RBI Governor, Mr.Urjit Patel has dramatically resigned from his role. He was appointed as the 24th Governor of RBI by the BJP Government after denying 2nd run for then RBI Governor Mr.Raghuram Rajan. He took charge on 5th September 2016. The term of office for RBI governor typically runs for 3 years. Hence, he was meant to serve till September 2019. The mid-term resignation has surprised the many as no initial notice was given to the Government before the Resignation. His unexpected Resignation has made him the RBI governor with the shortest tenure since 1992. Apart from this, he will be remembered for his activeness during Demonetisation and his decision to crackdown the defaulters.
After the Resignation, a statement by Patel was published on the Central Banks website saying “On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honor to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers have 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,”.
This is not the first time when RBI governor has resigned before completion of their term. One such incident also took place during Nehru rule when RBI Governor Sir Benegal Rama Rao Resigned from his role in January 1957 after Nehru started questioning RBI’s working. There were also conflicts between the Finance ministry and RBI.
What went wrong:
The difference of opinion on several issues between the Modi Government and Urjit Patel has to lead to this mid-term Resignation. The first sign of protest was observed when Deputy Governor of RBI Mr.Viral Acharya warned the Authorities about the wrath of the market if RBI’s autonomy is compromised in his 90-minute long speech delivered by him on 26th October 2018.
The other cause of conflicts:
1)Encroachment of government into RBI’s working.
2)Government’s demand to enforce section 7 of RBI Act which empowers the government to direct RBI on several issues of public welfare and interest.
3)Governments ambition to control over lending rates and Reserve cash of RBI.
4)The demand of Government to enjoy more profit share then-current rate to spend more on welfare programmes ahead of 2019 elections.
5)The difference of opinion between two bodies on resolving bad loans and the upliftment of poor public sector banks.
6)Disagreement on several issues in the RBI board meeting held on Nov 19 has also worsened the situation.
Point of concern:-
1)Encroachment in the RBI’s independence will result in catastrophic for Indian Market.
2) The concerns of RBI authorities is itself a great problem.
3) After the resignation of Urjit Patel, a record fall in the value of rupee is observed.
4) Now, the government has to appoint a new Governor as soon as possible. It is speculated decision on the same will become clear on Dec 14 when the next RBI board meeting is scheduled to take place.