Mumbai/New Delhi: RBI governor Urjit Patel on Monday resigned from his post, belying suggestions of an uncomfortable truce between the RBI and the Narendra Modi government over a host of issues.
“On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years,” Mr Patel said in his statement.
Though Dr Patel cited personal reasons for his sudden departure from Mint Road, analysts feel the resignation was caused due to the RBI losing its autonomy under an assertive Central government.
After the economic slowdown caused by demonetisation and GST rollout, the analysts claim the government has been trying to repair the economy by supporting MSMEs and bleeding banks.
Since its finances were strained, the government sought the RBI’s support by easing lending regulations and transferring over Rs 3 lakh crore capital. However, the RBI refused to play ball, forcing the government to enforce its will on the RBI through its members on the central bank’s board.
While there was a strong speculation about Dr Patel’s resignation on the eve of RBI’s board meeting on November 19, the event went off without any fireworks. Both the sides had suggested that the meeting was cordial, and the decisions were taken on merit and not forced by the government.
Ten days later, however, finance minister Arun Jaitley went public on November 30 stating that the government had indeed invoked the never-used-before provision under Section 7 of the Reserve Bank of India Act, ending any pretensions about the central bank’s autonomy.
Another 10 days later, Dr Patel decided to quit his post, triggering speculation about the reasons behind this decision.
Some analysts claim that the timing of the resignation looks odd as it comes days after high-octane elections in five states — billed as the semi-finals to the general elections next year — were over. They claim that it could be because he does not want his resignation to become political.
Another verison is that the government had sounded out Dr Patel about its decision to sack him after the elections and he might have decided to opt for an honourable option of resignation.
The lack of warmth between Dr Patel and the government is evident in his statement. “I take this opportunity to express gratitude to my colleagues and directors of the RBI Central Board, and wish them all the best for the future,” Dr Patel wrote without any reference to the finance ministry with which the central bank works so closely.
RBI director and Swadeshi ideologue S. Gurumurthy expressed surprise over Dr Patel’s decision. “The previous meeting was held in such cordial atmosphere that it comes as a shock. All directors said the media had created a wrong perception while inside it was totally different. That makes it even more surprising,” he said.
Dr Raghuram Rajan was scathing in his criticism. Calling the RBI governor’s resignation as a note of protest, Dr Rajan said “all Indians” should be concerned as strength of institutions is important for growth and development.
There were others who were criticial about Dr Patel’s decision to hang up his boots. According to Ajay Bodke, CEO, PMS, “None of the issues that caused a rift were insurmountable if the governor had an inclination to engage in a reasoned debate and dialogue.”
T.C.A. Srinivas Raghavan, who authored books on RBI’s history, felt Dr Patel should not have quit. “The position is extremely important. And whatever differences you might’ve had with the government, you don’t quit. Because it impacts the country, the economy, the image of the country, the image of the government.”
PM Narendra Modi spoke highly of Dr Patel’s credentials as an economist and RBI governor. FM Arun Jaitley said the government appreciates the services rendered by Dr Patel, and that it was a pleasure for him to deal with him.
