Reserve Bank of India Governor Urjit Patel resigned on December 10 due to speculation and speculation that has been going on for some time now. Taking steps after this, the Indian government appointed former Shikshakant Dass, former Secretary of Economic Affairs, for three years as the new governor of RBI.
It is worth mentioning that for the past some time there was confrontation between the Reserve Bank and the central government regarding the issue of autonomy of the central bank. The discussion was that the Indian government had demanded 3.60 lakh crores from the reserve bank’s reserve fund, which was opposed by the bank. This issue of the resignation of the governor’s resignation of the Reserve Bank seems undoubtedly normal, but in reality it is not so.
Why the controversy started? (What’s the Controversy?)
Indeed, in the second term of UPA, Raghuram Rajan, who became the Governor of the Reserve Bank, was appointed Governor in September 2016 after the expiry of his tenure. Two months later, the Indian government decided to emancipate, which was widely criticized. But at that time, Urjit Patel emerged as the ‘Yes Man’ of the Modi Government. Their dispute with the government began in June 2017, when their led monetary policy committee refused to meet the finance minister before the policy meeting. After this there was a difference between the government and the bank regarding the dividends given to the government and the infamous PNB scandal after that. While keeping the RBI’s side firmly, Patel asked the government to make the Banking Regulating Act, 1949 sharp. After this, the issue of bringing 11 public sector banks under the Prompt Corrective Action Framework also got swords between the government and the Reserve Bank.
Key points of controversy
- Government was not in favor of the Reserve Bank’s strictness on the NPA issue
- Government wanted to change the standards for the help of power companies (DISCOMs), but the Reserve Bank was not in favor of it
- The government wants to control it by making an independent payment regulatory board, but the Reserve Bank is willing to control it.
- There is no agreement on both issues related to financial solutions and deposit insurance bill-2017, economic capital structure, government and private banks demand for regulatory rights
Can say that the central bank, which was in favor of the tough steps for the banking sector and the economy, did not seem to favor the government. In such circumstances, the situation was not easy for any governor. Apart from this, the manner in which the government intervened in the meeting of the Board of Reserve Bank of India on 19th November, it was considered to reduce the autonomy of the central bank. Urjit Patel, who has experience in finance and banking, took steps to solve the problem of NPAs of banks during his tenure. Apart from this, they also introduced many initiatives in the interest of the common people, including making ombudsman for digital payments. It was also said that after the meeting of the government and the RBI board, the two have been reconciled, but it is believed that there was still no opinion on several issues between the two.
Reserve Bank governor’s selection process in India
Contrary to Canada, the United Kingdom and some other western countries, there is no formal procedure for the selection of the Governor of the Reserve Bank in India. No application is sought for this and generally the Prime Minister and the Finance Minister choose a suitable person after mutual consultation. As on December 11, Shastikanta Das was elected as the 25th Governor of the Reserve Bank.
The meaning of being Urjit Patel
First of all, know that we have only mentioned this name in symbolism. The governor’s post of the Reserve Bank is very important and it becomes even more important in terms of the fast growing economy like India. After the unexpected resignation of Urjit Patel, the Indian government appointed the ruling dal to be the new governor. However, Section 7 (2) of the RBI Act states that the Central Board of Directors will be responsible for the supervision of the general functioning of the bank and that all the powers and powers used by the bank will also be with this board. At the same time Section 7 (3) of the RBI Act states that in the absence of the Governor, the most senior deputy governor has the right to use powers.
RBI’s largest regulator, RBI
Reserve Bank is the largest regulator of the country’s economy. In such a situation, interference in his work and autonomy may be serious. The interference had escalated to this level that the Central Government had warned till the powers were exercised under Section 7 of the RBI Act. The government will have to understand that the governor of the Reserve Bank does not have any Adna Government servant, whose talk is ignored. Then it is a matter of resignation, which is certainly not done for personal reasons only.
Urjit Patel introduced adequate patience, restraint and discretion. So clear from his resignation that he was no longer in a position to bear any pressure. Urjit Patel assumed the post of Governor of the Reserve Bank on September 6, 2016. Earlier, while keeping the post of deputy governor with Raghuram Rajan, he was looking after the monetary policy department. He is known as a person fighting against inflation.
On the issue of Urjit Patel’s resignation, the former Governor of the Reserve Bank, Raghuram Rajan gave his reaction as follows: “It is such a fact that all Indians should be concerned … because the strength of our institutions is the development and sustainable development of the economy. And it is important for equities. We should investigate in detail that what was the deadlock that led to this forced the final decision. “
In the future, the situation will be avoided.
Last month, the meeting of the Reserve Bank Board held that the stalemate between the government and the central bank has now gone away. But it does not seem to be all right. Recently, RBI deputy governor Viral Acharya also emphasized the need to maintain the autonomy of the bank. Regardless of the reasons, however, there are no two opinions that Urjit Patel’s resignation is a challenge for the credibility of the Reserve Bank.
Such cases have happened before
Urjit Patel is the fifth Governor since independence who has resigned. In 1957, Finance Minister T.T. Binangal Rama Rau resigned after the dispute with Krishnamachari. K.R. Puri in May 1977 and R.N. Malhotra in 1990 and S. Venkitraman had resigned in December 1992.
Source: The Hindu, The Indian Express