India central bank governor quits after spat with govt

NEW DELHI • The head of India’s central bank resigned yesterday following a public spat with Prime Minister Narendra Modi’s administration about alleged government interference.

Reserve Bank of India (RBI) governor Urjit Patel (picture) cited “personal reasons” for his decision, but media reports have said that he was annoyed by repeated government efforts to influence central bank policy.

It comes after Patel’s deputy, Viral Acharya, warned the government in a strongly worded speech in October that undermining the bank’s independence could be “potentially catastrophic”.

Patel’s short statement yesterday made no mention of the rift, highlighting only what he called the the central bank’s “considerable accomplishments in recent years”.

“On account of personal reasons, I have decided to step down from my current position effective immediately,” Patel said in the statement yesterday, which was posted on the bank’s website.

The governor and Finance Ministry officials were reported to be at loggerheads in recent months over claims that the government was trying to influence the bank’s decision-making.

Indian business dailies reported in October and November that Modi’s government had invoked never-before-used powers to send at least three letters to Patel seeking to direct policy.

Newspapers suggested that Patel was close to quitting over the issue at the time, but the tension was believed to have been diffused following clear-the-air talks three weeks ago.

“The RBI and the government had numerous differences, but Patel’s resignation is shocking,” Sujan Hajra, an economist at Anand Rathi Securities, told AFP.

“There was a belief both were ironing out their differences, but the resignation raises issues about the RBI’s independence,” he added.

The government is believed to be unhappy with the central bank over a number of issues including interest rates, how to deploy reserves and how to respond to India’s sliding rupee.

It is understood the government is pressuring the RBI to enact policies to help spur growth ahead of next year’s elections, when Modi will run for a second term.

Modi described Patel as a “tho-rough professional with impeccable integrity”.

“He leaves behind a great legacy. We will miss him immensely,” Modi wrote on Twitter. — AFP