On December 11, in an unexpected move, the Reserve Bank of India (RBI) governor Urjit Patel resigned. Patel became the first RBI governor to have the shortest tenure since 1992. This “very unfortunate” development in India’s central banking institution is being observed as a “severe blow” to the country’s economy by many. Meanwhile, a day after Patel’s walkout, the Rupee opened lower in trade, as reported by Business Times.

Just four days before the Reserve Bank board meeting and amid ongoing tussle with the RBI and the government, Kenya born, Patel (55), stepped down from his position citing personal reasons. However, allies of Patel says that it is something more than just the “personal reasons” that made Patel resign, as reported by The Times Of India.

While speaking to The Times of India, one of the people close to Patel on the condition of anonymity said, “He (Patel) was clear that he neither wanted nor would he get, an extension beyond his current three-year term which was to end next September. For him, the cost of quitting wasn’t very high. Also, he felt the government was pushing too hard, to the point of undermining the RBI’s autonomy.” The anonymous sources also said that there was tension mounting over Patel in the last few months which was taking a toll on his health, and presumably, that made Patel think if it is “worth it” or not.  

“Matter of grave concern”: Raghuram Rajan

Patel was appointed as the governor by the Modi government before demonetisation in 2016, succeeding the former RBI governor Raghuram Rajan, who had then announced that he would not be serving his second term.

Soon after Patel’s resignation, Rajan said that Patel’s departure from the RBI is a matter of grave concern.

He also said, “I think Dr Patel has made a statement and I think this is the ultimate statement that a regulator or a civil servant can make. I think the statement should be respected,” as reported by the Economic Times. Rajan said that Patel’s resignation is something that all the Indians should be concerned about as he says that the strength of our institutions is really important for India’s sustainable growth and equity in the economy.

He further said that “we should look into the details” and should try to find out that why there was an impasse, which forced Patel to take his ultimate decision.

Veerappa Moily says Patel was under stress

After Patel’s resignation, many bigwigs raised their concerns about the current state of RBI. Commenting on the development, former Union law minister and present chairman of the Parliamentary Standing Committee on Finance, M Veerappa Moily said that in the last month’s panel, Patel seemed to him under a lot of pressure. The Union minister also said that he was anticipating that the “gentleman economist” would resign soon, as the BJP government was trying to take down the autonomy of the institution.

Calling it an inevitable move, Moily also said, “This government (BJP) has been putting all sorts of pressure in its (RBI’s) functioning and interfering in the autonomy and independence.”

Further, Moily said, “It is a time-tested institution which really served the economy well,” as reported by The Indian Express.

In the past, there have been several reports that claim that the relationship between the Modi government and the RBI was turning frosty over various issues like–public sector bank regulation, resolution of distressed assets and the central bank’s reserves–and that was making some noise. 

Manmohan Singh calls it unfortunate

Reacting on the hovering speculations about bad RBI and government relation and Patel’s resignation, former prime minister Manmohan Singh said that “it is very sad” that he received the news of the RBI Governor’s resignation. He called the incident “very unfortunate” and also said that it would be  “severe blow” to the country’s economy.

However, he hopes that RBI Governor’s sudden resignation is not a sign of  Modi government’s attempts to “destroy” the institutional foundations of India’s USD 3 trillion economies, as reported by the Hindustan Times.

Soon after the big blow in the RBI on Monday, both PM Modi and Finance Minister Arun Jaitley acknowledged services rendered by Urjit Patel.

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.

— Narendra Modi (@narendramodi) December 10, 2018

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.

— Narendra Modi (@narendramodi) December 10, 2018

Union minister Arun Jaitley also tweeted

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. (1/2)

— Arun Jaitley (@arunjaitley) December 10, 2018

Meanwhile, BJP MP Subramanian Swamy criticised Patel’s stepping down and called it bad for the Modi government. He said that PM Modi should discourage RBI Governor Urjit Patel from leaving, saying that Patel’s resignation would be wrong for the government, economy and the institution at this time.

“His resignation at this time would be wrong for the government, economy and the RBI. The prime minister should call him and find out what could be the personal reasons and dissuade him from leaving. This is what I think the PM should do,” Swamy said, as reported by Economic Times.

The fall in the Rupee

Urjit Patel’s departure came on Monday, just a day before the start of the winter session of Parliament and also before the results of five assembly results that are scheduled to come out on December 11. The Patel’s stepping out was followed by a fall in the Rupee in the market. According to the Business Times, on Tuesday, the rupee opened lower in trade. The rupees collapsed 114 paise in the early trade to 72.46 level. On December 10, the rupee trade was close to 71.32  level against the US dollar. However, it recovered some losses and was trading at 72.14 level in the forex market at 10:00 am.

Also Read: CIC Slaps Show-Cause Notice On RBI Governor For Non-Disclosure Of Willful Defaulters’ List