Govt did not ask for Urjit Patel's resignation as RBI Guv

Finance Minister Arun Jaitley Tuesday said the government did not seek resignation of Urjit Patel as RBI Governor over differences on some issues, and went on to cite how central bank heads were made to resign under prime ministers Jawaharlal Nehru and Indira Gandhi and when Yashwant Sinha was finance minister.

Defending his government's demands from the Reserve Bank to address certain issues including liquidity or fund problem in certain sectors, he said that there is no threat to the autonomy of the central bank.

Patel, who was brought in by Prime Minister Narendra Modi-government in 2016 after a second term was denied to outspoken former IMF chief economist Raghuram Rajan, in a surprise move resigned as RBI Governor on December 11.

Many blamed the pressure brought by the government on the central bank to ease lending restrictions and release more of its capital to bolster the economy for Patel's resignation.

"Sarkar ki unse koi istife ki apeksha nahi thi (The government did not seek Patel's resignation)," Jaitley said when asked about Patel's resignation at 'Agenda Aaj Tak' programme here.

The government had cited the never-used-before provision of the RBI Act that gives it powers to issue directions to the Governor, to get the central bank to discuss its areas of concerns.

Two board meetings after that were "cordial" and decisions were taken on three-four issues while there were also some on which no decision was taken, he said, adding the issue of paring of some of RBI's over Rs 9 lakh crore reserves after deciding on an appropriate size of buffer was decided to be referred to an expert committee.

While the committee was decided to be formed in the RBI board meeting held on November 19, a consensus on the composition eluded till Patel resigned.

Jaitley said the expert committee would be announced in few days time.

"So if you are saying that raising these issues is an infringement on autonomy, this is wrong," he said.

He then went on to cite past RBI governors who had resigned.

"The first governor to resign (was in) 1955 when (Prime Minister) Pt Jawaharlal Nehru wrote to Governor B Rama Rau (that) economic policy is to be framed by Government of India (and) monetary policy is to be framed by you. But your other policies like credit policies have to be in support of the government's economic policies. And if are suggesting you would resign, 'I am unable to advise you to the contrary'. So he resigned," he said.

Indira Gandhi got Sarukkai Jagannathan to resign after he refused to give an enhanced loan to Maruti.

"Yashwant Sinha, who became the high priest of RBI autonomy, during the Chandra Shekhar government called (RBI) Governor R N Malhotra and said I want your resignation," he added.

Former finance minister P Chidambaram, Jaitley said, was "not on speaking terms with two Governors during his tenure."
"Reserve Bank is autonomous. There is no threat to its autonomy," he said. "The government is sovereign. An elected government has to reply to people, businesses. RBI does not have to reply (to them)."