Urjit Patel
Urjit Patel Image Credit: Reuters

In an unprecedented development, Prime Minister Narendra Modi’s handpicked Governor of the Reserve Bank of India (RBI) Urjit Patel has resigned “effective immediately”.

This is the second RBI Governor to quit after Raghuram Rajan was not offered an extension by the Modi government.

In a curt letter short of even the pro-forma formalities, which was made public at the end of the trading day, Patel quit.

Rajan, going public on his concerns, said the “resignation was a protest and every Indian should worry about what happened in the RBI.”

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The Reserve Bank of India (RBI) Governor Urjit Patel and Deputy Governor Viral Acharya (L) attend a news conference after a monetary policy review in Mumbai, India, December 5, 2018. Image Credit: Reuters

Authoritative sources say Deputy Governor Viral Acharya has also quit. However, an RBI spokesperson said he has not resigned. 

The Modi government has indulged in a serial assault on all autonomous institutions during its term. From the murky midnight coup on the director of the Central Bureau of Investigation (CBI) Alok Verma, who was investigating the Rafale deal, to the unprecedented press conference by four judges of the Supreme Court including the present Chief Justice, Rajan Gogoi who said “democracy was in danger”.

Patel’s term was to end in September, but the daily assault and the invoking of Section Seven of the RBI Act to force them to hand over a dividend (a section never invoked by any government), the appointment of charted accountant and Sangh ideologue S. Gurumurthy to the RBI board, all forced Patel’s hands.

The next meeting of the RBI board was scheduled in four days on December 14 and by their protest resignations, Patel and Acharya went public on the Modi government’s assault on the 70-year autonomy of the RBI.

Authoritative sources say a dozen big business promoters with overdue bank loans of over ₹ 3.5 lakh crores wanted Patel to quit. The new RBI rule to send loan defaulters to bankruptcy courts was being strenuously resisted by cronies close to the Modi dispensation. Some have moved the Supreme Court and got a temporary reprieve.

Patel was, however, insistent that the RBI continue to force these defaulters to go into bankruptcy. Top sources stress that the Modi government was keen to bail out “friends” in an election year.

Demonetisation which was an entirely Modi-made disaster was forced upon Patel after Rajan refused to go in for voodoo economics. Patel was forced to shoulder the catastrophe that demonetisation wrecked on the economy, especially as it had no impact on black money at all.

After that assault on the RBI’s reputation, the Modi government wanted to gouge out a notional bonus which is meant for “financial emergencies”. Patel resisted. Sources say Patel had a one to one meeting with Modi before the November 19 meeting and told him that he was not going to allow the RBI’s independence to become a casualty to Modi’s election adventures.

Modi hates competence and qualification. Who will he replace Patel with? His favourite just retired Finance Secretary, Hasmukh Adhia, who has a PHD in yoga?

- Official source

Patel had not even moved into the RBI Governor’s bungalow and had preferred to be extremely low key after Modi had problems with Rajan’s larger than life public image. Sources say Modi was upset at Rajan’s international stature and his interventions on issues of public interest.

Interestingly, Modi did not act on a list sent by Rajan of what he described as “high profile scamsters”. Rajan sent the list to the Prime Minister’s Office (PMO) for “coordinated investigation” and wanted a “public example” to be made. The PMO has now sat on the Rajan list for three years without acting.

Narendra Modi, India's prime minister, on April 18, 2018 Image Credit: Bloomberg

Earlier in the year, chief economic advisor Arvind Subramanium had quit citing “personal reasons”. Subramanium recently criticised demonetisation. Earlier Arvind Panagariya had resigned as Niti Ayog chairman.

Sources say Finance Minister Arun Jaitley had told Patel that he did not even meet stakeholders to express his unhappiness. The Finance Ministry had made several attacks on Patel in public and made no secret of its unhappiness and that Patel would not get an extension.

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Union Finance Minister Arun Jaitley Image Credit: PTI

Patel’s resignation, which sources close to him described as a “principled protest”, has left the Modi government with egg on its face. The messy GST rollout the, the battering of the rupee and the absolute lack of job creation has taken the sheen of the Modi government’s management of the economy.

The attempt to massage GDP figures has also created an international embarrassment. With Patel gone expect a bloodbath in the markets. Sources say the bigger worry is the bleed out of the autonomy of the RBI.

Says a senior official: “Modi hates competence and qualification. Who will he replace Patel with? His favourite just retired Finance Secretary, Hasmukh Adhia, who has a PHD in yoga?” Worse sources say Adhia might even refuse. Happens when you run riot over institutional checks and balances.

Swati Chaturvedi is an award-winning journalist and author of 'I am a Troll: Inside the Secret  World of the BJP Digital Army'. Her twitter handle is @bainjal