Fight with centre taking toll on RBI Governor's health; Urjit Patel to resign on November 19 says report

Last Updated: Wed, Nov 07, 2018 12:28 hrs
Urjit Patel

The ongoing duel between the Centre and the Reserve Bank of India, not to mention the media reports that have fueled of a rift have likely affected the health of Governor Urjit Patel.

The latest revelation has been published in a Moneylife report. Anonymous sources close to the Governor explained that the Governor was likely to throw in the towel on November 19. Patel a few days back had called in an RBI board meeting on Nov 19.

The Governor's health could be affected owing to stressful communications and speculative rift with the Centre on economic policies. Some of the issues with the centre includes transfer of the RBI's contingency reserve corpus, estimated at over Rs 2.5 lakh crores that the central bank accumulated over past 3-4 decades. Other reasons also include calls for greater autonomy and reduced interference in economic-policy making.

In recent times the Central bank's communication with the finance ministry has reportedly gone sour. Fractured lines are more visible in recent times than during demonetisation. Arun Jaitley, the finance minister had openly criticized the central bank for failing to restrict lending by banks. He said that this in turn had left banks exposed to higher Non-performing assets.

Reports from the last week of October have speculated a break in communication between the ministry and RBI. The damage was so bad that the department of finance, a day later conceded that it batted for the autonomy of the RBI. This, in order to control market fears that the governor was stepping down.

With elections barely months away, the ministry has alleged RBI responsible for most of the economic failures. For instance, the IL&FS fiasco which has lead to a market-worry of liquidity crunch has also manifested into a headache, with the Reserve Bank being questioned for failing to ensure liquidity in markets. The success/failure of Demonetisation is also a classic example of the widening rift.

The central bank's data suggests that 99% of the currency notes were returned back to banks, suggesting that it could have been a classic failure. However, the government including most ministers have referred to demonetisation as an economic reform.

Although none of the Governors have come on record to claim that there was a breakdown in communication with the centre; deputy governors have so far asked for maintaining the central bank's autonomy in their public outings. Deputy Governor Viral Acharya was among the earliest in the month of October to connect theory of market-wrath with autonomy. The Department of Economic Affairs' secretary Subhash Garg however refuted his claims. Garg, in fact replied sarcastically on twitter to Acharya's theory.

NS Viswanathan, another RBI Deputy Governor reminded economic fundamentals and the need for banks while delivering a lecture at XLRI Jamshedpur. Using Uncle Scrooge for a metaphor, he said banks did not have huge coffers.

So far, media reports on a resignation have been countered by the government with assurances that it will maintain the autonomy of the government. Veteran Journalist Sucheta Dalal the author of the Moneylife story has said that the Governor is unlike his predecessors. Urjit Patel for instance does not prefer to stay in a sprawling bungalow on Altamount road that every Governor gets allotted.

Also unlike other governors he has remained away from the media glare. While his immediate predecessor Raghuram Rajan was viewed as a suave extrovert who would go to the extent of explaining economic policies to journalists, Governor Patel has refrained holding meetings with the media. Patel's outings are largely lectures delivered at colleges and not meetings with the media. During demonetisation when most had asked the economic need and the perils of the so-called reform, Patel had opted to diligently perform his duties in tow with expectations from the Finance ministry.

Even as reporters sought information and opinions from the Governor, he was largely to be seen in public discourse.

Speculative reports may project a sympathetic picture of a Reserve Bank in distress, Dalal, however counters this view in her report by claiming that the central bank's "performance has been poor". Some of the reasons are a failure to audit its own performance and operations. Also, the central bank's policies on third-party products sold by banks and refusal to pass benefits of lower interest rate revisions to floating rate borrowers has been a major question.

Even the Central Vigilance Commission as well as the Chief Information Commission have aired their criticism of the Reserve Bank. The CVC and CIC have blamed the RBI for not publishing a list of wilful defaulters.

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