RBI Governor need not have a rock star status to be successful and India’s ratings would depend on its policies and not any specific personality, Fitch Ratings today said.
Fitch’s comment comes in the backdrop of Government elevating RBI Deputy Governor Urjit Patel as the Governor of the Reserve Bank.
“A central bank governor does not need to have a rock star status to be successful in reigning in inflation or cleaning up the banking sector,” Fitch Ratings Director, Asia-Pacific Sovereigns Group, Thomas Rookmaaker said.
US-based rating agencies Moody’s and Fitch also said that Patel as the next RBI Governor signals a likelihood of policy continuity.
“We assume continuity of the RBI’s policies under the new Governor, Patel,” Moody’s Investors Service SVP, Sovereign Risk Group Marie Diron said.
Fitch said outgoing Governor Raghuram Rajan has set in positive transformation starting with recognition of high inflation and weak bank balance sheets problems.
Echoing similar views, Rookmaaker said: “Patel’s appointment as the next RBI governor signals a strong likelihood of policy continuity.”
From rating perspective, policies are more important than personalities, he added.
The positive transformation set in motion by Rajan, starting with the recognition of the problems associated with both high inflation and weak bank balance sheets, is not yet complete.
“Having served as deputy governor in the past three years, Patel is well-positioned to further institutionalise these policy changes in the period ahead,” Rookmaaker said.
The government yesterday elevated Patel as the 24th Governor of the Reserve Bank.
Springing a surprise, Rajan in a letter to RBI staff in June had announced that he would return to academia and not seek a second term. Rajan, who was often called the rock star central banker, demits office on September 4.
Diron further said two sets of policies and decisions by the Reserve Bank would be relevant to India’s sovereign credit profile.
“First, efficient transmission of credible monetary policy fosters a stable macroeconomic environment with inflation at moderate levels.
Second, banking sector risk weighs on India’s sovereign credit profile. The clean-up of bank’s balance sheet has started and it would be credit positive from a sovereign perspective, if it led to improved bank capitalization levels, renewed loan growth and robust risk processes,” Diron said.
She said future inflation developments will provide further indications of monetary policy credibility.
“We expect inflation to remain broadly stable around recent levels although there are sources of upside risks,” Diron said, adding Pay Commission award could stoke food inflation posing a challenge to RBI. PTI JD AA