Did Modi say to former RBI Governor Urjit Patel – You are sitting like a snake coiled around money?
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Modi said to former RBI Governor Urjit Patel – You are sitting like a snake coiled around money.
This statement is being widely shared on social media. Is this true? Let’s know.
Yes, the claim that Prime Minister Narendra Modi used that specific analogy is true according to an insider account, but the broader narrative requires proper context.
The quote originates from the memoir We Also Make Policy by former Finance Secretary Subhash Chandra Garg.
According to Garg’s account, during a highly tense economic review meeting on September 14, 2018, the government was deeply frustrated by the RBI’s firm stance against deploying the central bank’s accumulated reserves to relieve economic stress.
Garg wrote that the Prime Minister lost his temper and compared Patel to a “snake who sits over a hoard of money,” accusing him of being inflexible and unwilling to offer solutions to the government’s economic challenges.
Why the Modi Government Needed the Funds?
Heading into the 2019 General Elections, the Modi administration was facing severe economic and political pressures that required immediate funding:
The GST Revenue Shortfall: The newly implemented Goods and Services Tax (GST) was underperforming, creating a massive ₹1.7 trillion hole in the government’s tax collection budget.
Fiscal Deficit Targets: The government was at risk of missing its fiscal deficit targets. Missing these targets could damage India’s international credit rating and scare away foreign investors.
The Shadow Banking Crisis (IL&FS): In mid-2018, Infrastructure Leasing & Financial Services (IL&FS)—a massive shadow bank—defaulted on its debts. This triggered a severe credit crunch that threatened to paralyze small businesses (MSMEs) and construction sectors.
A Funding Source for Public Spending: The government argued that the RBI was holding a gross asset buffer of 28%, which they claimed was far higher than the global norm of roughly 14%. The Finance Ministry wanted to unlock ₹3.6 lakh crore (about a third of the RBI’s total reserves) to stimulate the slowing economy, bail out struggling public sector banks, and fund public expenditure programs ahead of the elections.
Why Urjit Patel rejected PM Modi’s Demands?
Patel argued that the RBI’s reserves were not “excess profit” but a vital cushion against severe global shocks, such as sudden currency depreciation, global recessions, or oil price spikes. Draining these reserves would leave India highly vulnerable.
The government wanted the RBI to ease its Prompt Corrective Action (PCA) framework, which restricted 11 weak state-run banks from lending recklessly. Patel refused, maintaining that relaxing these rules to artificially boost credit would undo years of hard work spent cleaning up toxic, non-performing assets.
Patel feared that giving in to the government’s demands would establish a dangerous precedent, making the RBI look like a political tool rather than an independent monetary authority. As Viral Acharya famously warned in a speech at the time, undermining central bank independence would “ignite an economic fire” and trigger the wrath of global financial markets.
Why Urjit Patel Left Office in 2018?
While Urjit Patel officially cited “personal reasons” for his sudden resignation on December 10, 2018, it came after months of severe ideological and policy rifts between the RBI and the Finance Ministry:
Surplus Reserves Transfer: The government wanted a significant portion of RBI’s capital reserves transferred to help fund fiscal needs. Patel resisted, arguing that draining reserves would undermine the central bank’s financial stability.
Lending Restrictions: The government pushed the RBI to ease capital requirements and relax the Prompt Corrective Action (PCA) framework to boost lending. Patel refused to lower these guardrails, aiming to clean up massive Non-Performing Assets (bad loans) in the banking system.
Section 7 Threat: The friction escalated to the point where the government initiated consultations under Section 7 of the RBI Act—a never-before-used provision that allows the Centre to give direct policy mandates to the Governor, which was widely seen as a direct threat to the central bank’s autonomy.
Following the resignation, Prime Minister Modi publicly praised Patel, calling him a “thorough professional with impeccable integrity” who left behind a “great legacy.” In later interviews, Modi asserted that Patel had expressed a personal desire to step down months prior to the formal announcement due to personal reasons.
However, external experts and former central bankers, including Raghuram Rajan, publicly noted that the resignation should be understood as a direct statement of protest regarding institutional independence.
Did Government get Funds?
Following Patel’s resignation in December 2018, the government appointed Shaktikanta Das as the new Governor. To settle the dispute over the funds, the government formed an expert six-member panel led by former RBI Governor Bimal Jalan.
The Jalan committee designed a new, formula-based framework that determined the RBI did indeed have surplus capital. Consequently, in August 2019, the RBI approved a historic, record transfer of ₹1.76 lakh crore to the Modi government to help plug its fiscal gaps and boost public spending.
