Govt will be more careful in raising issues publicly: R Gandhi

Reserve Bank of India governor Urjit Patel resigned citing personal reasons, triggering speculation behind the real reasons for his exit. R Gandhi, former deputy governor at RBI, discusses Patel’s resignation, autonomy of the RBI and impact of the exit on the markets in an interview with Shilpy Sinha.

Edited excerpts:

Does Patel’s resignation give a message that the autonomy of the RBI is under threat?

Not at all. Now, the government will be more careful in raising issues publicly. The government will be equally concerned about the autonomy of RBI. They won’t let the information out so that RBI’s autonomy is affected.


What message does the resignation send?

We do not know what transpired in the resignation. It will be too early to hazard a guess. There are many issues on which there have been differences of opinion between the RBI and the government. A combination of all factors must have influenced the decision. We cannot say whether it was transfer of reserves or PCA guideline that led to the resignation. It looked like they have reached common ground on a method of working in the board meeting. There is no indication as to what happened after the meeting.

What signal does it give to the markets?

It is negative for the market immediately but it will come back to normalcy quickly. The Reserve Bank has the resilience to bring things to normalcy. The government will also be concerned about it and will help in bringing stability.

Does it give a message that the board is above the institution?

It is all guesses right now. Last time, it was clear that the board has not given any direction to the RBI management. The board has its own role and RBI management has its own provisions. There are many members on the board and well qualified.

What happens when there is a conflict with the board in the future?

There will always be different views. They will agree to disagree and in larger interest let things go. Monetary policy is not in the board’s purview. Central bank is not managed by the board, though the board has certain responsibilities and the management has its own. Some members have spoken outside the board. There are occasions when the RBI has changed its view and in others when the board has. Never has it gone to the point of breaking. Here again, the board has not given any direction that the management has taken a different view.

Should the government be more accommodative towards the RBI, or should the RBI as an institution go for some reforms?

Just because of this instance, we should not come to the conclusion that it requires structural changes. Personalities matter and they can recognise each others’ compulsions and features. If pacified way of consulting is not there, the other party can get offended. Differences have been there and will be there. That is why separate institutions have been created.

Did Patel’s lack of communication affect his term as governor?

That he is reclusive is true. That could’ve contributed but that could not be the sole reason for his resignation. One of the reasons could have been the transfer of reserves, but we cannot say if it was the single most important reason. It is too early to come to any such conclusion.