OWL FLIES OUT, AS NEST COMES UNDER ATTACK

Industrialist Rahul Bajaj has a history of not mincing his words. Just last month, at the peak of a very ugly public spat between the RBI and the Centre, he commended RBI Governor Urjit Patel for showing the "spine".

After two lengthy meetings, and four days prior to a scheduled meeting of the central board again, Patel sent a shocker by announcing his resignation with immediate effect, becoming the fifth Governor to do so since the Independence (after Benegal Rama Rau was forced to quit in 1957 after a spat with then finance minister TT Krishnamachari; KR Puri in May 1977 and RN Malhotra in 1990 after change of governments and S Venkitaramanan in December 1992) and possibly showing the same qualities which earned him Bajaj's admiration. Patel succeeded the outspoken Raghuram Rajan to the 19th floor corner office of the Mint Road, saw through the badly implemented demonetisation decision for which the central bank came in for sharp criticism, but resolutely held the fort on all other aspects.

Patel, who refused to move into the official bungalow on the Carmichael Road continued to live in his deputy governor-days apartment with his ailing mother, carried forward Rajan's war on NPAs towards what is going to be a decisive end as resolution started appearing and more importantly, valiantly guarded the autonomy of one of the tallest institutions.

The resignation is sure to create more political firestorms for the government as it comes on the eve of the Winter session of Parliament where the Opposition has already made it clear to the treasury benches that infringing on the RBI autonomy would be a big talking point for them.

Though there were recent speculation suggesting that Patel was't keeping good health, at the last presser on the policy day on December 5,he looked perfectly healthy and hail.

Possible attacks on the RBI autonomy through many government measures, including invocation of the never- before-used Section 7 for forcing down decisions, have been the biggest pain points for the past two months and also started the rift which may have possibly resulted in the resignation.

Patel cited "personal reasons" for his drastic move but did not offer any explanation.

Among other things, government is pitching for a review of RBI's excess capital reserves which may result in transfer of a portion of over Rs 9.6 trillion of excess capital to a cash-starved government in an election year, relaxations to get banks out of the prompt corrective action (PCA) plan and sops for small businesses which are still to recover from the notebank shock.

In the face of incessant attacks, Patel first fielded his deputy Viral Acharya to go public who warned of the wrath of the markets if the autonomy of the central bank was compromised.

At the last week's post-policy interaction with the press, Patel refused to answer any queries on the friction with government.