All Eyes On Urjit Patel, The Man Who Stepped Into Raghuram Rajan's Shoes

Urjit Patel, who replaced the flamboyant Raghuram Rajan as Reserve Bank of India Governor, is in the spotlight today as he chairs his first policy review, which for the first time will see a committee set interest rates. 

Views are divided on whether there will be any change this time round, but regardless of the outcome, market players are closely scrutinising how the newly-formed monetary policy committee or MPC votes, trying to spot the doves and hawks among the six members - Mr Patel, two other RBI officials and three government appointed economists. 

If the MPC is split over whether to hold or cut interest rates, Urjit Patel could end up exercising his casting vote. 

Investors are keen to hear Mr Patel's views as he has made no public appearances since becoming governor on September 4, following three years as a deputy to his predecessor, Dr Rajan. 

Urjit Patel is regarded as less likely to stir controversy than Dr Rajan. The former International Monetary Fund chief economist had raised a few hackles with his socio-economic commentaries before quitting after just one three-year term, and members of the ruling BJP like lawmaker Subramanian Swamy had called for his removal. 

Investors say they will seek clues to how Mr Patel plans to steer the rupee through some pressure over the coming months due to expected outflows of $25 billion as dollar deposits raised during a rupee crisis three years ago are due to mature. 

Mr Patel, a former executive at energy conglomerate Reliance Industries, will also be scrutinised to see how he follows through on a campaign to make banks clean up their balance sheets. Some bankers have complained that Dr Rajan's March 2017 deadline was pushing them too fast. 

"We would like to get some clarity on the governor's thoughts on the banking sector, on the deadline of cleaning up bad debt as this is a priority for the economy," said D.K. Joshi, chief economist at CRISIL Ratings. 

On interest rates, a Reuters poll showed, 26 of 44 analysts surveyed expect the MPC to wait for more signs that inflation is easing and hold rates steady for now. But 16 economists see prospects for a 25 bps cut, while two expect an aggressive 50 bps cut. 

The policy repo rate has stood at 6.50 percent since April. As inflation is likely to slow on the back of slumping food prices after a good monsoon, most analysts expect the benchmark rate to be cut by 25 basis points this year.

Leaving rates on hold today would make it almost certain that the RBI would cut in December, analysts say.

Stock markets edged higher today ahead of RBI policy decision. The Sensex was up around 70 points while Nifty hovered around 8,750 levels.