Reserve Bank of India Urjit Patel today resigned, making him the first Governor to resign since 1990. Patel's 3-year term was to end in Sept 2019. Speculation of Patel's exit had gathered momentum, following differences with the government.
"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. 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," a statement by the RBI read.
There have been tensions between the RBI and the government over autonomy. The RBI Deputy Governor Viral Acharya had recently said that undermining central bank independence could be "potentially catastrophic".
There have been pressure on the RBI for relaxing MSME lending guidelines and gain access to surplus reserves of the central bank which can be employed towards public expenditure.
Prime Minister, Narendra Modi in a tweet 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 and ensured discipline. Under his leadership, the RBI brought financial stability."
Dr Patel's departure may lead to some anxiety among investors, especially foreign investors. Who replaces Dr Patel would be paramount, especially at a time when there is forex volatility, NPA worries and liquidity concerns.