Governor Urjit Patel announced Monday that he was stepping down from his post, effective immediately. Patel’s term was due to expire in September 2019.
“On account of personal reasons, I have decided to step down from my current position,” Patel said in a statement. “It has been my privilege and honor to serve in the Reserve Bank of India.”
The surprise resignation comes just weeks after senior RBI officials warned the government of Prime Minister Narendra Modi against threatening the central bank’s autonomy. Modi had reportedly been leaning on the RBI to relax lending criteria and use excess funds to boost economic growth before national elections next year.
Tensions between the two burst into the open last month, with reports that the government had activated a rare power that allows it to issue directives to the RBI.
Mark Williams, chief Asia economist at Capital Economics, said there “can be little doubt” that the central banker had resigned over “the insistence of the government that it set policy in areas that the RBI believed were its remit.”
“Patel’s departure suggests that he no longer feels able to withstand the government pressure,” added Williams.
Patel’s resignation statement on Monday did not mention the government.
“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,” he said.
The loss of the central banker comes at a tricky time for the Modi government, which faces multiple economic challenges as it heads into crucial elections early next year.
India’s economic growth slumped sharply in the quarter ended September, falling to 7.1% from 8.2%.
Its currency, the rupee, has fallen around 12% against the US dollar in 2018. It dropped more than 2% on Monday, with most of the losses coming after Patel’s announcement.
Modi showered praise on Patel following his resignation, calling him “an economist of a very high calibre” and a “thorough professional with impeccable integrity” in a statement on Twitter.
“He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” added Modi.
One signature accomplishment was keeping inflation near the bank’s target rate.
Those achievements are likely to be overshadowed by questions about the central bank’s independence.
Raghuram Rajan, often referred to as India’s “rock star” central banker, stepped down in 2016over disagreements with the Modi government.
In comments to Reuters following Patel’s resignation, Rajan said the development is “something all Indians should be concerned about.”