean up of banks, set things in motion and saw through the formation of the monetary policy committee, and made inflation his target. 

"On a broader view, Patel is seen as offering the closest feel to a second term by Raghuram Rajan," a Reuters report said.

Patel is deemed to be hawkish, just like Rajan, and it was a panel led by him that recommended the monetary policy committee (MPC) in the first place, and a switch to inflation - targeting, another Reuters report said. 

The MPC will decide the next interest rate due for announcement on October 4, and will pose Urjit Patel as the first governor to be a part of it. It will have three members from the RBI and three appointed by the government, with a veto vote on the policy reserved for the governor. The government is expected to choose its members this month. 

Brokerages expect that while this will limit the extent of a say that an RBI Governor will have in setting the monetary policy, it will let him focus on other key aspects. UBS Securities said, after the establishment of the MPC, the governor's role will be focussed on non-performing assets and liquidity, according to a Bloomberg TV India tweet. 

Talking about Patel's term, Goldman Sachs said, with Patel in the central bank's chair, "RBI will continue its focus on bringing down inflation."

"Patel is likely to maintain similar views as Governor Rajan," Goldman Sachs said, according to another tweet by Bloomberg TV India. 

Sachs said it expected policy continuity with Patel in office and expected RBI to keep rates on hold for the rest of 2016. 

Even Moody's and UBS Securities echoed similar views. 

Moody's Analytics said it expected a continuity of policy under Patel. In a statement, the senior Vice President and part of sovereign risk group at Moody's Investors Service, said that she expected policy continuity at the RBI under the new governor, Urjit Patel. 

UBS Securities said also that most of the views of the incoming RBI governor are similar to Governor Rajan. 

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