In a statement, Singh said he hoped that the RBI Governor's sudden resignation is not a harbinger of Prime Minister Narendra Modi-led government's attempts to "destroy" the institutional foundations of India's $3 trillion economy. The free-market economist Panagariya has been one of the most vocal supporters of Modi's "Gujarat model of growth" and was once considered as a successor to Raghuram Rajan at Reserve Bank of India (RBI). "The support and hard work of the RBI staff, officers and management has been the proximate driver of the Bank's considerable accomplishments in recent years".
Patel resigned from his post on account of personal reasons, with immediate effect.
But speculation has been mounting for weeks that Mr Patel could resign over government actions. "He had come to the RBI office only for the Monetary Policy Committee and the Board of Financial Supervision meetings", the source said, requesting anonymity.
Patel had taken over as RBI governor in September 2016 and was slated to serve a three-year term, . He previously served as the RBI's deputy governor. Senior Fellow at the Peterson Institute for International Economics, took charge in October 2014 as CEA, a post that had been lying vacant since September 2013 after Rajan took over as RBI Governor.
Eleven of the 21 state-run banks are under the PCA framework, while NPAs accumulated in the Indian banking system have touched a staggering Rs 12 lakh crore. While the exit of Panagariya and Subramanian did not follow any controversy, Patel has left amidst differences of opinion between the RBI and the government.
Rashtriya Swayamsevak Sangh (RSS) ideologue and RBI board member S Gurumurthy said that he was "surprised" at Patel's resignation.
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Former prime minister Manmohan Singh termed RBI Governor Urjit Patel's resignation as "very unfortunate" and said it was a "severe blow" to the country's economy.
"To that extent we must look at this decision and understand why Dr Patel, who was appointed by this government, essentially exercised this particular option", he added.
Section 7 of the RBI Act says "the central government may from time to time give such directions to the bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest". He leaves behind a great legacy.
"The previous meeting was held in such cordial atmosphere that it comes as a shock. That makes it even more surprising".
The issues that brought them head on included appropriate size of reserves the central bank must maintain, easing of lending norms to ease liquidity rules certain sectors and guidelines for weak banks.
A marathon RBI board meeting in November avoided any direct confrontation on the question of the central bank's autonomy.