Urjit Patel brought banking system to order from chaos

In a surprise move, Urjit Patel resigned as Reserve Bank of India (RBI) governor, cutting short his three-year tenure by nine months. The government is yet to name his successor.

When Patel, the then deputy governor was shortlisted to succeed Raghuram Rajan as the 24th governor of RBI, many were surprised. Deputy governors are rarely elevated to the top post, which is generally reserved for a bureaucrat from Delhi.

He waged a war on non-performing assets (NPAs) and undertook audits to clean up banks' books riddled with stressed assets of nearly Rs 12 lakh crore. It is to his credit that banks had to announce the under-reporting of NPAs if it exceeded 15% of the total NPAs. Almost all banks were forced to report their divergences.

RBI under him has also been instrumental in curtailing the tenures of YES Bank and Axis Bank heads for better governance standards and prudent NPA management. RBI also opposed Uday Kotak from reducing promoter holding in Kotak Mahindra Bank using the perpetual non-convertible preference shares (PNCPS) route to dilute his promoter shareholding, saying it was not acceptable. Kotak has moved court over RBI's decision.

Demonetisation also took place under his tenure.

While facing flak for failing to catch the Rs 13,000 crore Punjab National Bank scam, he strongly defended RBI saying, "If we need to face the brickbats and be the Neelakantha consuming this poison, we will do so as our duty. We will persist with our endeavours and get better with each trial and tribulation along the way," he said referring to the need to tackle of NPAs.

He went on to extend the mythological comparison, saying that promoters and banks should seek to be on the side of the "devas" (the gods) rather than "asuras" (the demons) in this "amrit manthan".

On Monday evening, Patel ended his fight almost with a whimper with a short note put up on the central bank's website: "On account of personal reasons, I have decided to step down from my current position effective immediately."

Sources said the resignation was in the offing with the RBI Board turning more powerful, with external members pushing for regulatory reforms and the government eyeing its reserves. The government was keen to take part of its reserves for welfare schemes contrary to RBI's belief on the need for reserves.

However, bankers complain that RBI under Patel had become uncommunicative with few discussions. The February 12 circular when RBI withdrew all existing restructuring schemes was one example bankers cite. Major assets that got impacted with this circular were the power companies with state-of-the-art factories, which stared at a spectre of getting liquidated if a resolution was not needled out in 270 days. In a power deficit country the regulation was seen as unrealistic.

Patel lives in his own residence with his mother not having moved into the RBI governor's bungalow in Carmicheal road in South Mumbai. Patel was born in Nairobi to a business family. His family ran a chemical factory in the Kenyan Capital. He obtained his Bachelor's in Economics from the London School of Economic, later taking his doctorate in Economics from Yale University in 1990.

THE TIMELINE

2016

4 September – Urjit Patel takes charge as governor of India’s central bank

8 November – Govt announces demonetisation of high-value corrency notes 

2017

7 June – Patel reveals MPC has refused to meet finance ministry 

10 August – RBI says will pay the government Rs 30,659 crore as annual dividend

2018

12 February – RBI issues circular asking banks to chalk out a resolution plan within 180 days

12 March – Patel defends RBI on the grounds that it has weak regulatory control over public sector banks such as PNB

9 April – RBI puts 11 public sector banks under the prompt corrective action for poor performance in handling bad loans

30 August – RBI reveals 99.3% of demonetised notes have returned to banks

19 October – RBI opposes separate regulator for digital payments in India

26 October – RBI deputy governor Viral Acharya gives a speech over the central bank’s independence

16 November – Govt proposes new regulations to enable closer supervision of RBI

19 November – Centre, RBI meet midway in the central bank’s Board meeting