Urjit Patel on Monday stepped down as of the Reserve Bank of India (RBI), which is effected immediately.
There has been speculation of his resignation after deputy governor Viral Acharya’s speech last
month that sought to defend the autonomy of the RBI and the subsequent differences between the
government and the RBI over various issues related to liquidity, credit flow and the controls governing
Patel cited personal reasons for his decision. “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,” he stated. “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,” he went on add. Patel’s tenure was to end in September 2019.
On October 27, RBI deputy governor Viral Acharya said governments that “do not respect the central bank’s 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”.
After Acharya made these comments, the issues on which the government and the RBI were at loggerheads became public.
These issues ranged from the government wanting the RBI to ease some norms so that banks could easily lend money. The government also wanted the RBI to help in ensuring better credit flow to Micro, Small and Medium Enterprises (MSMEs).
Another flashpoint was the Centre asking that the RBI to transfer surplus reserves to the government.
The RBI vs government tensions were capped off by the latter invoking Section 7 of the RBI Act — an unprecendented move in the history of independent India.