indica News Bureau –
After a long-draw battle of disagreements with the central government, Reserve Bank of India (RBI) governor Urjit Patel has stepped down from his current position with immediate effect.
Patel said in his resignation letter that the decision to step down was a personal one.
“On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honor to serve in the Reserve Bank of India in various capacities over the years, he said in a statement issued by the central bank.
Patel’s term as RBI governor was to end in September 2019. He was appointed the 24th Governor of the RBI on September 4, 2016 for a three-year term after Raghuram Rajan had resigned from the post.
Patel quit barely four days ahead of RBI board meeting on December 14. The meeting, sources said, was expected to consider governance reforms within the RBI.
The resignation comes after months of public confrontation between the central bank and the Modi government over a wide-range of issues, including India’s bad loans crisis, central bank’s autonomy, easing off lending norms and other policies.
Patel’s view on loan waivers offered by the state governments last year was the first sign of his disagreement with the government policies. “Waivers undermine an honest credit culture,” he had said.
Reacting to the development, former RBI governor and Patel’s predecessor Raghuram Rajan warned that the government must tread cautiously in furthering its relationship with the central bank.
“First Mr Arvind Subramanian (former Chief Economic Adviser) now Mr Urijit Patel, I think it’s time govt should understand something is not right with the independence of financial institutions. Anyone, if observe with neutral view, will surmize the decisions that led to these events,” Rajan tweeted immediately after his successor called it a day.
Patel’s stepping down is significant as well as shocking as it comes just a day ahead of assembly election results in five Indian states where the ruling Bharatiya Janata Party (BJP) is expected to face a stiff contest from opponents according to the exit polls.
BJP MP Subramanian Swamy urged Prime Minister Narendra Modi to dissuade Patel from leaving as “his resignation would be wrong for the government, economy and the institution at this time”.
While Modi said that Patel ‘will be missed’, Union Finance Minister Arun Jaitley took to his twitter to laud Patel’s work as the central bank governor.
“The Government acknowledges with deep sense of appreciation the services rendered by Dr Urjit Patel to this country both in his capacity as the Governor and the Deputy Governor of The RBI. It was a pleasure for me to deal with him and benefit from his scholarship,” Jaitley tweeted.
The opposition, which has been a harsh critic of the government’s alleged interference in the working of the RBI, latched upon the news of resignation with Congress president Rahul Gandhi alleging that Patel had to resign because he was trying to save RBI from PM Modi.
In a series of tweets, former finance minister and senior Congress leader P Chidambaram said the last meeting of the RBI Board held on November 19 was the “day of reckoning” and Mr Patel should have resigned on that day.
“Saddened, not surprised, by Dr Urjit Patel’s resignation. No self respecting scholar or academic can work in this government,” Chidambaram tweeted.
“Dr Patel may have thought that government will re-trace its steps. I knew it would not. Good he quit before another humiliating meeting,” he added.
Last month, Chidambaram accused the Modi-led government at the Centre of attempting to “capture” the RBI ahead of the upcoming Lok Sabha elections in first half of 2019 – a move, which he said, will have “catastrophic” consequences.
The Congress veteran had said that the governor will be unable to maintain his autonomy after November 19 as the Finance Ministry had invoked a provision under Section 7 of the RBI Act, which says that the central bank has to accept the directions issued by the government after consultations with the Governor.
The development has shocked many as in the last board meeting on November 19, the government and the RBI had appeared to reach a truce over liquidity concerns and lending restrictions on state-run banks.
“Surprised at the news that RBI governor has resigned. The previous meeting was held in such cordial atmosphere that it comes as a shock. All directors said media had created a wrong perception while inside it was totally different. That makes it even more surprising,” non-official RBI board director and economist S Gurumurthy’s twitter handle read.
“Mr. @narendramodi, I would like to ask you if it is your conscious effort to destabilize institutions or it is your failure to understand governance? Either ways, it just means people are getting more reasons to vote you out,” Congress leader and former Karnataka Chief Minister Siddaramaiah tweeted.
Autonomy has been a major issue over which the government and the RBI have been locking horns. Modi’s administration seeks to reduce curbs on lending and to gain access to the RBI’s surplus reserves.
Deputy governor N.S. Vishwanathan will be the acting head of the RBI until the announcement of next governor.