Since Das was a bureaucrat, he is expected to act as a catalyst between the central bank and the government
The banking sector will be hoping that newly-appointed Reserve Bank of India (RBI) Governor Shaktikanta Das will relax some of the strict rules imposed on it by the previous regime. Some of these rules have been points of contention between the government and the RBI over the past year.
Since Das was a bureaucrat, it is expected that he will act as a catalyst between the central bank and the government, which will lead to mutual agreement on different policies. Industry players are hoping for relaxation of certain norms and expect credit growth and profitability of banks to improve.
The former economic affairs secretary has to deal with key issues like addressing the liquidity crunch in non-banking financial companies (NBFCs), taking a call on norms for the Prompt Corrective Action (PCA) framework, which restricts troubled banks from lending, and the RBI's February 12 circular.
According to the circular, banks are given a strict 180-day timeline to agree on a resolution plan for stressed assets, failing which they have to initiate the insolvency resolution process under the Insolvency and Bankruptcy Code. Power companies, corporate players and some government officials opposed this policy, but the central bank held its ground.
However, State Bank of India Chairman Rajnish Kumar recently hinted that with a change in leadership at the RBI, it is difficult to predict what the fate of the February 12 circular will be.
Commenting on bond yields, Ashish Vaidya, Head of Markets for India at Singapore’s DBS Bank, told The Economic Times that bonds will rally on expectations of "a softer interest rate regime next year". He added that short-term investor sentiment should be revived due to higher demand for sovereign bonds.
Vaidya also expects banks' credit growth to improve in the coming quarters.
The government's quick appointment of Urjit Patel's successor showed maturity on its part while dealing with tricky situations, said Bhaskar Panda of HDFC Bank. He added that this will bring assurance to the markets.
