Raghuram Rajan on Monday reacted to Urjit Patel's decision to step down as Reserve Bank of India (RBI) governor and said that he has made a statement that the autonomy of the central bank should not be undermined. "Believe resignation of RBI Governor Urjit Patel is a matter of great concern. Resignation by a government servant is a note of protest when faced with circumstances they cannot deal with," Raghuram Rajan told ET Now.
While refusing to speculate what led to Urjit Patel's resignation, he advised the government to take "extreme care" in its relationship further with the RBI. "Need to understand what prompted this act by Urjit Patel," he told the news channel.
Urjit Patel announced his decision to step down in a brief statement on Monday. "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," he said.
Urjit Patel's resignation followed a series of controversial developments, including the reported plan of making RBI a board-led regulator. The media speculation on Urjit Patel's resignation began after it came to light that the government had invoked Section 7 of the RBI Act to initiate consultation on several issues including lending restrictions on weaker banks.
The rift between the RBI and the government came to light after Viral Acharya's speech in early November when he warned that the governments that undermine the autonomy of the central bank invite wrath of the market.
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