Rajan cues towards light at the end of the tunnel

With majority of bankers expecting Rajan to keep the repo rate under the liquidity adjustment facility unchanged at 6.5 per cent, he followed suit, maintaining his stance as accommodative. The CRR has also been kept unchanged at 4 per cent of Net Demand and Time Liabilities. FY17 GDP forecast has been retained at 7.6 per cent.

Mr. Michael Patra will be RBI's board nominee on the proposed Monetary Policy Committee (MPC) along with Governor and Deputy Governor to bring into force the fundamental institutional reform aimed at modernising the policy framework, and building a platform for strong and sustainable growth.

Direct concerns that Rajan spoke about;

Liquidity:

Stating about liquidity he said, RBI would provide liquidity but progressively lower than the average ex-ante liquidity deficit from 1 per cent of NTDL to neutrality. The calculation of liquidity is complicated. One needs to segregate income generated domestically and internationally. Seasonally, June/July cash comes back from the system for excess liquidity, which is not a part of eliminating structural deficit by RBI.

NPAs:

RBI said that banks are now very comfortable in recognising their NPAs. Banks have taken valid steps and the culture of cleaning and recovery has been embedded. The banks are efficiently utilising the RBI schemes put forth. For instance, scheme for Sustainable Structuring of Stressed Assets S4A, which predicts sustainable debt level for a stressed borrower, and split of the outstanding debt into sustainable debt and equity instruments, which may provide upside to the lenders when the borrower turns around.

Derived concerns that Rajan released were:

KYC norms: The depositors are completely harassed by the KYC norms that bankers impose upon them. The norms have been simplified with time but they have not trickled down to the local branches of the banks. The same has been made available on the RBI website.

Fake emails under Governor’s name: The depositors receive emails promising a sum of 50 lakhs or so from the official email ids with just a transaction fee of Rs 20000 to be transferred to a specified account number. He asked receivers to delete the emails and not act upon such emails. Why would RBI give directly to the individuals though it has spent plenty of it.

Finally, he said that it was his last policy statement but still has 28 days in hand and he promised to utilise the time fully. Indian markets are resisting  Rajan's farewell and have bottomed out entirely except for PSU Banks.