Urjit Patel: India’s central bank governor resigns

The Reserve Bank of India (RBI) Governor Urjit Patel arrives to attend a news conference after a monetary policy review in Mumbai, India, October 5, 2018. REUTERSImage copyrightREUTERS
Image captionRumours that Mr Patel was going to quit have been swirling around for weeks

India’s central bank governor Urjit Patel has resigned from his post citing “personal reasons”.

His resignation comes amid reports of a rift between the Reserve Bank of India (RBI) and Prime Minister Narendra Modi’s government,

This marks a rare case of a serving governor leaving his job midway through his five-year term.

Correspondents say the move is likely to undermine confidence in the economy and cause the rupee to fall.

In a statement, Mr Patel thanked his staff and officers, calling them the reason for the “bank’s considerable accomplishments in recent years”.

But speculation has been mounting for weeks that Mr Patel could resign over government pressure on the bank.

In late October, the RBI’s Deputy Governor Viral Acharya fired what appeared to be a broadside against attempts to undermine the bank’s independence.

“Governments that do not respect central bank independence will sooner or later incur the wrath of the financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution,” he said.

The government reportedly wants the RBI to allow ailing state-owned banks, groaning under bad loans to industries, to resume lending to small businesses. It also wants the regulator to lower interest rates to inject much-needed liquidity into the economy.

Reports say the government also wants to access the RBI’s surplus reserves.

Fears for economy

Prime Minister Modi and Finance Minister Arun Jaitley have issued statements voicing appreciation for Mr Patel’s work.

Mr Modi tweeted that Mr Patel left behind a “great legacy” while Mr Jaitley described a “deep sense of appreciation” for him.

However, others have responded with concern.

A former governor of the RBI, Raghuram Rajan, said that Mr Patel’s resignation should be seen as a statement of protest. Former Finance Minister Yashwant Sinha said “the resignation is a clear sign of the government trying to interfere with the working of the RBI”.

“Although India’s $2.6tn (€2.3tn; £2tn) economy has recently been boosted by a strong performance in consumer spending and manufacturing, the rupee has fallen by about 15% against the surging dollar so far this year, private investment remains slack and there are doubts on whether the economy will accelerate further,” says the BBC’s Soutik Biswas.

“The trade deficit, inflation, and high oil and commodity prices are a major concern,” our correspondent adds.

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