MUMBAI (Reuters) - The Governor of India’s central bank, Urjit Patel, resigned abruptly on Monday after a months-long tussle over policy with the government that has raised concerns about the bank’s independence as a national election nears.

FILE PHOTO: The Reserve Bank of India (RBI) Governor Urjit Patel pauses during a news conference after a monetary policy review in Mumbai, India, December 5, 2018. REUTERS/Francis Mascarenhas/File Photo

Government officials have been pressuring the Reserve Bank of India to allow some bad-debt-laden public sector banks to lend more easily, and pushed for it to hand over some of its surplus reserves to help fund the fiscal deficit.

Prime Minister Narendra Modi’s ruling Hindu nationalist Bharatiya Janata Party (BJP), which must call national polls by May, faces anger in rural communities because of slumping farm incomes, and broader concerns about a lack of jobs growth in small businesses that are finding it hard to get banks to lend them money.

Getting control of the reserves would give the government more flexibility in spending on welfare policies and farm support schemes.

Patel cited “personal reasons” for his decision to immediately step down.

His resignation came four days before an RBI board meeting, and at a sensitive time for the government.

On Tuesday, votes in key state elections are due to be counted, with exit polls suggesting the BJP could suffer some major defeats at the hands of the opposition Congress party.

That scenario, and Patel’s resignation, are expected to roil Indian markets. On Monday, forward contracts tracking the rupee against the dollar outside of market hours INRNDFOR= posted their biggest fall in more than five years.

That added to earlier losses caused largely by concerns - triggered by the state exit polls - that next year’s election might end with a defeat for the pro-business Modi and a weak coalition government, leading to policy uncertainty.

Investors will want to know quickly who Patel’s replacement will be, and how that will affect the direction of financial and monetary policy, analysts said. There was no clear frontrunner, but one name being mentioned was former Finance Secretary Hasmukh Adhia who retired at the end of November.

While not commenting directly on Patel’s exit, Moody’s Investors Service said on Monday any signs the government was attempting to curtail the RBI’s independence would be a credit negative.

“We currently assume that the RBI will continue to pursue price and financial stability and implement policies towards these goals,” the agency said in an emailed statement.

Patel announced his departure in a short statement on the RBI’s website in which he said that “on account of personal reasons, I have decided to step down from my current position effective immediately”.

Modi suggested he had not wanted Patel to leave. On Twitter, the Indian leader praised Patel as a “thorough professional with impeccable integrity”.

“He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” Modi tweeted. “He leaves behind a great legacy. We will miss him immensely.”

BUILDING FOR MONTHS

Even before Patel's announcement, the 10-year benchmark Indian government bond yield IN10YT=RR rose the most since September, and stocks posted their worst close in four weeks, with the broad NSE index .NSEI losing 1.9 percent.

The pressure on him had been building for some months.

The government has made clear it was not happy with the RBI’s policies and stacked its board with pro-BJP representatives.

Former RBI Governor Raghuram Rajan, who did not take an extension after his term ended in September 2016, said Indians should be concerned about what was happening.

“We should go into the details on why there was an impasse which forced (Patel) to take this ultimate decision,” Rajan told the ET NOW television channel. “The strength of our institution is really important.”

Within the RBI there was a combination of anxiety and relief at the announcement.

“It was very shocking... Morale of employees is very down,” said one RBI official who has been with the central bank for more than a decade. “This is very sad moment.”

But another official said Patel was often inaccessible to key financial market players and had stifled discussion within the RBI, and that now it might be possible to open up more.

“Finally things will come to peace. I can talk more openly,” this official said.

The officials asked not to be named due to the sensitivity of the matter.

ARGENTINE WARNING

The rift between the government and the central bank became very public in late October when RBI Deputy Governor Viral Acharya warned in a speech that undermining a central bank’s autonomy could be “catastrophic”.

He referred to a meltdown in Argentina’s financial markets in 2010 after a struggle between the government and the central bank over who controlled the bank’s reserves.

Last week, Patel declined to answer reporters’ questions about the rift with the government, which former government officials and analysts said they were convinced was a major factor in his decision to quit.

Slideshow (2 Images)

There was speculation a month ago that Patel might quit over the government pressure, but the rumours eased after the two sides reached an uneasy truce ahead of last month’s RBI board meeting.

“The timing just before this week’s board meeting suggests that there’s still a huge gap between the government and RBI positions on key issues,” said A. Prasanna, head of research at ICICI Securities Primary Dealership in Mumbai. “Markets will now hope that the government has a plan of action ready so as to restore calm.”</s>Mumbai: Reserve Bank of India (RBI) governor Urjit Patel on Monday resigned from the post citing personal reasons. “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 said in a brief statement.

Patel took charge as the RBI governor on 4 September 2016 after Raghuram Rajan resigned from the post on 19 June of that year. Patel’s term as RBI governor was to end in September 2019.</s>The Governor of India’s central bank, Urjit Patel, resigned abruptly on Monday after a months-long tussle over policy with the government that has raised concerns about the bank’s independence as a national election nears.

Government officials have been pressuring the Reserve Bank of India to allow some bad-debt-laden public sector banks to lend more easily, and pushed for it to hand over some of its surplus reserves to help fund the fiscal deficit.

Prime Minister Narendra Modi’s ruling Hindu nationalist Bharatiya Janata Party (BJP), which must call national polls by May, faces anger in rural communities because of slumping farm incomes, and broader concerns about a lack of jobs growth in small businesses that are finding it hard to get banks to lend them money.

Getting control of the reserves would give the government more flexibility in spending on welfare policies and farm support schemes.

Patel cited “personal reasons” for his decision to immediately step down.

His resignation came four days before an RBI board meeting, and at a sensitive time for the government.

On Tuesday, votes in key state elections are due to be counted, with exit polls suggesting the BJP could suffer some major defeats at the hands of the opposition Congress party.

That scenario, and Patel’s resignation, are expected to roil Indian markets. On Monday, forward contracts tracking the rupee against the dollar outside of market hours INRNDFOR= posted their biggest fall in more than five years.

Investors will want to know quickly who Patel’s replacement will be, and how that will affect the direction of financial and monetary policy, analysts said. There was no clear frontrunner, but one name being mentioned was former Finance Secretary Hasmukh Adhia who retired at the end of November.

While not commenting directly on Patel’s exit, Moody’s Investors Service said on Monday any signs the government was attempting to curtail the RBI’s independence would be a credit negative.

“We currently assume that the RBI will continue to pursue price and financial stability and implement policies towards these goals,” the agency said in an emailed statement.

Patel announced his departure in a short statement on the RBI’s website in which he said that “on account of personal reasons, I have decided to step down from my current position effective immediately”.

Modi suggested he had not wanted Patel to leave. On Twitter, the Indian leader praised Patel as a “thorough professional with impeccable integrity”.

“He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” Modi tweeted. “He leaves behind a great legacy. We will miss him immensely.”

Even before Patel’s announcement, the 10-year benchmark Indian government bond yield rose the most since September, and stocks posted their worst close in four weeks, with the broad NSE index losing 1.9 percent.

The pressure on him had been building for some months.

The government has made clear it was not happy with the RBI’s policies and stacked its board with pro-BJP representatives.

Former RBI Governor Raghuram Rajan, who did not take an extension after his term ended in September 2016, said Indians should be concerned about what was happening.

“We should go into the details on why there was an impasse which forced (Patel) to take this ultimate decision,” Rajan told the ET NOW television channel. “The strength of our institution is really important.”

Within the RBI there was a combination of anxiety and relief at the announcement.

“It was very shocking… Morale of employees is very down,” said one RBI official who has been with the central bank for more than a decade. “This is very sad moment.”

But another official said Patel was often inaccessible to key financial market players and had stifled discussion within the RBI, and that now it might be possible to open up more.

“Finally things will come to peace. I can talk more openly,” this official said.

The officials asked not to be named due to the sensitivity of the matter.</s>“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,” Mr. Patel said.</s>After a fractious faceoff with the Narendra Modi-led government over the liquidity crunch in the economy, the RBI Governor Urjit Patel resigned on Monday from his post with immediate effect citing ‘personal reasons’. Urjit Patel’s resignation, which came 10 months ahead of his term, is being seen a result of trust deficit between the central bank and the ruling government. According to many experts, this development can trigger a major crisis in the politico-economic sphere of the country.

In the recent past, several media reports said that Urjit Patel could resign after the government’s decision to invoke the never-used-before special powers under Section 7 of the RBI Act to initiate consultation on a range of issues such as the Prompt Correct Action (PCA) norms, among others. Urjit Patel was appointed the 24th governor of the RBI on September 2016 for a three-year term and was heavily criticised for his silence on demonetisation, which was announced just 2 months after his appointment.

Check Financial Express’ continuing coverage on Urjit Patel’s resignation as RBI Governor

What happens now

Urjit Patel resigns as RBI Governor; now, what’s next?

 Even as most saw Reserve Bank of India and Modi government reaching truce, RBI Governor Urjit Patel tendered his resignation on Monday. He cited ‘personal reasons’ behind the exit. However, the sudden decision to quit has raised a couple of pressing worries. First, how will the stock markets react? Second, and the most important, who will be the next RBI Governor?

Moody’s on Urjit Patel: Govt attempt to curtail RBI Independence credit negative

 Patel’s resignation came just 4 days ahead of the December 14 meeting of the Reserve Bank that could have discussed issues of simmering differences with the government.

Hope for smooth transition with approach acceptable to all: India Inc on RBI Governor’s resignation

 India Inc Monday said it hopes for a smooth transition and “an approach acceptable to all” after RBI Governor Urjit Patel’s resignation, citing liquidity and credit offtake issues in the financial sector. Patel, who had a run in with the government over autonomy of the central bank, Monday resigned from his post.

RBI reduced to a government department

 Urjit Patel’s resignation shows up the govt in a poor light, of one unwilling to accept an independent RBI Governor.

Urjit Patel: The vigilant owl flies out in protest, as the nest comes under attack

 Patel’s three-year tenure was scheduled to end early September 2019 and he had hinted at rate cuts in the future if the RBI continues to see a dip in inflation.

Urjit Patel exit adds to India’s risk as PM Modi gears up for vote

 Urjit Patel’s shock exit as governor of the Reserve Bank of India dealt investors another bout of monetary policy uncertainty when they were already bracing for an electoral test of Prime Minister Narendra Modi.

Urjit Patel’s resignation roils nervous India markets

 Urjit Patel quit on Monday citing personal reasons, a decision that some investors took as a new fissure in the Reserve Bank of India’s relationship with Prime Minister Narendra Modi’s government.

Urjit Patel resignation: Expect markets volatility for some time

 While both the stock and markets could settle down should a new RBI governor be appointed soon, the fact is India’s markets have been performing poorly in 2018, being hugely over-valued even as corporate earnings have been very ordinary.

Sebi, exchanges step up vigil as volatility looms over state poll results, RBI Governor’s exit

 Capital markets regulator Sebi and the stock exchanges have stepped up their surveillance systems to keep manipulative forces in check amid an extreme volatility expected on Tuesday due to the sudden resignation of RBI Governor Urjit Patel and the state assembly results.

Urjit Patel resigns: Govt’s push for more power to RBI board was the trigger

 In a terse statement issued after the end of market hours, Patel, the 24th RBI governor, who had 268 days to go before his three-year term ends on September 4 2019, cited ‘persons reasons’ for the decision.

Urjit Patel resignation: Power erosion may have weighed on RBI chief’s exit decision

 Urjit Patel’s surprise resignation as the RBI governor seems to have been precipitated by the long-simmering tussle between the government and the central bank over a raft of vexed issues.

Urjit Patel resigns as RBI governor; cites personal reasons

 On account of personal reasons, I have decided to step down from my current position effective immediately, said Urjit Patel.

Conflict between RBI and government not new: Here’s what happened in past

 The longest-serving RBI governor to resign was Benegal Rama Rau (July 1, 1949 to January 14, 1957) who was forced to quit after differences with the then finance minister TT Krishnamachari.

Here’s what PM Modi said about Urjit Patel after his resignation as RBI governor

 Urjit Patel steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability, PM Modi said.

Rahul Gandhi on Urjit Patel’s exit: We have to stop BJP’s assault on institutions

 The opposition seized the opportunity to launch a fusillade at the central government accusing it of assaulting and undermining India’s institutions, from CBI to RBI, and resolved to “work together to defeat the BJP, RSS combination.”

RBI Governor Urjit Patel’s resignation ‘severe blow’ to nation’s economy, says former PM Manmohan Singh

 Former prime minister Manmohan Singh Monday termed RBI Governor Urjit Patel’s resignation as “very unfortunate” and said it was a “severe blow” to the country’s economy. Singh said it will be “foolhardy” to diminish institutions for short-term political gains.

Urjit Patel eased out by Centre to bring in someone ‘more pliable’, says Arvind Kejriwal

 Delhi Chief Minister Arvind Kejriwal on Monday alleged that RBI governor Urjit Patel was eased out by the BJP-led NDA government at the Centre to bring in a “more pliable” person to fill the post. “RBI governor Urjit Patel has been eased out since he refused to allow the Modi govt to plunder Rs three lakh crore of RBI reserves,” he said.

Urjit Patel’s resignation will be bad for economy, warns Subramanian Swamy; gives this advice to PM Modi

 Senior BJP leader and Rajya Sabha member Subramanian Swamy on Monday warned that Urjit Patel’s resignation as Reserve Bank of India (RBI) governor will be bad for the economy.

RBI Governor’s “forced” exit blot on India’s monetary and banking system: Congress

 BJP government has unleashed a defacto financial emergency. The country’s reputation and credibility is now at stake,” senior Congress leader Ahmed Patel said.

Raghuram Rajan reacts to Urjit Patel’s resignation; says ‘Dr Patel has made a statement’

 Raghuram Rajan on Monday reacted to Urjit Patel’s decision to step down as Reserve Bank of India (RBI) governor and said that he has made a statement that the autonomy of the central bank should not be undermined.</s>Raghuram Rajan on Monday reacted to Urjit Patel’s decision to step down as Reserve Bank of India (RBI) governor and said that he has made a statement that the autonomy of the central bank should not be undermined.

Raghuram Rajan on Monday reacted to Urjit Patel’s decision to step down as Reserve Bank of India (RBI) governor and said that he has made a statement that the autonomy of the central bank should not be undermined. “Believe resignation of RBI Governor Urjit Patel is a matter of great concern. Resignation by a government servant is a note of protest when faced with circumstances they cannot deal with,” Raghuram Rajan told ET Now.</s>MUMBAI (Reuters) - Reserve Bank of India Governor Urjit Patel resigned for “personal reasons” on Monday, a decision analysts linked to intense pressure on the central bank from the government to ease regulatory curbs.

“On account of personal reasons, I have decided to step down from my current position effective immediately,” Patel said in a statement on the RBI website after financial markets had closed.

Analysts said the dispute between the RBI and the government could have been a major factor in Patel’s decision to resign.

“Quite clearly the resignation of Urjit Patel shows that nothing has changed,” Yashwant Sinha, a former finance minister and member of the ruling Bharatiya Janata Party, told CNBC-TV18.

“The resignation is a clear sign of the government trying to interfere with the working of the RBI,” he added.

Prime Minister Narendra Modi’s government has put pressure on the RBI to ease its regulatory curbs on some banks, increase liquidity and relax capital norms as it faces a slowing economy ahead of general elections due by May.

RBI Deputy Governor Viral Acharya said in a speech in October that undermining a central bank’s autonomy could be “catastrophic”, prompting a public dispute that added to the rift between the bank and government.

The Modi government has stacked the RBI’s 18-member board with its own nominees, in what critics say is a move to exert greater control over the central bank’s regulatory powers.

On Twitter, Modi praised Patel as a “thorough professional with impeccable integrity”.

“He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” Modi tweeted.

“He leaves behind a great legacy. We will miss him immensely.”

There was speculation a month ago that Patel might quit over the government pressure, but the rumors eased after the government and central bank reached an uneasy truce ahead of a RBI board meeting last month.

Patel resigned before results from crucial state elections are declared on Tuesday and ahead of an RBI board meeting on Friday.

“The timing just before this week’s board meeting suggests that there’s still a huge gap between the government and RBI positions on key issues,” said A. Prasanna, head of research at ICICI Securities Primary Dealership in Mumbai.

“Markets will now hope that the government has a plan of action ready so as to restore calm.”

Patel’s resignation is expected to roil financial markets on Tuesday. Investors will want to know who is Patel’s replacement and how that will affect the direction of financial and monetary policy, analysts said.

“Markets certainly will be concerned unless there is further clarification that comes through tonight,” said R. Sivakumar, head of fixed income at Axis Mutual Fund.

“I think tomorrow and over the next few days we can expect heightened volatility in the markets,” he added.</s>In giving a terrific shock to the Narendra Modi led NDA government, Reserve Bank Of India Governor Dr. Urjit Patel has resigned from his position.

RBI governor’s unexpected resignation from the post will certainly set fire to opposition’s plans to question the government‘s monetary policies including demonetization and GST. The opposition will, without doubt, raise this as a political issue and the government will have to answer it. The winter session of parliament is also starting this week and the government will be questioned in both the houses of the parliament also.

The apex bank and the central government were engaged in a cold war for the last few months.</s>Patel, who took charge of the central bank on September 4, 2016, resigned from the post of the Reserve Bank of India (RBI) Governor with immediate effect on Monday, citing "personal reasons"

Reacting to RBI Governor Urjit Patel's sudden resignation, Finance Minister Arun Jaitley on Monday appreciated his services to the nation and said it was a pleasure working with him.

"The government acknowledges with a deep sense of appreciation the services rendered by 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," Jaitley tweeted.

"I wish Patel all the very best and many more years of public service," he said in another tweet.

Patel, who took charge of the central bank on September 4, 2016, resigned from the post of the Reserve Bank of India (RBI) Governor with immediate effect on Monday, citing "personal reasons".

"On account of personal reasons, I have decided to step down from my current position effective immediately," he said in a statement released by the RBI.

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This story has been sourced from a third party syndicated feed, agencies. Except for the change in the headline, the story has been provided "AS-IS," "AS AVAILABLE, without any verification or editing from our side. Mid-day accepts no responsibility or liability for its dependability, trustworthiness, reliability and data of the text. Mid-day management/mid-day.com reserves the sole right to alter, delete or remove (without notice) the content in its absolute discretion for any reason whatsoever.</s>Urjit Patel steps down as RBI governor with immediate effect

New Delhi, Dec 10: Urjit Patel, has stepped down as governor of the Reserve Bank of India, with immediate effect.

In a statement, he said that he is stepping down due to personal reasons.

'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, ' a statement by Patel read.

He further said that the support and hard work of the RBI staff, officers and management has been the proximate driver of the Bank's considerable accomplishments over the years. I take this opportunity to express gratitude to my colleagues and directors of the RBI Central Board and wish them all the best for the future, Patel also said.

There was speculation for sometime about Patel quitting following differences between the RBI and the government. It began when RBI deputy governor, Viral Acharya delivered a speech in which he had spoken about the need to ensure independence of the central bank.

Also Read | In Marathon meeting, RBI agrees to ease liquidity, increase credit to MSMEs

Over the past few months several contentious issues have cropped up between the RBI and the government. The main problem was when the government demanded that the RBI shell out more dividend from its reserves.

Further, the government officials on the RBI's board pushed for the relaxation of the promotion corrective action framework being used to nurse weak banks back to health. The government and the RBI were also at loggerheads over the suggestion to set up a payment regulator outside the purview of the RBI.
The Governor of the Reserve Bank of India, Urjit Patel, resigns abruptly.