Urjit Patel resigns citing personal reasons; Raghuram Rajan says resignation a matter of grave concern

NEW DELHI: In a surprise move, the Reserve Bank of India Governor Urjit Patel resigned on Monday evening, citing personal reasons.

Commenting on the development, former RBI governor Raghuram Rajan told ET NOW: “Resignation of the RBI governor is a matter of grave concern.”

Government must take extreme care in how it proceeds further in its relationship with the RBI

-Raghuram Rajan

N S Viswanathan, the senior most Deputy Governor, is likely to hold charge as RBI's interim lead, ET NOW reported.

Meanwhile, Prime Minister Narendra Modi said under his leadership, the RBI brought financial stability.

“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. Urjit Patel is a thorough professional with impeccable integrity. He has been in the Reserve Bank of India for about 6 years as Deputy Governor and Governor. He leaves behind a great legacy. We will miss him immensely,” Modi tweeted.

Finance Minister Arun Jaitley said the government acknowledges services rendered by Urjit Patel.

"The government acknowledges with deep sense of appreciation the services rendered by Dr. Urjit Patel to this country both in his capacity as the Governor and the Deputy Governor of The RBI. It was a pleasure for me to deal with him and benefit from his scholarship. I wish Dr. Patel all the very best and many more years of public service," Jaitley posted on Twitter.

In recent times, the relationship between the central bank and the government has turned frosty over a host of issues, including the economic capital framework, PCA guidelines for banks and a special facility for NBFCs.

“Saddened, not surprised, by Dr Urjit Patel's resignation. No self respecting scholar or academic can work in this government. November 19 was the day of reckoning. Dr Patel should have resigned on that day. Dr Patel may have thought that government will retrace its steps. I knew it would not. Good he quit before another humiliating meeting,” former finance minister P Chidambaram wrote in a series of tweets.

The government has been pushing the RBI to ease lending rules, bring in more liquidity and allow easier capital norms for banks to boost economic growth ahead of general elections due by May.

The RBI is increasingly under pressure to pay a higher dividend from its reserves to help bridge fiscal deficit. The government has argued that the central bank’s surplus funds are higher than needed, but the RBI has countered such contention, saying it needs the funds for any financial emergency.

The conflict dates back to late October when Deputy Governor Viral Acharya warned that undermining central bank independence could be “catastrophic”.

In the latest policy review, Patel refused to comment on the ongoing controversy, maintaining a tight upper lip.