Under enigmatic Patel, Indians failing

 To RBI policy forecasting the Reserve Bank of India would cut its key rate by a quarter of a percentage point. But the RBI held rates and moved to a "neutral" policy stance, signalling an end to India's longest monetary easing cycle since the 2008-09 global financial crisis. Denny Jose, a small-town caterer in Kerala, was closely watching the RBI meeting last week. Newspapers and markets were forecasting the Reserve Bank of India would cut its key rate by a quarter of a percentage point. But the RBI held rates and moved to a "neutral" policy stance, signalling an end to India's longest monetary easing cycle since the 2008-09 global financial crisis. The move surprised Jose and crimped his expansion plans. "We were planning to buy two commercial vehicles to transport food and were expecting a rate cut. Now, we're forced to defer that plan." He was not the only one wrong-footed.

 Under governor Urjit Patel, the RBI has significantly reduced communication with markets after he took over in September, an analysis of his public comments shows. Some critics say that a lack of clarity is pushing bond yields higher, and that in turn could send interest rates higher and restrain economic growth. A government source familiar with the RBI's thinking said that with modifications to the laws governing the bank and the introduction of a monetary policy committee, the governor was no longer sole arbiter of policy as prior RBI governors had been. His views would not be reflective of the entire MPC, added the source, who declined to be named. Central bankers around the world keep moves in benchmark interest rates a closely held secret before they are announced, but governors and other senior policy makers tend to guide markets, helping to avoid surprises that may cause volatility

 And last week's surprise move to a "neutral" stance sent yields up by 30 basis points. Some traders said insufficient information about the RBI's thinking was one of the main reasons for the rise. "Uncertainty in markets breeds defensiveness," said the treasury banker. The sharp increase in yields has meant a lost opportunity for state-backed transmission company Power Grid Corp, which had decided to wait for a rate cut before issuing bonds to finance capital expenditure, said Ajay Manglunia, head of fixed income markets at Edelweiss, one of the underwriters. The company was likely to issue bonds worth 20-25 billion rupees ($300-375 million), Manglunia added. An official with direct knowledge of the matter said Power Grid had deferred the issuance and was looking for alternative funding sources. Power Grid did not respond to a request for comment. "The volatility in the market has gone to such a level that credible investment is taking time to re-surface and issuers may be better off deferring the transactions," said Jayen Shah, head of debt capital markets at IDFC Bank .

 The government source said the market had "misread" the role of the MPC within the confines of amendments to legislation, and noted that the tweaks made "inflation a much bigger focus for the committee with growth being secondary." Patel, a deputy governor since 2013, had been known within the RBI as reserved, insiders have said. He is widely regarded as having the professional and academic credentials to succeed, but the governor's role also involves communicating, some bankers say. In public so far, he has done that significantly less than his two predecessors. 

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