- RBI is locked in major tussle with the government over its autonomy
- Government has appointed several of its nominees to the board
- Urjit Patel says quitting effective immediately for personal reasons
Amid an unprecedented public face-off with the government over a range of issues including autonomy, Reserve Bank of India Governor Urjit Patel stepped down from his post today citing "personal reasons". Mr Patel was appointed in 2016 for a three-year term, which was to expire in September next year.
"On account of personal reasons, I have decided to step down from my current position effective immediately," Mr Patel said in his letter that had no word on his future plans.
The resignation comes days ahead of a crucial board meeting on Friday, that was meant to discuss the progress on issues raised by the board's government nominees last month.
In a series of tweets, Prime Minister Narendra Modi said Mr Patel "leaves behind a great legacy. We will miss him immensely".
Dr Urjit Patel is an economist of a very high calibre with a deep and insightful understanding of macro-economic issues. He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability.— Narendra Modi (@narendramodi) December 10, 2018
Wishing Mr Patel "all the very best and many more years of public service" Finance minister Arun Jaitley tweeted: "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."
One of the first to respond to the issue was Mr Patel's predecessor Raghuram Rajan. "All Indians should be concerned about Governor Patel's resignation," said Mr Rajan, the outspoken former Governor who, at the end a controversial three-year tenure, had returned to academia.
The simmering differences between the RBI and the government over three key issues, which included excess reserves, boiled over in October. The government was seen to be ramping up pressure on the bank to release the reserves, which, critics said, would be used to boost the economy in an election year.
There were apprehensions that the government might try to force the Governor's hand. Senior Congress leader and former Union minister said it could be done through the bank's board, which the government has "filled with its men".
Last month, the board met for more than nine hours in Mumbai to resolve the differences, which ended on a conciliatory note. The bank had agreed to set up a panel on sharing surplus reserves and restructure loans of small businesses up to Rs 25 crore.
The RBI has an excess reserve of Rs 3.6 lakh crore, which, the government maintains, can be used for development, sources said. The bank contends that keeping extra reserves are essential in view of possible emergencies.
S Gurumurthy, one of the government-nominated members of the Board, had said while studies suggest that reserves could be 12 to 18.7 per cent of assets, the RBI has 27-28 per cent -- which amounts to 3.6 lakh crore.
This is Urjit Patel's full statement:
"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. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank's considerable accomplishments in recent years. 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."