RBI Guv Urjit Patel unlikely to quit, say sources

Despite severe differences between the government and the Reserve Bank of India (RBI) over many issues, the governor Urjit Patel is unlikely to resign from the post he has been holding since September 2016, highly-placed sources hinted on Wednesday.

Though given the sensitivity of the issue, none of the sources were willing to come on record, but multiple sources close to the Governor's office confirmed to DH that the RBI governor is not contemplating any resignation, contrary to speculations in the sections of media.

“Why would he resign. He is not at fault,” one of the top RBI officials said.

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An economist, who is close to RBI chief, said Patel is not contemplating over resignation, though, according to him, “He has expressed displeasure to the government over the issue.”

As the sources suggest that Patel is going to stay, RBI governor on Wedneday called a board meeting on November 19 to discuss the pending issues, which created a rift between the government and the central bank, in the previous meeting held last week.

On Finance Minister Arun Jaitley’s remarks lashing out at the apex bank for indiscriminate lending between 2008 and 2014, a senior official said, “They have made a subtle attack against RBI. They have made their point, but shielded themselves by targeting Subbarao, who is a soft-spoken person.”

Jaitley on Tuesday criticised RBI for pushing banks into indiscriminate lending during the UPA regime, a period when DV Subbarao was heading the apex bank. However, sources say that in case the government decides to officially invoke Section 7 of RBI Act, 1934, the dynamics might change.

Section 7 gives power to the government to instruct the RBI governor to act on issues of public interest. The provisions of this Act has never been used since the formation of the central bank 83 years ago.

"The central government may from time to time give such directions to the bank as it may, after consultation with the governor of the bank, consider necessary in the public interest," reads the Section in the Act.

However, sources close to ruling Bharatiya Janata Party (BJP), suggest that the government is unlikely to officially invoke Section 7 of the RBI Act. “Be assured that Patel is going to stay there. It is just immature of Deputy Governor Viral Acharya to speak out at a moment of time when the economy is in the crisis,” confided a former top banker, who happens to be a close confidante of BJP.

The Section, if invoked, will lead to undermining of the autonomy of the institution.

The sources in RBI suggest that the government, in recent weeks, has written separate letters to Patel quoting this section, on issues ranging from liquidity for NBFCs, capital requirement for weak banks and lending to SMEs. It is also learned that the Centre is unhappy with the strict handling of NPAs by the banking regulator.

Sources suggest that it was because of this interference that RBI Deputy Governor had made a public lecture against government’s interference in RBI’s operations.
In the footnotes to his speech, Acharya thanked Patel “for his suggestion to explore this theme for a speech.”

Top executives of financial institutions, who are close to the RBI governor, are of the opinion that the government is unlikely to escalate the issue any further, as general elections are around the corner, and that “They might not want to open one more front against them after CBI fiasco.”

Meanwhile, the rupee slid below 74-mark yet again on Wednesday, after stabilising between 73-74 against US dollar.

Analysts attribute this fall in the currency to the ongoing spat between the RBI and the government as it has triggered a negative sentiment in the market.