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Why Modi compared RBI ex-governor Urjit Patel to a snake

September 27, 2023 20:39 IST

Under Urjit Patel, the then RBI Governor, the central bank had a habit of making complete about-turns on various issues, including electoral bonds and digital payments, former finance secretary Subash Chandra Garg said in his book titled 'We Also Make Policy: An Insider's Account of How the Finance Ministry Functions.'

Urjit Patel

Photograph: Danish Siddiqui/Reuters

Citing some instances of about-turns by the then RBI Governor Patel, Garg in his book said, RBI had done so on the electoral bond issue and it had so in case of setting up of Payments Regulatory Board (PRB).

RBI also made unilateral decisions like ordering complete data localization for participation in the payment system, Garg wrote in the book which will hit the stands on October 1.

"We humbly pointed out to RBI that the report (on PRB) was unanimous.


"If there was any dissent, it should have been made before the report was finalised.

"We would have gladly included the dissent note as part of the report and provided a rejoinder to the points raised by RBI," the book read.

However, claiming inaccurately that its representative had submitted a dissent note on certain recommendations of the committee, RBI posted a dissent note on its website by way of a press release on 19 October 2018, it said.

The 2007 PSS law remains unamended. The government has still not notified the PRB as created by the Finance Act 2017.

"The government did not take any action on the recommendations of the inter-ministerial group that I headed.

"These recommendations had the potential to transform the payment architecture, infrastructure and institutional arrangements in the country.

"Though RBI is acting upon some of the recommendations made, India still has not institutionalized a good experimental regulatory sandbox," it said.

Recently, in a paper issued by RBI, it said, it proposed opening up the payment space to NBFCs and other private entities.

Patel's reluctance to part ways with reserves of the central bank for transfering it to the government of India prompted Prime Minister Narendra Modi to compare him with a 'snake who sits over a hoard of money'.

Garg, who served as economic affairs secretary between June 21, 2017 and July 25, 2019, also served as the finance secretary to the government of India, dealt with the politics of deciding the minimum support price (MSP) to farmers, introducing electoral bonds, recapitalizing banks and monetizing six airports, among others.

However, the most contentious and talked about issue during his tenure was relationship between the Mint Street and North Block which houses the finance ministry.

According to the book, the prime minister had convened a meeting to review the state of the economy amid a difficult economic situation in September 2018.

During the meeting, a considerable strain between the government and the Reserve Bank of India was witnessed and Prime Minister Narendra Modi lost his cool on Patel and compared him to a "snake who sits over a hoard of money", as per the book.

"I saw him in such an angry mood for the first time.

"He was scathing in his attack on RBI's stance on the resolution of non-performing assets (NPAs) and its intransigent, impractical and inflexible attitude to finding solutions.

"He criticised Governor Patel for proposing the withdrawal of the LTCG tax, which had since stabilized with hardly anyone objecting to it, and asking for fiscal deficits to be cut down further in the middle of the financial year," Garg said in his memoir.

He (Modi) compared Patel to the snake who sits over a hoard of money, for being unreceptive to putting RBI's accumulated reserves to any use, it said, adding, Prime Minister Modi had also been briefed about the reluctance of Governor Urjit Patel to convene a special meeting of the Central Board despite agreeing to do so in the last meeting of the board held on August 8, 2018.

The governor had agreed to convene this special meeting on 30 or 31 August subject to 'all directors attending it', the memoir published by Harper Collins said.

"RBI had also sought the convenience of the directors by writing letters the following week. However, Governor Patel had developed second thoughts and had not convened the meeting.

"The PM was critical of the governor for not calling this special meeting to discuss burning issues and take decisions.

"When we were leaving after the meeting, I asked Urjit Patel, tongue-in-cheek, whether he would convene the special meeting of the Central Board.

"Sticking to his intransigent stance, he responded without batting an eyelid: I will not," it said.

Pointing out that the unexpected happened on December 10, 2018, Garg narrated "I was chairing a meeting in the committee room close to my chamber in North Block from 5 pm onward.

"Around 6 pm as I entered my room, I saw the news flashing on the television channels: RBI Governor Urjit Patel had resigned."

Urjit Patel resigned in a most unusual manner as he put his resignation letter on RBI website.

He did not send in his resignation to the government as required under the rules and established procedure.

"After posting his resignation letter on RBI website, he simply went home.

"He referred to 'personal reasons' for his decision to step down.

"He recalled his association with RBI in various capacities over the years and attributed the considerable accomplishments of the bank to its staff, officers and management," it said.

He also expressed his gratitude to his colleagues and directors of RBI, it said, adding, there was something very conspicuous by its absence — there was no reference to the government, PM and finance minister in the resignation letter.

"I called Arun Jaitley who confirmed that he had no prior knowledge of the resignation.

"However, he said he intended to accept his resignation forthwith and not ask for any reconsideration," he said.

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