Urjit Patel’s one year as RBI guv: Easy start, bumpy ride
On Monday, Urjit Patel completes a year as the governor of the Reserve Bank of India. It was a period that witnessed some of the most tumultuous changes in monetary and banking policy such as the invalidation of high value bank notes and the central bank stepping in directly to deal with stressed asset loan cases.
Patel had a somewhat easy start. His predecessor, Raghuram Rajan, faced a potential currency crisis. But soon RBI found itself holding the short end of the stick after demonetisation with its role becoming a matter of public debate.
The central bank had to take most of the blame for the hardship faced by public following demonetisation. The exercise called for more communication from RBI to the general public, and to bankers who had to face customers’ anger, said people.
Even in other matter such as the new monetary policy committee structure, Patel should have communicated more, said people. “The Indian financial market has always been used to a personality-driven monetary policy. There is need for more communication especially by the governor, on aspects of liquidity, inflation forecasting etc,” said a Mumbaibased economist, who preferred anonymity.
But there are other views. Former deputy governor R Gandhi said that the choice of talking in public is prerogative of every governor. “This is an individual characteristic and we should not read too much into it.”
To be sure, Patel has spoken on matters concerning monetary policy and price stability. He has been vocal about farm loan waivers, which according to him, impacts credit culture and entails inflationary pressure. He had called for better alignment of administrated rate of small sav- ings scheme for faster policy transmission, and pressed for stepped-up recapitalisation of public sector banks.
The war on bad loans took an unprecedented turn under his Patel’s governorship. When Patel took over, the bulk of the recognition of non-performing assets across banks was completed. Resolution was the remaining piece and it was sluggish as bankers feared that their decision may attract vigilance scrutiny as the solution entailed them to sacrifice some interest dues.
The government, through an ordinance amended the Banking Regulation Act, empowered RBI to suggest to, and even compel, banks to invoke proceedings against defaulters using the Insolvency & Bankruptcy Code.
The Patel administration drew a list of 12 large defaulters and asked banks to initiate insolvency proceedings against them at National Company Law Tribunal. RBI has drawn a second list, of at least 26 defaulters, where banks have been given a 13 December deadline to come-up with a resolution plan.
“The RBI has been fast moving and leaving no stone unturned on the resolution of bad loans,” said a senior banker on the condition of anonymity.