NEW DELHI, India - At a time when the country's central bank is engaged in a prolonged rift with the Indian government over its independence, the Governor of the Reserve Bank of India, Urjit Patel, announced his decision to resign from the role.
In a statement on Monday, Patel cited "personal reasons" for his abrupt decision to resign from the post, merely days ahead of a crucial RBI board meeting, which was set to be focussed on governance at the central bank.
In his brief statement, Patel said, "On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Banks considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future."
Patel's statement, which was released after market hours on Monday, was believed to not only undermine confidence in the economy, but was set to cause the rupee to fall.
The former RBI Governor has been engaged in a tense face off with the Indian Prime Minister Narendra Modi's administration over the level of autonomy that the central bank should have.
While the Modi government is seeking to reduce curbs on lending and gain access to the RBI's surplus reserves, some of the top central bank officials have argued that compromising the RBI's independence could be catastrophic.
More recently, the RBI's Deputy Governor Viral Acharya lashed out against attempts to undermine the bank's independence in late October.
He said, "Governments that do not respect central bank independence will sooner or later incur the wrath of the financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution."
However, after a prolonged battle, last month after a marathon meeting, the government seemed to have found middle ground with the RBI.
Following the meeting, the RBI announced concessions on the capital adequacy of banks.
Further, issues related to transfer of surplus reserves and easing norms for weak banks were referred to committees.
Patel's decision from Monday caused widespread shock in both political and financial circles in India.
The top official's exit also triggered attacks by the opposition.
Leaders of the opposition alleged that the BJP-led National Democratic Alliance (NDA) was systematically eroding institutions in the country.
However, in a bid to ease some of the blow, both Prime Minister Narendra Modi and the country's Finance Minister Arun Jaitley took to Twitter to praise Patel for his contributions.
Modi wrote on Twitter, "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."
He added in a second tweet, "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."
Meanwhile, Jaitley tweeted, "The Government acknowledges with deep sense of appreciation the services rendered by Dr. Urjit Patel to this country both in his capacity as the Governor and the Deputy Governor of The RBI. It was a pleasure for me to deal with him and benefit from his scholarship. I wish Dr. Patel all the very best and many more years of public service."
Patel's resignation comes midway through his five-year term.