INSUBCONTINENT EXCLUSIVE:
Brokerages believe that the RBI Governor Urjit Patel's resignation will be sentimentally negative for markets
Urjit Patel’s resignation from the Governorship of the RBI comes nine months before his term ends
Here's what brokerages are saying on his resignation:
CLSACLSA said the RBI Governor's resignation is a sentiment-negative for markets and
could impact flows into debt and equity markets
The RBI may intervene in the currency or G-sec market to manage volatility
While decisions at the RBI are institutionalised and past decisions may not change, the market will speculate over PCA norms,
shareholding/the CEO role of promoters in private banks and holding company structures, said CLSA
The direction of monetary policy actions will also be relevant, it said
The government has been seeking the relaxation of PCA norms for PSU banks, which if relaxed, would be positive for those banks, said
CLSA.
CitiAs the rift between the RBI and the government was laid bare in late October, the markets possibly would not be completely
Still some kneejerk negative reaction is expected as the market grapples with the extent of RBI’s loss of independence and the uncertainty
about the new Governor, it added
The extent of the intervention by the RBI Board in policy matters will be closely watched and the 14 Dec RBI Board meeting assumes special
significance , if it is not deferred, said Citi
The firm expects RBI’s independence on interest rate and FX policies to be maintained but said that the board might want more influence on
NomuraNomura said both the RBI and the government are right on various issues, but the sudden resignation will lead to questions about
whether the government is trying to stifle institutions and whether the resignation is a statement to protect the RBI’s independence
This, along with the lack of policy coordination between the RBI and the government, will mean higher India risk premium, at least in the
short term, in an environment where domestic political uncertainty is anyway on the rise owing to the elections scheduled in second quarter
Nomura said the resignation should have no bearing on the direction of monetary policy, which is decided by the monetary policy committee,
and which is set to take a dovish skew owing to fundamental reasons such as low growth and low inflation
However, decisions on the regulatory functions of the RBI could be affected, it said
