RBI Governor Urjit Patel's Resignation "Severe Blow" To Economy: Manmohan Singh

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RSS ideologue and independent director on RBI board S Gurumurthy Monday described the resignation of Urjit Patel as a setback to the convergence that the central bank and the government were reaching on contentious issues.

Prime Minister Narendra Modi met with Patel before the board meeting and what emerged on November 19 was seen as settling the debate on the central bank's autonomy and clearly establishing the government as a stakeholder in policy making.

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

Patel's short statement Monday made no mention of the rift, highlighting only what he called the RBI's "considerable accomplishments in recent years".

Submitting his resignation, Urjit Patel cited personal reasons and stepped down with immediate effect. "The manner in which RBI governor has been forced to quit is a blot on India's monetary and the banking system", Patel said on Twitter.

West Bengal Chief Minister Mamata Banerjee hit out at the Modi government over Patel's resignation, saying it was a matter of "great shock".

"Financial stability is not there..." Taking away reserves from RBI to save your skin is an act against this nation.

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Analysts said the dispute between the RBI and the government could have been a major factor in Patel's decision to resign.

The Finance ministry is yet to offers its response.

In comments to Reuters following Patel's resignation, Rajan said the development is "something all Indians should be concerned about".

RBI Governor Urjit Patel and Finance Minister Arun Jaitley mutually chose to appoint Bimal Jalan as the chairman and Rakesh Mohan as the vice-chairman of the panel.

He said Patel is a thorough professional with "impeccable integrity". He leaves behind a great legacy. "We'll miss him immensely". "That makes it even more surprising", he said.

"The timing just before this week's board meeting suggests that there's still a huge gap between the government and RBI positions on key issues", said ICICI Securities Primary Dealership, Mumbai Head of Research A Prasanna. "It has been my privilege and honor to serve in the Reserve Bank of India".

It was agreed in the meeting that RBI's reserves won't be touched, but RBI would be flexible in examining if some banks could be brought out of the prompt corrective action framework (PCA).