On Monday, Urjit Patel resigned from his post midway through his three-year term, citing "personal reasons".
"On account of personal reasons, I have chose to step down from my current position effective immediately".
Dr. Patel further said that it was of utmost importance to maintain the central bank's reserves as this was essential to maintain the country's AAA rating.
Reacting to Patel's resignation, Modi said, "Dr Urjit Patel is an economist of a very high calibre with a deep&insightful understanding of macro-economic issues".
The RBI's central board has 18 members, which includes the Governor and his four deputies as full-time official directors, while the rest have been nominated by the government, including the Economic Affairs and Financial Services Secretaries.
The prime minister praised Patel for being a thorough professional with "impeccable integrity". "We will miss him immensely".
"Patel's resignation seems like a protest to the government's interference", said Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics.
In a brief statement, Patel said he has chose to step down with immediate effect.
"The sudden resignation will lead to questions about whether the government is trying to stifle institutions and whether the resignation is a statement to protect the RBI's independence", Brokerage firm Nomura said in a statement.
Besides, the RBI also set up a new Enforcement Department as part of broader plan to develop a rule-based approach to deal with breaches of law, rules and directions and to make the enforcement process stringent and consistent.
The remarks were widely seen as a sign that the RBI was pushing back hard against government pressure to relax its policies and reduce its powers before a general election due by May. "(And) to determine economical capital for the Reserve Bank was resolved", said Marathe.
Another former RBI Governor, C. Rangarajan, anxious about the fallout of Patel's quitting on the market. "At this point, it is important that the government recognises the statement made by Urjit Patel", Rajan said.
Patel's resignation is expected to roil financial markets on Tuesday. This owing to the series of tussles that the Reserve bank as an institution had with the centre.
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