New Delhi: Days after the deadlock with the Centre over a range of issues, Urjit Patel stepped down as the Governor of the Reserve Bank of India (RBI) on Tuesday, according to media reports. Also Read - Need Coordinated Action Between Centre, States on Tax Reduction in Fuel Prices: RBI Governor
Patel tendered his resignation citing personal reasons. Also Read - Scarred by Pandemic, Task Ahead to Restore Economic Growth And Livelihood: RBI Governor
“On account of personal reasons, I have decided to step down from my current position (RBI Governor) effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years,” he said. Also Read - RBI Keeps Repo Rate Unchanged At 4 Percent, Revises Real GDP Growth Projection For 2020-21
“The support and hard work of RBI staff, officers and management has been proximate driver of Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of RBI Central Board and wish them all the best for future,” Patel added.
Reacting to Patel’s resignation, Prime Minister Narendra Modi said, “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. He leaves behind a great legacy. We’ll miss him immensely”.
Finance Minister Arun Jaitley also praised Patel for offering his services as the central bank’s governor.
“Government acknowledges with deep sense of appreciation the services rendered by Dr Urjit Patel to this country, both in his capacity as Governor and Deputy Governor of RBI. I wish Dr Patel all the very best and many more years of public service,” Jaitley said.
Attacking the Modi government over Patel’s resignation, Congress chief Rahul Gandhi said that there is consensus among opposition parties that the assault on institutions such as the RBI must be stopped.
West Bengal Chief Minister Mamata Banerjee hit out at the Modi government over Patel’s resignation, saying it was a matter of “great shock”. “Institutions, from the CBI to the RBI, have become total disasters. This has never happened before. It is a matter of great shock. We must protest,” Banerjee said.
She proposed that the meeting should continue on Tuesday and leaders of opposition parties should also meet President Ram Nath Kovind over Patel’s resignation. “The BJP is behaving like a dictator. There should be a campaign against this rule. Everybody has agreed to that,” she said.
“Financial stability is not there… Financial emergency has started,” she alleged.
Slamming the government over resignations of RBI Governor and Chief Economic Advisor Arvind Subramanian, senior Congress leader Kapil Sibal said, “People he (PM) appointed are resigning, first Arvind Subramanian left as CEO and now it’s Urjit Patel. Economy is suffering, Modi thinks that he’s the biggest economist and he doesn’t need them, so they are resigning”.
Expressing shock over the development, S Gurumurthy, Government nominee in RBI Board, said.”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.”
“I enjoyed several hours of personal discussions with him where we found large areas of agreement as well as mutually understandable disagreement. His resignation is indeed set back to the effects of the convergence of views that was taking place. We will miss him,” he added.
Notably, tensions between the RBI and the government have recently, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.
Section 7 of the RBI Act says “the central government may from time to time give such directions to the bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest”.
However, it was reported the central bank and the government have reached a common ground on several issues to bring the standoff to an end during the last board meeting of the central meeting.
Patel — who resigned three days ahead of the RBI board meeting — was appointed the 24th Governor of the central bank on September, 2016 for a three-year term. His tenure was due to end in September next year.
Tensions between the RBI and government spilled into the public domain after the RBI Deputy Governor Viral V Acharya stated that undermining the central bank’s independence could be “potentially catastrophic”. This was seen as a veiled reference to RBI pushing back hard against government pressure to relax its policies and reduce its powers.
The government of the day, he said, was pushing banks to lend which resulted in credit growth in a year shooting up to 31 per cent from the normal average of 14 per cent.
In a push back, Finance Minister Arun Jaitley criticised the central bank for failing to check indiscriminate lending during 2008 and 2014 that has led to the present bad loan or NPA crisis in the banking industry.
“You see (between) 2008 to 2014, after the global economic crisis, to keep the economy artificially going, banks were told open your doors and lend indiscriminately,” Jaitley said at India Leadership Summit organised by US-India Strategic Partnership Forum.
“The central bank looked the other way, there was indiscriminate lending,” he said.