Urjit Patel resigns, updates: Markets brace for uncertain opening on Tuesday as RBI governor quits on even of Assembly election results

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Urjit Patel resigns, updates: Markets brace for uncertain opening on Tuesday as RBI governor quits on even of Assembly election results
  • 19:45 (IST)

    IMF chief had asked Indian govt to pay heed to RBI's message on financial stability 

    "The Indian government must heed the RBI's message on financial stability," IMF's Chief Economist Maurice Obstfeld has said on Sunday. Addressing a group of journalists, he also said that the International Monetary Fund does not want politicians "manipulating" central banks for political ends. "There is debate over whether it's better for financial stability to be the remit of the central bank or an independent regulator...the UK in 1997, split them, then put them back together again," he said, responding to a specific question on the recent developments in India regarding the RBI and the Government. "I'm not going to take a position on that...But I think...the central bank does have to be intimately concerned with financial stability to some degree and with the payment system," he added. 

    "We need to think about what is the best institutional framework in which fiscal policy can be set with regard to long-term stability of the economy, not just to performance over political horizon," Obstfeld said. "Well, I think they (the RBI and the Indian government) have reached an agreement on how to proceed. I think their (RBI) message that financial stability is important is correct. And it is important for the government to heed that," he added.

  • 19:16 (IST)

    Market experts anticipate gloom on Dalal Street tomorrow with election results lined-up

    The resignation of RBI governor Urjit Patel has come as a big blow for not just the central bank but also the financial markets. There was already an anticipation of a tumultuous day for the markets owing to the five state Assembly elections results and with Patel's departure, the Sensex and Nifty could suffer further. Here is what the experts are predicting for the street as of now.

  • 19:10 (IST)

    The road ahead for RBI

    With the RBI governor resigning nine months short of his scheduled departure, there is a big question mark on who will take over the reins of the central bank. Former deputy governor Rakesh Mohan told CNBC-TV18 that all the four deputy governors should stay and steer the ship in the governor's absence. He also cautioned the government to proceed with deliberation over the next pick for the post.

  • 18:53 (IST)

    No truth to rumours of Viral Acharya resigning, confirm RBi officials
     
     
    Amid speculations of RBI deputy governor Viral Acharya also resigning, the central bank has refuted the rumours saying that there is no basis to such reports. "Reports of deputy governor Acharya also having quit are baseless and incorrect," an RBI spokesperson told PTI.
     
     
     
    Acharya had made the 26 October speech on the need to preserve the autonomy of RBI, which got the soured central bank-government relationship out into the public domain. In the over 90-minute long speech, Acharya, who is in charge of the monetary policy department, warned of the wrath of the markets if the autonomy of a central bank is compromised. Acharya had explicitly said he had the backing of Governor Patel for making the speech. 

  • 18:45 (IST)

    P Chidambaram says no self-respecting scholar can work in Modi govt, Patel should have resigned on 19 Nov itself

    Chidambaram tweeted that he was saddened but not surprised by Patel's resignation. He said that no self-respecting scholar or academic can work in the current central government. "19 November was the day of reckoning. Patel should have resigned on that day. Patel may have thought that government will re-trace its steps. I knew it would not. Good, he quit before another humiliating meeting," Chidambaram wrote on Twitter. 

  • 18:34 (IST)

    Question mark on next RBI board meet as RBI guv quits 9 months before end of tenure

    Urjit Patel, 54, quit the post about nine months before his three-year term was to come to an end in September 2019. He stepped down just ahead of the scheduled meeting of the RBI Board meeting on 14 December to consider proposals like RBI governance and providing liquidity for Non-Banking Financial Companies (NBFCs).

    Patel, who was the Deputy Governor of the RBI before being elevated to the post of RBI Governor, had succeeded Raghuram Rajan after the latter’s term ended in September 2016.

  • 18:31 (IST)

    Urjit Patel's resignation is a statement of dissent: Raghuram Rajan

    Urjit Patel's predecessor Raghuram Rajan who has been open in his criticism of Modi government's economic policies including demonetisation said in an interview that the RBI governor's resignation a matter of serious concern and a strong statement of dissent.

  • 18:17 (IST)

    'Believed that all issues had been resolved in the board meeting,' says former RBI governor C Rangarajan

    Former RBI governor C Rangarajan said that he had believed that all issues between the government and the RBI governor were resolved in the last board meeting. He also hoped that the Centre came out with a clarification on this soon.

  • 18:12 (IST)

    S Gurumurthy expresses shock at Patel's resignation, says previous meeting with RBI governor was 'cordial'

    RBI's independent director and RSS ideologue S Gurumurthy expressed shock at Patel's resignation saying that it was unexpected as the previous meeting with the RBI governor was held in such a "cordial atmosphere". 

  • 18:03 (IST)

    'All Indians should be concerned by Patel's resignation,' says former RBI governor Raghuram Rajan 

    Reacting on Patel's resignation, former RBI Governor Raghuram Rajan said that, "All Indians should be concerned about governor Patel's resignation," Reuters reported.

  • 18:00 (IST)

    Narendra Modi praises Urjit Patel, says RBI governor steered banking system form 'chaos to order'

    Modi called Patel "an economist of a very high calibre with a deep and insightful understanding of macroeconomic issues". He praised the RBI governor for steering the banking system from "chaos to order" and for bringing financial stability in the country.

  • 17:55 (IST)

    Arun Jaitley thanks Urjit Patel for his services, says it was a pleasure to benefit from his scholarship

    The finance minister took to Twitter to thank the RBI governor and wished him best for 'many more years of public service'.

  • 17:47 (IST)

    Govt has succeeded in crushing another institution: Arun Shourie

    Former World Bank economist and BJP leader Arun Shourie told CNBCTV18, "Urjit Singh's departure is yet another signal that the government has succeeded in crushing another institution."

  • 17:38 (IST)

    Centre and RBI rift had widened after Viral Acharya's remarks; dy governor had warned against undermining central bank's independence

    The government and the RBI have been fighting for weeks over how much autonomy the RBI should have as the central administration had reportedly sought to reduce curbs on lending and to gain access to the RBI’s surplus reserves. The rift worsened in October when one of the bank’s deputy governors Viral Acharya said in a speech that undermining central bank independence could be “potentially catastrophic”.

  • 17:34 (IST)

    Congress says 'another one bites the dust'; calls out 'Chowkidar's attempt to 'assault' democratic institutions

    Soon after the RBI governor Urjit Patel tendered his resignation, the Congress launched a sharp attack on the BJP, directly calling out the Prime Minister Narendra Modi (referring to him as 'chowkidar') for 'assaulting' democratic institutions. 

  • 17:30 (IST)

    Was the RBI governor's resignation imminent? 

    After weeks of speculation and 'will he?-won't he?', Urjit Patel tendered his resignation from the post on Monday afternoon, just a day before the crucial state Assembly election results in five states.

    There have been many instances in the past of acrimony between the central government and the RBI governor after questions were raised on the autonomy of the central bank.

  • 17:26 (IST)

    RBI governor steps down citing 'personal reasons', thanks colleagues, Board of Directors 

    Urjit Patel in his resignation letter wrote: "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. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent 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."

  • 17:22 (IST)

    RBI Governor Urjit Patel resigns

    Patel on Monday announced his decision to step down on Monday with immediate effect citing "personal reasons". His resignation comes in weeks after the finance minister Arun Jaitley met the RBI board of directors in a marathon meeting on 19 November.

RBI governor Urjit Patel resigns LATEST updates: The abrupt resignation of Urjit Patel leaves India's financial system up for a rude shock. The first indication of this will come when the stock markets open on Tuesday, which also happens to be the day when five states will count votes for Assembly elections. With Patel resigning citing "personal reasons", there is a fair amount of uncertainty surrounding what's going to happen next in the RBI-government battle.

P Chidambaram tweeted that he was saddened but not surprised by Patel's resignation. He said that no self-respecting scholar or academic can work in the current central government. "19 November was the day of reckoning. Patel should have resigned on that day. Patel may have thought that government will re-trace its steps. I knew it would not. Good, he quit before another humiliating meeting," Chidambaram wrote on Twitter.

Urjit Patel, 54, quit the post about nine months before his three-year term was to come to an end in September 2019. He stepped down just ahead of the scheduled meeting of the RBI Board meeting on 14 December to consider proposals like RBI governance and providing liquidity for Non-Banking Financial Companies (NBFCs).

Prime Minister Narendra Modi praised the RBI governor who he said is a 'thorough professional with impeccable integrity' for steering the banking system from "chaos to order" and for bringing financial stability in the country.

Reacting on Patel's resignation, former RBI Governor Raghuram Rajan said that, "All Indians should be concerned about governor Patel's resignation," Reuters reported.

RBI's independent director and RSS ideologue S Gurumurthy expressed shock at Patel's resignation saying that it was unexpected as the previous meeting with the RBI governor was held in such a "cordial atmosphere".

Finance Minister Arun Jaitley took to Twitter to thank the RBI governor and wished him best for 'many more years of public service'.

RBI governor Urjit Patel has resigned. In a letter posted on the RBI website, Patel cited personal reasons for stepping down from his position, effective immediately.

The letter said: "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. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent 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."

After weeks of speculation and 'will he?-won't he?', Urjit Patel tendered his resignation from the post on Monday afternoon, just a day before the crucial state Assembly election results in five states. Earlier on Monday, IMF chief economist Maurice Obstfeld criticised the Indian government, saying it must heed the RBI's message on financial stability,

Relations between the Mint Road and North Block soured since late October after the finance ministry mandarins started consultations under the never-before-used Section 7 of the RBI Act which empowers the government to direct the central bank to undertake certain policy measures in public interest.

File image of Urjit Patel. AFP.

File image of Urjit Patel. AFP.

The government had sent three letters to the RBI before 10 October with nearly a dozen demands, which were replied to within a week.

The government primarily wants the RBI to help the struggling non-bank lenders and MSMEs get some liquidity support, liberalise the prompt corrective action framework on 11 of the state-run banks and undertake other steps which will help push growth, while the RBI has been maintaining a conservative stance avoiding any bad precedents.

The government, which is staring at falling revenue and a likely fiscal slippage, also wants the RBI to part with a large portion of it Rs 9.6 trillion of its cash surplus, which the central bank has been sternly opposing.

As the public spat between the two got wider public attention, the RBI's central board, at its 19 November meeting, had decided to climb down and decided to set up a panel to study the quantum of capital it requires apart from restructuring loans of up to Rs 25 crore to give a succour to the troubled MSMEs.

At the policy review held last week, the RBI had said it is committed to act as a lender of last resort to NBFCs but underlined that it does not feel the necessity do so now. It also formed a panel to look at the issues plaguing NBFCs which will submit its report in June 2019.

The frictions came to light through a public speech by deputy governor Viral Acharya, wherein he warned of investors' wrath if the RBI's autonomy is compromised.

After reports of action under Section 7 came up, the government had tried to ease tensions by stating that autonomy is "essential" and an accepted governance requirement.

Patel's tenure

Never a media favourite, Patel was criticised for his passive role during the controversial demonetisation execution and the way the bad loan clean-up has been executed with aggression or even the way he and his colleagues at the MPC (monetary policy committee) have approached the interest rate policy. But, overall Patel has done a commendable job in sticking to the mandate of the RBI during difficult times despite heavy criticism and in an environment when political pressure becomes the predominant force in influencing the course of the economy.

New RBI governors often see something big, really big happening in the immediate days after they take over charge. For D Subbarao, it was the global financial crisis. Within days after he took over are governor, Lehman Brothers filed for bankruptcy and all hell broke loose across financial markets. For Raghuram Rajan, it was the US Fed shocks and a freefalling rupee and for Patel, it was the demonetisation challenge thrown by the Narendra Modi government.

Patel drew a lot of flak for the slow counting of old notes. When he appeared before a Parliamentary panel to explain the delay, Patel was ridiculed and criticised. He became the subject of social media jokes. But, it didn’t make sense to bay for Patel’s blood. He was an extra in the PM Narendra Modi show on demonetisation. In hindsight, this was also part of Modi government's plan to gradually deconstruct the image of the central bank post the 'rockstar' Raghuram Rajan-era.

But, if one excludes the demonetisation episode, Patel has played a crucial role in the RBI. It won't be an exaggeration to say that Patel is the architect of India's new retail price-focused inflation-targeting monetary policy infrastructure. It was a panel headed by Patel which gave shape to the CPI-inflation based policy and the formation of Monetary Policy Committee (MPC) structure. Monetary policy, which used to be a one-man show of the RBI governor till then became a team show, with the governor being only one member of the panel. The MPCs unrelenting focus on inflation target and its conservative stance on rate hikes/cuts worked well to bring inflation under control, although the fight is far from over even now.

Patel has never been a darling of the media unlike his predecessor Raghuram Rajan, but more like a technocrat who kept his head down and worked hard. That was exactly what the Modi government wanted too and didn’t find that in the outspoken Rajan. Over the years, Patel has proved that he is his own man when it comes to taking calls on critical policy functions.

In 2017, Patel and his colleagues at the MPC had the courage to say no to the finance ministry when it sought a meeting prior to the monetary policy. Patel also made a public pitch for more powers for the central bank in the regulation of state-run banks. The government retorted saying there are already enough powers with RBI to regulate PSBs and the debate is still on.

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Updated Date: Dec 10, 2018 20:01:16 IST

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