Percy S Mistry, chairman of the high-powered committee on making Mumbai an international financial hub, has put in his papers following differences of opinion with other members.
This could delay the implementation of the recommendations of the committee, which was set up in 2005, in line with Prime Minister Manmohan Singh's resolve to transform Mumbai into another Shanghai.
When contacted, Mistry, a former World Bank economist, directed the queries to the finance ministry saying he had no comment to make.
Sources say that when a draft report was circulated, some members including State Bank of India chairman O P Bhatt objected to the report referring to Indian public sector banks as "zombie banks." Zombie banks, a phrase coined by American economist Edward Kane, broadly refers to banks that would not be in business but for government support.
A few members also objected to the usage of the expression "third world country" for India and instead suggested "emerging economy." A demand was made to scrap these words from the report.
The objections Bhatt raised over the words used by Mistry were incorporated in the final report as a footnote, which Mistry did not accept.
Sources in the committee say the issue was too trivial for Mistry to resign over and the issue is now over for them.
Mistry, who operates from Mumbai and London, was to advise the government on how to make Mumbai a regional financial centre.
The committee consisted of the SBI chairman, Bank of India chairman M Balachandran, Mahindra & Mahindra director Bharat Doshi and National Securities Depository Ltd MD CB Bhave, among others.Members say the report has made wide-ranging proposals to the government, which includes setting up a $500 billion economic powerhouse, ushering in capital account convertibility by 2008, and a single regulatory body.