The Indian government has narrowed down its list of candidates to become the next governor of the Reserve Bank of India to four, a senior government official told Reuters.

A new Monetary Policy Committee also will be chosen soon, the official said. The moves seek to ensure policy continuity after RBI chief Raghuram Ji Rajan shocked markets 10 days ago when he announced he would not seek reappointment in September.

The failure of negotiations on his possible return had sparked fears that Rajan's departure could put at risk the inflation-targeting central banker's gains in stabilising Asia's third-largest economy over the past three years.

The four were current RBI Deputy Governor Urjit Patel, former deputy governors Rakesh Mohan and Subir Gokarn, and State Bank of India Chair Arundhati Bhattacharya.

"State Bank has a very good line-up of people. I don't see any reason why people have any doubts regarding succession in SBI.

We are very well provided with talent. The MDs are extremely capable. The work will go on no matter who will be there," Bhattacharya told reporters on the sidelines of the bank's annual general meeting for 2015-16 here.

"We are very hopeful that the present governor will be a member of this search committee," the first official said, adding that if all goes well the new panel would be formed by Aug. 1.

Patel, also a close confidante of RBI governor Raghuram Rajan, was instrumental in reshaping India’s monetary policy targeting inflation control.

It was based on the proposals of a panel headed by Patel, the central bank began focusing primarily on the retail inflation (consumer price index-based inflation) for the purpose of monetary policy formulation.

Until then, the whole attention of economists and financial markets were on wholesale prices index inflation (WPI).