Business as Usual For Bankers, as Urjit Patel Gets RBI Top Job

It’s going to be business as usual for bankers as the uncertainty surrounding the appointment of the governor of the Reserve Bank of India dissipated with the government announcing late on Saturday that Urjit Patel, deputy governor in charge of monetary policy, would take charge.

Bankers took up the refrain of industry and economists and said that the appointment meant that continuity in monetary policy formulation would be ensured.

ICICI Bank’s Managing Director and Chief Executive Officer Chanda Kochhar pointed out that as deputy Governor of the RBI, Urjit Patel had played a key role in developing the new monetary policy framework that has focused on reigning in inflation and has imparted stability to the currency.

Indeed, the inflation targeting policy framework and the imminent creation of a Monetary Policy Committee were both recommendations of a committee that he chaired.

Her private sector peer, Rana Kapoor, managing director and chief executive officer of Yes Bank is of the opinion that Patel’s appointment is a great decision by the Modi government, as he is “in sync with the economic circumstances, which are full of growth opportunities”.

Urjit Patel’s appointment is also expected to ensure that the RBI’s tough stance on bad loans, which was taken up by Raghuram Rajan, will continue. With the first stage of the RBI’s asset quality review, that is recognition of the stress in the system, having been completed, efforts will now move towards the resolution of bad loans.

The RBI is expected to review the latest scheme for bad loan resolution, the Scheme for Sustainable Structuring of Stressed Assets.

The scheme aims to identify the sustainable portion of bad loans, that is the portion that can be repaid with current cash flows. If this portion is equal to or more than 50 percent of the outstanding debt, then it qualifies for restructuring and the remainder can be converted into equity, or quasi-equity by banks.

Bankers have raised concerns that the 50 percent sustainable debt threshold is too high and have requested a review of the scheme.

With only two weeks remaining on Rajan’s term, Patel is now widely expected to announce the changes, if there are any.

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Business as Usual For Bankers, as Urjit Patel Gets RBI Top Job