Five priority areas for new RBI Governor Urjit Patel

KOLKATA/MUMBAI: The new Reserve Bank of India Governor Urjit Patel, when he takes over the baton from Raghuram Rajan in September, needs to put the inflation expectation on track immediately as the markets would be expecting softer policy rates from him once the commodity price cycle turns favourable with better rainfall.

Even if the role of RBI governor would lessen with the formation of the monetary policy committee, every stakeholders out in the market would be keen to assess his plans on two these two key aspects - inflation expectation and better credit delivery.

"One would look for continuity from the new governor. We will be keen to see how Urjit Patel manages inflation expectation," said Partha Ray, professor of Economics at Indian Institute of Management in Kolkata.

"It is important that RBI and the government speak the same tone. The differences, if any, should be kept behind the curtains and it would be interesting to see how the new governor fits in this role," Ray said.

The market would expect firmness in liquidity management so that lenders have enough ammunition when credit demand picks up with better economic outlook.

"He is the architect of inflation targeting approach. Investors don't want any change in policy direction," said Devendra Kumar Pant, chief economist with Indian Ratings & Research. He need to ensure that fallout of benign global environment does not impact India.

Market would keenly follow Patel, who is known as reticent and media shy, on whether he speaks out his mind more often than earlier. It is widely known that central bank governors often set the market tone by communicating effectively central bank's strategy even before the actual policy actions.

All eyes will also be on Patel on how he takes the bank clean up act forward, setting aside the pressure to ease the norms a bit. Rajan has set March 2017 as the deadline for cleaning up banks' balance sheet.

"He should keep much more attention on commercial banks' balance sheet and the cleaning up exercise from the very beginning. Raghuram Rajan started it much later in his tenure as governor," Ray said.

RBI insiders will be keen on hoe the new governor continue the work culture changes ushered in by Rajan.