In January 1957, Sir Benegal Rama Rau resigned after Prime Minister Jawaharlal Nehru’s strongly-worded letter about the nature of RBI’s function.
New Delhi: Reserve Bank of India Governor Urjit Patel’s resignation Monday, just ahead of the central bank’s board meeting on 14 December, is only the second instance of an RBI governor to have quit office before expiry of the term.
In 1957, Sir Benegal Rama Rau, the fourth RBI governor, resigned in protest when he had serious differences with then finance minister T.T. Krishnamachari under the Jawaharlal Nehru government.
Rau’s resignation came after Nehru sided with his finance minister and told the RBI governor in no uncertain terms that the central bank was part of the various government functions.
In his letter to Rau, Nehru said the central bank must advise the government on its policies but it would be completely absurd if the RBI followed its own set of objectives. He also said the “RBI could not obviously have policies contrary to those of the central government”.
Rau was one of RBI’s longest serving governors. He was in office between 1 July, 1949, and 14 January, 1957.
On the prodding of Nehru, however, Rau decided to resign just before the expiry of his second term in January 1957.
Nehru’s letter to Rau was so strong that when fissures started to appear between Urjit Patel and the Narendra Modi government over the autonomy of the central bank, this bit of history was widely quoted.
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‘Quit for personal reasons’
In his statement Monday, Patel cited “personal reasons” for his resignation but the decision came as a huge surprise to his colleagues who were preparing for the forthcoming board meeting.
After Patel’s statement, Prime Minister Narendra Modi in a tweet said, “Dr. Urjit Patel is a thorough professional with impeccable integrity. He has been in the Reserve Bank of India for about 6 years as Deputy Governor and Governor. He leaves behind a great legacy. We will miss him immensely.”
Dr Urjit Patel is an economist of a very high calibre with a deep and insightful understanding of macro-economic issues. He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability.
— Narendra Modi (@narendramodi) December 10, 2018
Dr. Urjit Patel is a thorough professional with impeccable integrity. He has been in the Reserve Bank of India for about 6 years as Deputy Governor and Governor. He leaves behind a great legacy. We will miss him immensely.
— Narendra Modi (@narendramodi) December 10, 2018
Former RBI governor Raghuram Rajan too made a comment about resignations at the RBI.
“I do think this is a serious issue, it needs to be dealt with carefully. The government has to ask what lead to this resignation. Resignations are not frequent at the RBI,” Rajan told CNBC-TV18.
Also read: Urjit Patel resigns as RBI governor, cites ‘personal reasons’
First and foremost, don’t anyone start comparing or connecting the first Prime Minister and the existing Prime Minister in this regard. It is evident that RBI Governors are usually scholars and masters in their respective fields related to economy. Their work is to boost and protect the the economy from any pitfall.
The year Shri Shekhar Gupta and I were born, so it does seem a little far back in time …