It is not that everything the Reserve Bank of India has done or is doing is right. There is a lot to be said about the way in which the central bank has functioned and it is fair to criticise, even attack, it over lack of transparency, poor bank supervision and of course the wonky management of demonetisation. But when the situation reaches such a pass that a hand-picked governor resigns, when the top brass of the bank is ranged, almost as one, against the government and conversations at the highest policy making level are reduced to bickering, then surely there is something wrong with the way the affairs of the nation are being managed.
The sudden, though not entirely unexpected, resignation of Governor Urjit Patel this evening is to be seen in this light. It is nothing short of shocking that he has called it quits amid the all too well-known pressures from the government on several fronts –- the dispute over transfers of surplus, the government demand for easier loans to businesses and the demand for easing of norms to help banks pull back from their disastrous ride of growing bad loans. Dr Raghuram Rajan is right in saying that this resignation is a statement of dissent. It puts the nation on notice. Here is a political leadership that brooks no other view, is driven by an agenda and is disconnected from the real world.
What we have this evening is a financial world in shock. The talk among senior professionals is that this resignation at the helm of the central bank makes India the laughing stock of the world. It signals that there is no place for dissent. This administration demands blind loyalty to a direction dictated from the top, and even if this is a road to ruin, it is the only road to be taken and without as much as a whimper.
There are also reports doing the rounds that one or two deputy governors may also quit. These reports were however, not confirmed.
Dr Raghuram Rajan decided two years ago that he would not continue for a second term amid the mud-slinging and derogatory remarks heaped on him while the political establishment looked the other way. When Dr Patel replaced him on Sep 04, 2016, it was to be expected that the government had interviewed, satisfied itself and then chosen a nominee who was competent enough and one that the government might work with for a full term of three years. But it’s just about two years and the differences between them have become irreconcilable.
What precisely has transpired over the last few weeks is not known yet. But Dr Patel’s brief statement of resignation, which came up on the RBI web site this evening, is just four days ahead of the next board meeting of the RBI. This is the traditional Kolkata meeting and what has been under discussion, as is understood, is the composition of the committee that is to decide on the framework for transfers of surplus from the RBI to the government. This is where the government sees a windfall gain for itself and where the RBI has held its ground to argue that it cannot play with its reserve funds and handover the kitty to the government, as it were. The amount in question is of the order of Rs 3.6 lakh crore.
The RBI Governor’s statement steered from all controversy, it merely said: “On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future.”
There is already some speculation on names that will replace Dr. Patel. But there is also the conviction among experts that very few professionals would like to work with this government and this kind of political leadership. That is a bad signal. The prejudiced positions that are thrust upon institutions are breaking them from within. This will hollow out the tallest of our institutions for the sake of expediency. This is playing with the future of the nation.
It was Judge Gurfein who said during the Watergate scam: “The security of the nation is not at the ramparts alone. Security also lies in the value of our free institutions”. That security is being broken bit by bit by this government and that is the message that Dr Patel’s resignation seems to send out loud and clear. This should be a cause for worry.
The writer is a journalist and faculty member at SPJIMR.
(Syndicate:The Billion Press)
