RBI governor Urjit Patel quits; North Block-Mint Road ties back in focus

Announces his decision in a statement posted on RBI's official website

Reserve Bank of India (RBI) Governor Urjit Patel has resigned citing personal reasons, said a statement by him on the central bank's website on Monday.

"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," Patel's statement said.

"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," he said. The note had no mention of the government, which has disagreement with the central bank over key policies.  

Patel’s predecessor, Raghuram Rajan, also had announced his resignation before the end of his tenure, but had not quit with immediate effect. 

Patel, 55, was appointed as the 24th Governor of the RBI on September 2016 for a three-year term. His resignation comes a day ahead of the results of the crucial Assembly elections in Rajasthan, Telangana, Madhya Pradesh, Chhattisgarh and Mizoram, which have been touted as the semi-finals for the general elections in 2019. 

Patel had more than eight months of the first three-year tenure left and was eligible for a second term as was given to several of his predecessors, barring Rajan.

He has worked with the International Monetary Fund (IMF), Boston Consulting Group and Reliance Industries, among other organisations. Patel was the eighth Deputy Governor at RBI to be made Governor, the last being Y V Reddy. Besides, at least five former Governors had served at IMF before becoming RBI chief, while a few others went on to work at IMF after leaving the central bank. 

Relations between the Mint Road and North Block have reportedly soured since late October this year after the finance ministry started consultations under the never-before-used Section 7 of the RBI Act, which empowers the government to direct the central bank to undertake certain policy measures in public interest.

Central bank sources had told news agencies that the government had sent three letters to the RBI before October 10 with nearly a dozen demands, which were replied to within a week. 

The government primarily wants the RBI to help the struggling non-bank lenders and MSMEs get some liquidity support, liberalise the prompt corrective action framework on 11 of the state-run banks and undertake other steps that will help push growth, while RBI has been maintaining a conservative stance avoiding any bad precedents.

The poll-bound government, which is staring at falling revenue and a likely fiscal slippage, also wants the RBI to part with a large portion of its Rs 9.6-trillion cash surplus, which the central bank has been sternly opposing. 

As the public spat between the two got wider public attention, the RBI's central board, at its November 19 meeting, had decided to climb down and to set up a panel to study the quantum of capital it requires, apart from restructuring loans of up to Rs 250 million to give succour to the troubled MSMEs.

The frictions came to light through a public speech by Deputy Governor Viral Acharya, wherein he warned of investors' wrath if the RBI's autonomy is compromised.