RBI-Govt spats are nothing new but resignations by Governors are!

Relations between a central bank and the government have had its moments of discord. Globally, governments like to believe that the central bank is a department of the Treasury. The central bank is expected to bail out the economy in a crisis by being the lender of last resort. In India too there have been instances of differences between the government and the central bank — most notably, YV Reddy, D Subbarao and Raghuram Rajan in the recent past. But seldom has it ended in the resignation of the governor. ET lists some controversial and not-so-controversial exits of governors before the expiry of their term.

SBORNE SMITH
Osborne Smith, an Australian had to quit since his outlook on policy issues like exchange rates and interest rates differed with that of the government. He resigned before the completion of his term of office for not toeing the British government line way back in 1937.


1957 BENEGAL RAMA RAU
The spat between Benegal Rama Rau and the ‘rude’ finance minister, TT Krishnamachari, in the fifties was another case. It was largely a clash of personalities as well as Krishnamachari’s belief that the RBI was a department of the finance ministry

2018
The tension between the government and the Reserve Bank surfaced sporadically after Urjit Patel took over in September 2016. But it became ugly with both going public using media as a platform to air their differences since late October 2018 when a deputy governor of the RBI aired concerns over the central bank’s autonomy. The series of issues that followed ultimately led to Governor Urjit Patel’s resignation.

NOT SO CONTROVERSIAL EXIT BEFORE END OF TERM
1990 Governor RN Malhotra, himself a bureaucrat of impeccable credentials, left before his extended term ended. But his exit did not hog media attention. Many did not know what triggered his exit. The paper could not verify any record of his resignation.