Published: Tue, December 11, 2018
Money | By Wilma Wheeler

RBI Governor Urjit Patel resigns citing personal reasons

RBI Governor Urjit Patel resigns citing personal reasons

It has been my privilege and honour to serve in the RBI in various capacities over the years.

"The manner in which RBI governor has been forced to quit is a blot on India's monetary and banking system". Although there were rumours of Patel's deputy Viral Acharya too resigning, but the RBI spokesperson denied social media rumours.

The Prime Minister said Patel leaves behind a great legacy and will be missed immensely.

The RBI Governor appeared before the panel days after the RBI's face-off with the finance ministry over issues ranging from the appropriate size of reserves to be maintained by the central bank to easing of lending norms for small and medium enterprises.

"In the middle of the meeting (of opposition leaders), we were told that RBI Guv has resigned because he could no longer work with govt".

To a query on the sovereign rating impact of the developments around RBI, Moody's said, "While the motivation for the RBI Governor's resignation is unclear, the independence of a country's central bank is an important consideration in our assessment of a sovereign's institutional strength".

Patel tendered his resignation citing personal reasons.

Central to the liquidity issue was the government's demand that the RBI hand over its surplus reserves by amending its "economic capital framework".

The government would like the RBI to lower interest rates and free up more of its cash reserves to invest in Asia's third-largest economy, analysts say.

On the issue of reserves, the RBI board made a decision to form an expert committee to examine its economic capital framework, which will decide the amount of reserves it can maintain, handing over the balance to the government.

In a statement, Singh described Patel as an "economist of high repute and also someone who cared deeply about India's financial institutions and economic policy" and wished him success for future endeavours.

Patel's sudden resignation is expected to roil financial markets on Tuesday. "Institutions, from the CBI to the RBI, have become total disasters".

A marathon RBI board meeting in November avoided any direct confrontation on the question of the central bank's autonomy. It is not just in India, but central banks across the globe, including the US Federal Reserve, seem to be getting drawn into conflict with the administration.

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