Opinion Exit lines
Urjit Patel’s resignation sets the bar for his successor, raises disquieting questions about autonomy of institutions
Country needs to evolve well-rounded protocols for managing disasters, not look at them as only administrative problems. 
The relationship between the RBI and the Centre has been particularly fraught of late.
It is not clear what were the “personal reasons”, if any, behind Urjit Patel’s stepping down as governor of the Reserve Bank of India (RBI). What is obvious is this: The manner and timing of the resignation — nearly nine months before the end of his three-year term and four days before a crucial board meeting scheduled to discuss governance issues at the country’s central bank — raise uncomfortable questions about the imperilled space and autonomy of regulatory and supervisory institutions in the country today. If the year began with the unprecedented afternoon press conference by the Supreme Court’s four senior-most judges on the crisis in the judiciary, it ends now with the central banker’s resignation. There is no immediate crisis confronting the economy. Consumer price inflation, the RBI’s main concern, is way below the 4 per cent medium-term target. With global oil prices falling off their early-October highs, the rupee, too, has stabilised at 71-to-the-dollar levels. Growth isn’t great, but the situation is certainly not what it was last year, post the twin shocks of demonetisation and unveiling of the Goods and Services Tax. Moreover, the green shoots of recovery can be seen even with regard to capital investments. Simply put, the reasons for Patel’s departure have evidently little to do with the state of the economy. Indeed, it wouldn’t have surprised many had his exit come in the aftermath of demonetisation — a decision that was purely political and that was, by all accounts, forced on the RBI.
The relationship between the RBI and the Centre has been particularly fraught of late. It has been marked by a vicious public spat, with the government invoking a never-used provision in the RBI Act to push the central bank to ease restrictions on bad loan-saddled public sector banks placed under its Prompt Corrective Action framework, setting up a special liquidity window for non-banking financial companies and augmenting credit flows to small and medium enterprises. This is something that the central bank has not taken kindly to.
Patel may have lacked the communication skills of his predecessor Raghuram Rajan. But in choosing to step down, rather than give in, he may have raised the bar for his successor. He can be credited for having stood firm in taking forward the agenda of cleaning up bank balance sheets and recognition of bad loans. He also broached governance issues in India’s private banks, including in three top ones whose chiefs were forced to leave. Patel’s equally fundamental contribution was in formulating a report that laid the basis for making inflation targeting an explicit goal for the RBI and the setting up of a monetary policy committee to take decisions with regard to fixing of interest rates. It is for the government to demonstrate that those gains — investors value the macroeconomic stability which comes with central bank independence — are not under threat today.
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