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Almost logged out of RBI Guv post on rift with PC: Y V Reddy

As the key figure in the balance of power between the government and the Reserve Bank of India, former RBI Governor Y.V. Reddy once contemplated resignation, and had to even offer an unconditional apology to the minister, his autobiography reveals.

In 'Advice and Dissent: My Life in Public Service', being released on Tuesday, Reddy, who was RBI Governor between September 2003 and September 2008, describes his differences of opinion with then Finance Minister P. Chidambaram. These led him to also think of putting in his papers. The issue concerned opening the banking system to foreign ownership, which came to a head with Chidambaram in 2008.

Reddy narrated his meeting where the Finance Minister told him: "Governor, this is a national commitment made to global financial community. How do we justify reversal of such a policy? Is it just because there is a change in the incumbency of the government? Do we review our commitments every time a governor or the RBI changes?" Reddy, according to the book, told him that "it has serious irreversible consequences. I believe it is better to go back on our comitment at this stage, in national interest."
"But I believe that it is in our national interest," Chidambaram was quoted as telling the RBI Governor.

Reddy writes that he confided his troubles to then Economic Affairs Secretary Rakesh Mohan. "'Rakesh,' I told him, 'it is better I leave this job. I believe that the issue is very critical to our national interest. I think opening up of foreign banks should not be done at this stage at all. Still, if the government feels that this has to be done, it has to be done. But I will not be able to put my heart in it'," Reddy said.

"So, better I quietly leave the job," Reddy added.

He writes that despite Chidambaram's unwillingness to relieve him as Governor, "I felt that there was a growing distance between us as months passed by. His (Chidambaram) image as a reformer pushing for double-digit growth was, in his view, being dented by my caution to the extent of resisting implementation of some of his policies," Reddy wrote.

"At one stage, he said that he was cancelling his foreign tour because he could not face them with nothing to report on reform. His frustration was confirmed later, I think in early 2008," Reddy wrote.

When he met the minister, Chidambaram said the RBI was not adequately reciprocating by progressing with reforms. "I expressed my unconditional apology to him and conveyed that I would keep in mind the issue of being supportive," Reddy said, describing how the matter ended.

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