Monday was supposed to be a good day for the government. It announced the Cabinet’s decision to raise the Centre’s contribution to the National Pension Scheme for its employees, and was expecting the UK’s decision on extradition of fugitive liquor baron Vijay Mallya. But things changed after 5 pm when Reserve Bank of India Governor Urjit Patel’s resignation hit the RBI website.
Highly-placed sources in the government say that none of the senior ministers had any inkling of Patel’s resignation. Even Finance Minister Arun Jaitley came to know about it minutes before Patel quit.
The government will soon form a panel to search for a new RBI governor, an official said. RBI’s deputy governors, former government officials and top bankers and economists could be considered.
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“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. I wish Dr Patel all the very best and many more years of public service,” Jaitley tweeted, around an hour after Patel quit. Moments later, Prime Minister Narendra Modi tweeted.
While Patel cited ‘personal reasons’ for his exit, former officials who’ve worked alongside him and current officials involved with the events of the past few months acknowledge that the reasons were different.
“He did not thank the government in his statement, did he?” asked an official, when contacted by Business Standard. “We all know what has been happening in the past few months.”
Sources in the government say the resignation is all the more surprising after the last board meeting, which was a cordial affair by all accounts, and a resolution was reached on two contentious issues.
The central bank decided to refer the issue of RBI’s excess capital to a committee. The constituents of the committee and its terms of reference are still being discussed by the government and the RBI. The RBI also referred its prompt corrective action norms to its Board of Financial Supervision. The next Board Meeting is scheduled for December 14.
“It is sad and unfortunate,” said a former secretary to the government, who did not wish to be named as he still works with the government in another capacity. “I thought they could resolve their differences. (Former RBI governor) Raghuram Rajan had informed the Prime Minister and the Finance Minister that he will not seek an extension, as per convention. It is one thing to feel uncomfortable with an individual, and have a conflict with him. It is another to have him been pressured through the RBI board which has all your nominees. He must have felt that this creates a perpetual state of conflict and hence his position becomes untenable.”