Urjit Patel on Monday stepped down as the Governor of the Reserve Bank of India (RBI) with immediate effect citing personal reasons.
'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,' he said in a statement posted on the central bank's website.
'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,' it added. Mr. Patel was appointed as the 24th Governor of the RBI on September 2016 for a three-year term.
His resignation comes a day ahead of the results of the crucial Assembly elections in Rajasthan, Telangana, Madhya Pradesh, Chhattisgarh and Mizoram, which have been touted as the semi-finals for the general elections in 2019.
The relations between the Mint Road and North Block have reportedly soured since late October this year after the Finance Ministry started consultations under the never-before-used Section 7 of the RBI Act, which empowers the government to direct the central bank to undertake certain policy measures in public interest.
Central bank sources had said the government had sent three letters to the RBI before October 10 with nearly a dozen demands, which were replied to within a week.
The government primarily wants the RBI to help the struggling non-bank lenders and MSMEs get some liquidity support, liberalise the prompt corrective action framework on 11 of the state-run banks and undertake other steps that will help push growth, while RBI has been maintaining a conservative stance avoiding any bad precedents.
The poll-bound government, which is staring at falling revenue and a likely fiscal slippage, also wants the RBI to part with a large portion of it Rs 9.6 trillion of its cash surplus, which the central bank has been sternly opposing.
As the public spat between the two got wider attention, the RBI's central board, at its November 19 meeting, had decided to climb down and decided to set up a panel to study the quantum of capital it requires, apart from restructuring loans of up to Rs 250 million to give a succour to the troubled MSMEs.
The frictions came to light through a public speech by the Deputy Governor, Mr. Viral Acharya, wherein he warned of investors' wrath if the RBI's autonomy is compromised.