Top four major challenges ahead of the new RBI Gov, Urjit Patel
By NewsX Bureau
| Monday, September 5, 2016 - 17:12
New Delhi: Urjit Patel has taken charge as Governor of the Reserve Bank of India (RBI), an official statement said here on Monday.
"Urjit R. Patel assumed charge as the twenty-fourth Governor of the Reserve Bank of India, effective September 4, 2016 after serving as Deputy Governor since January 2013," the RBI statement said.
Patel, who has been given a three-year term, succeeds Raghuram Rajan, whose three-year term ended on Sunday. The handover ceremony has been scheduled for Tuesday.
Here are few of the major challenges that the new RBI governor has to take up after he takes on the office:
Redemption of Foreign Currency Non Resident FCNR (B) deposits: In September-November 2013 Reserve Bank of India raise about $35 Billion as deposits in these accounts, most of which are due this year. As per the Central Bank, this resultant dollar out-flow could create a liquidity crisis in the market. For the new Governor, Urjit Patel, managing these deposits remains a huge challenge as it could destabilise the domestic exchange rate and push rupee towards record lows. However, as per the previous RBI governor it should not be a challenge if managed well.
Growth Push: The previous RBI governor, Raghuram Rajan, was hugely criticised by the government for his serious take on inflation as he did not reduce the rates enough. On the other hand, Urjit Patel, might have to cut rates sharply in order to let the growth happen the required manner.
Asset quality resolution: As per the RBI's asses quality review the public sector banks' gross debt neared around Rs 6 lakh crore at the end of 2015-16 fiscal year. The new challenge faced by the new Governor is how the central bank will go about with the resolution process as RBI’s previous schemes have not been very effective.
Capitalization of Public Sector: As for the current situation the Indian banks are in need of more capital to meet credit demand of this fast paced growing economy. For now the capital is adequate, but has seen serious erosion with the rise in bad debts. So that the erosion was even higher than governments capital infusion of about Rs 25,000 crore.