No big decision taken, plenty of discussion has happened on liquidity and also about banks under PCA, but is that along expected lines and would we rather have the governor spend some time, get apprised, understand the position of the institution that he now heads before really taking a final call?
Absolutely, I think there should not be any decision made without extensive consultation and understanding the situation. Also, the main point is it should not be seen as board dictated because that is very important from the governance point of view. Take feedback from the board… That is important for the autonomy of RBI so it is very good that there were extensive consultations, discussions, the board members should be seen as wise people who know the economy, know different sectors and are giving feedback to the RBI. And then the RBI takes decisions.
For everybody who expected liquidity spigots to be opened, that is unlikely to happen. And I think Mythili is absolutely bang on there when she says he is a career bureaucrat and he is not going to take a decision in a rush. He will spend time, and the position on liquidity perhaps will be reviewed only in January?
He does have a reputation of taking quick decisions in the demonetisation phase and the government also wants to be seen moving quickly on policy, but it is really good that it is not announced at the board meeting. If they are going to take a decision, they should do it relatively quickly. But is should be done by the Reserve Bank and not necessarily announce at the board meeting.
Also markets were really thinking that taps will turned on and they are booming, it is not clear whether they are booming because of that or because they expect policy to become more balanced. I think this gives the message that the boom should be because policy might be more balanced not necessarily that all the taps will be turned on. Because that has threats for future.