Urjit Patel has been at loggerheads with the finance ministry on matters including the banking crisis and interest rates
His exit comes days ahead of the central bank’s board meeting on December 14 and at a time when India, which is closing in on Italy to become home to banks with the worst bad-loan ratio among major economies, is delivering a bitter pill to resuscitate its banking sector.
Oxford-trained Patel, who has tried to stay away from the spotlight, was initially seen playing along with Prime Minister Narendra Modi after he backed a ban on high-value currency notes in November 2016. Since then, he has waged a war to get India’s struggling banking system in order and punish errant borrowers who have stopped servicing their debt even though they have the ability to pay.
Earlier this year, the RBI introduced new rules forcing lenders to declare a delinquent borrower even if payments were overdue by a day. That was aimed at easing mounting bad loans, particularly from the power sector.
Patel also moved in to ring-fence weak state-run banks. Currently, a total of 12 banks – 11 in the public sector and one in the private sector – are under the so-called prompt corrective action framework that places curbs on lending, expanding branch networks and dividend distribution.
