Conflict between RBI and government not new: Here’s what happened in past

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Published: December 11, 2018 5:29:37 AM

The longest-serving RBI governor to resign was Benegal Rama Rau (July 1, 1949 to January 14, 1957) who was forced to quit after differences with the then finance minister TT Krishnamachari.

Prior to Malhotra, KR Puri (August 20, 1975 to May 2, 1977), who was appointed by the Indira Gandhi government, stepped down after having disagreements with the Janata Party government.

Even though the news of the resignation of Reserve Bank of India (RBI) governor Urjit Patel came as a jolt, conflicts between the government and RBI are nothing new. Patel would be the first governor since 1990 to resign prematurely after RN Malhotra. He put in his papers after serving nearly five-and-a-half years (April 4, 1985 to December 22, 1990) when Chandra Shekhar became prime minister. He also had differences with the finance ministry over increase in fiscal deficit. During Malhotra’s tenure, efforts were made to develop the money markets and new instruments were introduced.

Prior to Malhotra, KR Puri (August 20, 1975 to May 2, 1977), who was appointed by the Indira Gandhi government, stepped down after having disagreements with the Janata Party government. Malhotra had tiffs with the then finance minister Yashwant Sinha. Malhotra alerted the government on the looming balance of payment crisis in 1988, but his views were not taken seriously.

The longest-serving RBI governor to resign was Benegal Rama Rau (July 1, 1949 to January 14, 1957) who was forced to quit after differences with the then finance minister TT Krishnamachari. The then prime minister Jawaharlal Nehru backed his cabinet colleague, and wrote to Rau: “Obviously (the bank) also has a high status and responsibility. It has to advise the government, but it also has to keep in line with the government.”

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