The ongoing conflict of trust between the Reserve Bank of India and the central government leads to RBI Governor Urjit Patel’s resignation on Monday, almost 10 months ahead of his term — ending the shortest tenure a central banker in India has had since 1992.
“On account of personal reasons, I have decided to step down from my current position effective immediately,” Patel said in a brief statement. He thanked his RBI colleagues but avoided any reference to the government or the Finance Ministry.
“Building institutions take a long time and effort but they can be destroyed in a whimper. It is institutions such as the RBI, among many others, that have served as the edifice of our great nation’s progress since independence. It will be foolhardy to diminish these institutions for short-term political gains,” former Prime Minister Manmohan Singh said.
What does the rift between India’s government and its central bank say about the country’s politics? https://t.co/zbXoHDl2Hb
— The Economist (@TheEconomist) December 10, 2018
“I also sincerely hope that this sudden resignation of the Governor is not a harbinger of the Modi government’s attempts to destroy the institutional foundations of India’s USD 3 trillion economy,” he added.
In October, RBI Deputy Governor Viral Acharya, saying he had discussed the theme with Patel, had warned that “governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.”
“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,” said Patel in his statement.
Speaking to The Indian Express, a senior Director on the RBI Board said, “Patel’s resignation was unexpected. Dust raised earlier was settling down after the previous board meeting. Some of the issues were actually sorted out in the meeting. I don’t know what led to his departure at this stage.”
Responding to the resignation, Prime Minister Narendra Modi said Patel is a “thorough professional with impeccable integrity,” who leaves behind a “great” legacy. “We will miss him immensely,” he said. “He’s an economist of a very high calibre and insightful understanding of macroeconomic issues. He steered the banking system from chaos to order and ensured discipline.”
Patel, 55, took over as the 24th Governor on September 5, 2016, when he was chosen by the BJP-led government after his predecessor Raghuram Rajan was denied a second-term.