Urjit Patel quits as RBI Governor with immediate effect

Amidst the unprecedented feud with the government over how much autonomy should be given for the Reserve Bank of India (RBI) to function, Urjit Patel has stepped down from the post of the Governor with immediate effect.

Patel has however cited personal reasons for his exit from RBI.

"On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years," he stated.

Patel, whose tenure was supposed to end in 2019, was appointed the 24th governor of the RBI in September for a three-year term.

The RBI and the government have been at loggerheads since October. The government was seen to have been ramping up pressure on the bank on three key issues that included excess reserves in the bank.

The RBI has an excess reserve of Rs. 3.6 lakh crore, which the bank contends that keeping it is essential in view of possible emergencies. The government however is of the view that that excess reserve can be used for development, according to sources.

Observes Anurag Bhatia, CEO and Head of Investments, Minance on RBI Governor's resignation, “This does not bode well for the RBI, the government, or the economy. There will be a knee-jerk reaction tomorrow and coupled with the election results, it is going to be a very volatile day. The effects, however, will be short-term. The bigger issue at stake is what this means for the future of the RBI. Patel’s resignation will shake foreign and domestic trust in the RBI’s autonomy and shows that a red line has been crossed. Even if the government moves fast and appoints someone credible, the suggestion of being a government proxy will be hard to shake off.”