RBI governor Urjit Patel resigns ahead of key meeting

Reserve Bank of India (RBI) governor Urjit Patel resigned on Monday, citing personal reasons, four days ahead of the next board meeting slated for December 14. He has exited the central bank with immediate effect.

"On account of personal reasons, I have decided to step down from my current position effective immediately," Patel said in a brief statement put up on the central bank's website.

He added that it has been his privilege and honour to serve in the RBI 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. 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."

The resignation, sources say, was the outcome of the weeks-long friction between the central bank and the government over the access to RBI's contingency reserves of Rs 9.2 lakh crore and relaxed guidelines for tackling non-performing assets in the Indian banking system.

Many believe that the RBI board meeting of October 23 was the turning point. The 9-hour-long meeting ended inconclusively for the first time and the second round of the meeting was called on November 19. This seemed to have ended on a conciliatory note with both sides meeting half-way with some give and take.

Some RBI officials told DNA Money that the induction of some independent directors was blurring the line between the RBI and the government.

The central bank's February 12 circular that withdrew all special restructuring schemes was a red letter day for bankers and the government. Indian companies, especially those from the power sector, challenged the circular which pushed all the debt of Rs 2,000 crore and above to the National Company Law Tribunal (NCLT) for liquidation if not resolved in 270 days from May 1.

The prevailing friction between the government and the RBI led to a flash-point in the board meeting as some independent directors insisted on taking away a part of the RBI's contingency reserves and also pushing credit for the non-banking finance companies (NBFCs) and micro, small and medium enterprises (MSMEs).

After a long interval, the 18-member board of RBI is completely full, with 10 government-nominated members, four eminent personalities taken from various sectors and four RBI members (RBI governor and 3 deputy governors).

The growing difference between the government and the banking regulator came under public glare when for the first time the RBI published on its website a dissent note, expressing its disagreement with the government in setting up a separate payments regulator. The fragile relationship reached a breaking point when the government asked the RBI to relax lending restrictions imposed on certain weak banks to tackle their non-performing assets (NPAs).

RBI deputy governor Viral Acharya, a close confidante of the governor, said while delivering a memorial lecture that undermining a central bank's independence could be "potentially catastrophic".

Urjit Patel, former deputy governor of RBI, had taken over as the 24th governor of RBI succeeding Raghuram Rajan on September 4, 2016, for a period of three years until September 19, 2019.