Patel : Independent, rigid Guv who found his voice

Mumbai, December 10 

From being considered government’s man on the Mint Street, outgoing RBI Governor Urjit Patel had in less than two years emerged from the shadows to find his own voice on issues that mattered the most — autonomy and independence of the central bank.

From facing flak for allegedly toeing the government line on the shock decision to overnight junk 86% of the currency in circulation, he overcame all that as he followed “wisdom of an owl” in clamping down on loan defaults and cleaning up bank balance sheets.

Succeeding an outspoken Governor with ‘rockstar’ appeal, Patel was often considered reticent, rigid, uncommunicative and someone who appeared reluctant to meet and consult not just finance ministry officials but his own colleagues in the bank.

But the 55-year-old Patel, who Monday announced his decision to step down as the RBI Governor, nearly nine months before his three-year term was to come to an end, meticulously conducted the “deep surgery” initiated by his predecessor Raghuram Rajan to clamp down on loan defaulters, while seeking to safeguard the Indian banking system from any collateral damage.

The resignation came just days ahead of the December 14 meeting of the Board of RBI that was to take up issues like governance in the central bank.

Patel, who is the first Governor to resign since 1990s, cited personal reasons for the resignation but industry watchers say there were undercurrents since the the government cited hereto never-used-before provisions of the law to bring him to negotiating table on issues it felt were of national interest.

The friction between the RBI and the Finance Ministry was attributed to the recalcitrance of Patel, who appeared keen to be seen as a defiant, independent-minded Governor of high credibility by resisting the government’s call for increased transparency on the central bank’s reserves and for enhanced liquidity so that credit can be eased to money-strapped sectors especially MSMEs. — PTI

What could have led to resignation

• Possible attacks on the RBI autonomy through many government measures
• Invocation of the never-before-used Section 7 for forcing down government decisions
• Review of RBI’s excess capital reserves which may result in transfer of a portion of over Rs 9.6 trillion of excess capital to a cash-starved government in an election year
• Relaxations to get banks out of the prompt corrective action plan and sops for small businesses which are still to recover from the note-bank shock