Former Reserve Bank of India Governor D Subbarao said the sudden resignation of Urjit Patel sent a strong message to the government that it should respect the autonomy of the central bank.
The government can convey its views to the RBI on any issue but there are limits to how it pursues its position, he told BloombergQuint in an interview. The current government, Subbarao said, breaching its “limits” triggered the resignation. “It was a reaction to the tussle between the government and the RBI.”
“I don't believe that Dr. Patel resigned for personal reasons,” he said. “It's a testimonial to his sense of responsibility that he indicated personal reasons rather than the circumstances or spat with the government over the last two months.”
Speculation about Patel's exit had picked up after differences between the government and the RBI came out in the open when Deputy Governor Viral Acharya delivered a hard-hitting speech on the need to ensure the top bank's independence. That was provoked by the letters sent by the government seeking consultations under a rare provision of the RBI Act.
Yet, Subbarao said, Patel's move will be a “morale booster for the RBI”. “The staff of the RBI will see this as something positive in their favour that the message has gone to the government that there were limits to which the government can push the RBI.”
#UrjitPatel | Government should respect the independence of the RBI, says former RBI Governor D Subbarao. pic.twitter.com/RxNfVRYtuw
The RBI, Subbarao said, is not structured for its board to drive policy. If the board has to decide on a policy, then its structure has to change radically, he said. “You can't have business people, corporate leaders or part-time directors on the board.”
That comes after former Finance Minister P Chidambaram accused the government of trying to turn the central bank into a “board-managed company”.
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