The friction between the Reserve Bank of India and the Union Government likely forced the resignation of Governor Urjit Patel on December 10, 2018. Patel went about demitting office in an understated manner without even giving any statement for the apparent reason as to why he left. Maybe, he is keeping the best for the end and probably, like his predecessors, he must be contemplating on enlightening the citizens of India about the malady that is plaguing the Central Bank due to policy interventions and arm-twisting tactics in the form of a book. That is for later.
Coming back to the current turmoil, actually the resignation of Patel as RBI Governor has elicited sharp reactions from all quarters, so to say. The first reaction came from his predecessor Raghuram Rajan who termed Patel's resignation as a matter of grave concern.
Rajan also added that it need not be only the opposition to policy decisions of the Government that triggers the person on the hot seat to quit. He hinted that the top officer would have quit as he could have reached a point of no return.
However without allowing anyone to speculate, Rajan gave a word of caution to the Union Government that while dealing with the Central Bank, it should take extreme care in maintaining cordial relationship. However, he added that we need to comprehend as to what actually pushed Patel to leave the office before his tenure ended.
In a curt statement, Patel sent across the message that he was quitting the job for personal reasons with immediate effect, not forgetting to reminisce the fact that it had been his privilege and honour to serve in the Central Bank in various capacities over the years. The note itself reflected a bit of sadness. Apparently, the situation that warranted Patel to demit his office could be a string of recent controversial events that upset him. Such issues included the use of Section 7 of the RBI Act by the Government before it called for a major consultation with the RBI on a slew of issues including lending restrictions on weaker banks.
The seed of discontent between the RBI and the Union Government can to light in the early part of last month itself, when the RBI Deputy Governor Viral Acharya cautioned that those governments which try to stifle RBI' independence will subsequently get adverse reaction from the market forces.
The routine words of solace from the government side is all the more hurting than the real issues which prompted Patel had to quit. Look at the various reactions that came immediately after the resignation of Patel. Prime Minister Narendra Modi tweeted: "Dr. Urjit Patel is a thorough professional with impeccable integrity. He has been in the Reserve Bank of India for about six years as Deputy Governor and Governor. He leaves behind a great legacy. We will miss him immensely."
Another tweet from PM said, "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."
If there is any element of sincerity in these statement, the Government should have urged Patel to stay back, unfortunately, no such attempt for a rapprochement took place, leaving others to conclude that the Government's reaction must be "Good Riddance."
The Union Finance Minister Arun Jaitley, taking to Twitter, had said: "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.
The minister's praise is awfully artificial as it is clear Patel was pressured and pushed to resign. Over many decades, the respective ruling dispensations tried to stifle the Central Bank through overt and covert means, though many successive governors towed the line and few who resisted had to leave the office with a heavy heart. Thanks to the strong judiciary, many of the Government's authoritarian moves have been shot down.