Bank stocks drop after appointment of Urjit Patel as new RBI Governor

Shares of fifteen banks dropped by 0.01% to 2.34% at 10:30 IST on BSE after Ministry of Finance said that Dr. Urjit R Patel has been appointed as the new Governor of Reserve Bank of India.

The announcement of his appointment as the new Governor of the central bank was made on Saturday, 20 August 2016.

Meanwhile, the BSE Sensex was down 49.78 points, or 0.18% to 28,027.22.

Among public sector banks, UCO Bank (down 0.01%), Syndicate Bank (down 0.79%), Bank of Baroda (down 1.64%), Punjab National Bank (down 0.62%), Corporation Bank (down 0.48%), Allahabad Bank (down 0.25%), Bank of India (down 0.04%), Union Bank of India (down 1.36%), and Canara Bank (down 0.34%) edged lower.

State Bank of India (SBI) declined 0.66%. The bank said on Saturday, 20 August 2016 that the committee of directors will meet on 24 August 2016, to consider and examine the status and decide on long term AT1 fund raising in single/multiple tranches in domestic/foreign currency through a public offer and/or private placement during the financial year ending 31 March 2017.

Among private sector banks, Axis Bank (down 0.55%), ICICI Bank (down 1.52%), Kotak Mahindra Bank (down 0.54%), Federal Bank (down 0.45%), and IndusInd Bank (down 2.34%) edged lower. Yes Bank (up 0.56%) and HDFC Bank (up 0.04%) gained.

Urjit Patel has been appointed as Governor of Reserve Bank of India (RBI) for a period of three years with effect from 4 September 2016. He will replace the present RBI Governor Dr. Raghuram Rajan, whose tenure ends next month. Dr Patel is presently the Deputy Governor of RBI and is holding this assignment since 2013.

Investors reportedly expect that the appointment of Urjit Patel would result in a seamless continuity in the policies pursued by the RBI to conduct its monetary policy in an independent manner. Patel's elevation signals consolidation and continuation of the inflation targeting monetary policy stance of RBI under the regime of Rajan, report added. International investors are expected to receive this very positively as continuity in policy formulation assures consistency and predictability of the central bank's monetary stance.

The government in consultation with the RBI had notified consumer price inflation target of 4% with upper tolerance level of 6% and lower tolerance level of 2% to be achieved by RBI. The government notified the inflation target range of 2% to 6% in the Official Gazette on 5 August 2016 and it will be valid until 31 March 2021.

The BSE Bankex had outperformed the market over the past one month till 19 August 2016, rising 2.89% compared with 1.04% gains in the Sensex. The index had also outperformed the market in past one quarter, gaining 18.41% as against the Sensex's 10.54% rise.

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