Prime Minister Narendra Modi allegedly compared former Reserve Bank of India (RBI) governor Urjit Patel to a “snake who sits over a hoard of money”, according to revelations made by former finance secretary Subhash Chandra Garg in his book, ‘We Also Make Policy’. Garg’s book claims that tensions between the Centre and the RBI during Patel’s tenure “frustrated” PM Modi as well as then finance minister Arun Jaitley, as per the book, excerpts from which were published by the Financial Express.
The excerpts provide insight into the alleged strained relationship between the government and the central bank during Patel’s time as governor. According to Garg, the Modi government’s frustration with Patel began as early as February 2018. It escalated in March when Patel said the government was unable to shed regulatory authority over nationalised banks. Patel believed this left the RBI with insufficient regulatory control over public-sector banks compared to their private-sector counterparts.
The tension between the Centre and the RBI, as detailed by Garg in his book, weighed heavily on PM Modi, who had personally selected Patel as the governor and publicly supported him. Garg claimed that Patel’s communication with then Finance Minister Arun Jaitley and the acting finance minister Piyush Goyal had deteriorated, leaving the only channel of communication through then Additional Principal Secretary PK Mishra in the Prime Minister’s Office (PMO), as stated in the book.
According to Garg, PM Modi grew frustrated with the situation, and the government invoked Section 7 of the RBI Act, 1934, which allows the central government to give such directions to the RBI “as it may, after consultation with the Governor of the Bank, consider necessary in the public interest”.
Why PM Modi Was Upset With Urjit Patel
During a meeting convened by Modi on September 14, 2018, Patel presented solutions to be executed by the government, including the elimination of the Long-Term Capital Gains (LTCG) tax, an increase in disinvestment targets, approaching multilateral institutions for investment in Indian government bonds, and settling outstanding bills of various companies. Garg claims that Jaitley, out of frustration, called Patel’s solutions “totally impractical and generally undesirable” during the meeting.
Having listened to Patel’s presentations carefully and patiently, the book claims, PM Modi assessed that the RBI was not effectively addressing the economic situation or resolving its differences with the government.
This led to an outburst, with the Prime Minister criticising Patel for the RBI’s stance on the resolution of non-performing assets and its “intransigent, impractical, and inflexible attitude” in seeking solutions, Garg has written in his book.
PM Modi also reportedly rebuked Patel for proposing the withdrawal of the LTCG tax, which had since stabilised with minimal objections, and for requesting further cuts in fiscal deficits in the middle of the financial year. The book notes that Modi likened Urjit Patel to a “snake who sits over a hoard of money” for being reluctant to utilise the RBI’s accumulated reserves.
Garg’s revelations also shed light on the frustration felt by then Finance Minister Arun Jaitley, who perceived Patel’s actions as a quest to be remembered as the most independent RBI governor in history.
Urjit Patel resigned as the 24th Governor of the RBI in December 2018, citing “personal reasons”.
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