Urjit Patel resigns as RBI Governor; now, what’s next?

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Updated: December 11, 2018 9:32:53 AM

Even as most saw truce reaching between the central bank and Modi government, RBI Governor Urjit Patel tendered his resignation on Monday.

RBI Governor Urjit Patel tendered his resignation on Monday.

Even as most saw RBI and Modi government reaching truce, Urjit Patel tendered his resignation on Monday. He cited ‘personal reasons’ behind the exit. However, the sudden decision to quit has raised a couple of pressing worries. First, how will the stock markets react? Second, and the most important, who will be the next RBI Governor?

The domestic stock markets opened sharply lower today after RBI Governor Urjit Patel’s resignation and ahead of the crucial state elections outcome. The 30-share Sensex shed 375 points to open at 34,584.13, while the Nifty 50 tanked to 10,350-level.

“Mr. Urjit Patel’s resignation as RBI’s Governor may create temporary flutter in the markets that are waiting expectantly to know which way the citizens of 3 crucial Hindi Heartland States have voted. Global headwinds like escalating trade war between US & China, Britain’s Parliamentary vote on Brexit and fears of slowdown in global economic growth in 2019 has already led to a sharp spike in risk aversion for risk assets like equities,” Ajay Bodke, CEO and Chief Portfolio Manager – PMS, Prabhudas Lilladher.

Also read: Share market LIVE Updates: Sensex, Nifty may open sharply lower after Urjit Patel’s exit; state poll outcome eyed

Finding replacement for Urjit Patel will be keenly watched by the markets, said. Nirmal Jain, Chairman, IIFL Group. It’s important to find a person of high credibility to replace Patel, he added.

“This is the event that has happened. More important, than post mortem, is to watch who succeeds. It’s very important at this stage, that government quickly finds a replacement with impeccable and high credentials to ensure continuity and stability”, he said.

“This was unexpected. The timing is also surprising as Governor continued after the contentious board meeting and also during the December monetary policy. This seems the culmination of the differences of opinion between government and RBI on a large range of issues. We had the feeling that the difference are bridging but today’s event suggests otherwise. This will create uncertainty. Appointment of a credible governor quickly can dispel the situation”, said Sujan Hajra, Chief Economist, Anand Rathi Financial Services.

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