Amid heightened tensions with the Ministry of Finance, Reserve Bank of India Governor Urjit Patel resigned abruptly on Monday, citing personal reasons.
“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 said in a statement posted on the RBI website.
Patel's exit comes before a crucial RBI Board meeting on Friday in which the government nominees on the bank are expected to push for allowing state-owned banks to lend more.
Bad blood between the central bank and the Narendra Modi government has grown, with the Centre trying to wield greater control of an institution widely respected for its independence.
Patel’s outspoken predecessor at the bank, Raghuram Rajan, who had been denied a second term by the Modi government, termed Patel’s resignation a “statement of dissent”.
Patel’s sudden decision to step down, 10 months before his tenure was to come to an end, evoked strong reactions from the Opposition. Former finance minister P Chidambaram said, “Make no mistake. This government’s intention is to make RBI a board-managed company…immediate agenda is to grab the reserves of RBI to meet its fiscal deficit target and to get funds for spending in an election year.”
Patel had the shortest tenure as Governor in the past 25 years.
Ironically, he had been seen as a safe choice after the government’s relationship with Rajan went south. But of late, the battle with his political masters had become bitter. The government acknowledged with a “deep sense of appreciation” the services rendered by Patel. Patel’s resignation note thanked his colleagues but was silent on the government.
The 55-year-old Governor, a Kenyan-born bachelor who stays with his mother, presided over the implementation of Modi’s surprise demonetisation decision, taking much of the flak for something that he had little say on. He also had to grapple with a crisis in state-run banks hit by huge bad loans by issuing strict norms against lending.
This strengthened many of the weak banks' balance sheets but also landed him in trouble with the government, which wanted banks to increase lending, especially closer to elections.
In Patel’s clean-up operation two top private bank chief executives – Shikha Sharma of Axis Bank and Rana Kapoor of Yes Bank -- were denied extensions. His tenure also saw Chanda Kochhar of ICICI resigning amid allegations of impropriety.
Sources in the government said a successor to Patel would be appointed soon.