BUSINESS: RBI Governor, Urjit Patel on Monday, 10 December, stepped down from his position with immediate effect, citing “personal reasons”.
The government and the RBI have been at loggerheads for weeks over how much autonomy the central bank should have as the Modi-led government seeks to reduce curbs on lending and access RBI’s surplus reserves.
A board meeting of the central bank was slated for 14 December.
Former PM Manmohan Singh Issues Statement on Patel’s Resignation
Here is the full text of Manmohan Singh’s statement:
It is with great sadness that I received the news of the resignation of the governor of the Reserve Bank of india, Dr. Urjit Patel.
I have known Dr. Patel to be an economist of high repute and also someone who cared deeply about India’s financial institutions and economic policy. Dr. Patel’s sudden resignation, at a time when the Indian economy is faced with many headwinds is very unfortunate and is a severe blow to the nation’s economy.
There have been apprehensions expressed earlier by the Deputy Governor of the RBI about the government’s intent to raid the capital reserves of the RBI for fiscal purposes. I hope the resignation of the Governor is not a sign that this may soon becone a reality.
Building institutions take a long time and effort but they can be destroyed in a whimper. It is institutions such as the RBI, among many others that have served as the edifice of our great nation’s progress since Independence. it will be foolhardy to diminish these institutions for short-term political gains.
I wish Dr. Urjit Patel success in his future endeavours. I also sincerely hope that this sudden resignation of the Governor is not a harbinger of the Modi government’s attempts to destroy the institutional foundations of India’s $3 trillion economy.
High-Level Panel Headed By Cabinet Secretary To Select Next RBI Governor
The successor of Urjit Patel, who surprisingly resigned as RBI Governor with immediate effect, will be found by a high-level panel headed by the Cabinet Secretary.
Once the panel finalises the name, it will be sent to the Appointments Committee of the Cabinet headed by Prime Minister Narendra Modi.
According to sources, the government will soon initiate the process for appointment of new RBI Governor following the sudden resignation of Patel on Monday.
The Financial Sector Regulatory Appointment Search Committee (FSRASC) is headed by Cabinet Secretary P K Sinha. Apart from him, the panel includes Additional Principal Secretary to the Prime Minister P K Mishra, who is a permanent government nominee, and three other experts, among others. As per the process, the panel will invite applications from eligible candidates and based on interactions with them will select the candidate.
The appointment would be made by the central government on the recommendation of the FSRASC. It is noted that the FSRASC is free to identify and recommend any other person also, on the basis of merit, who has not applied for the post.
This process was followed for the selection of Sebi chairman Ajay Tyagi and IRDAI chairman S C Khuntia.
As per the RBI Act, the central bank should have one governor and four deputy governors – two from within the ranks and one commercial banker and another an economist to head the monetary policy department.
RBI Act, 1934″If the Governor or a Deputy Governor by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the Central Government may, after consideration of the recommendations made by the Central Board in this behalf, appoint another person to officiate for him…”