Mumbai:Viral Acharya, the Reserve Bank of India's deputy governor has resigned on Monday. The 45 year old Professor of Economics was inducted in the Central bank as a governor on January 23, 2017, after Dr. Urjit Patel's elevation as a Governor in September 2016.
The RBI shared a note with details of his exit, soon after news of Acharya's surprise resignation and many questioning that it was six months prior to the end of his term. "A few weeks ago, Acharya submitted a letter to the RBI informing that due to unavoidable personal circumstances, he is unable to continue his term as a Deputy Governor of the RBI beyond July 23, 2019," said the note.
A New York University economics professor, Acharya called himself the "poor man's Raghuram Rajan" once. He also batted for the independence of the Central bank. His departure is surprising, considering that former Governor Dr Urjit Patel had also resigned in a similar fashion - nine months prior to the end of a term.
In October 2018 the relationship between the Centre and the RBI deepened with issues such as an increase in NPA, need to increase dividends, a spike in NPAs, and invocation of Section 7. Reports called the invocation of Section 7 as akin to a breakdown in communication between Mint Street and Finance Ministry.
It was around this time that Dr. Viral Acharya delivered a lecture, reminding how the banking regulator ought to be treated. "Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution," Acharya had cautioned back then.
He shared the example of Argentinian central bank governor who resigned after the country's government raided the central bank's balance sheet.
At a time when the larger narrative has been cheaper loans to counter economic worries ranging from lack of jobs to slowing GDP, it has been Acharya who has batted for a pragmatic approach.
Since Shaktikanta Das took over as Governor, short term lending rates for commercial banks have been cut thrice and have been brought to 5.75 per cent. Acharya voted against a cut on two out of three times.
Reducing bank interest rates does offer cheaper home loans and credit cards, but they also hit earnings of savings accounts and other deposits. Acharya voted for rate cuts twice in 15 monetary policy reviews. He had opposed for implementing a rate cut during the February and April monetary policies this year. He opined that the RBI's monetary policy committee (MPC) had to focus on ensuring inflation kept closer to a target of 4 (+/-2) percent in a durable way. This, opposed with Governor Das's stance of a repo rate cut to boost economic growth.
Acharya voted for rate cuts in June as an "insurance" against further slowdown, labelling the factors for slowdown as temporary during the June meeting. "Correct economic measurement of the fiscal slippage should factor in the implications of a rising PSBR (Public Sector Borrowing Requirement) rather than rely solely on the consolidated fiscal deficit figures," the former Deputy Governor had said.
Getting to the MPC Minutes in a bit but Viral Acharya quoting Ernest Hemingway in the Minutes is priceless. pic.twitter.com/VtYJIXA4fu— Ira Dugal (@dugalira) June 20, 2019
Acharya was appointed by a Cabinet ranked Appointments Committee headed by the Prime Minister. His departuree and the consequential action from his letter is under consideration with this authority.
With the "poor man's Raghuram Rajan" gone, the RBI is left with three deputy governors- N S Vishwanathan, B P Kanungo and M K Jain.
In the meanwhile, Twitter has been curious on the reason for the untimely departure.
Here are a few thoughts:
RBI Governor, Viral Acharya's resignation comes just six months before his tenure was due to end; could his abrupt decision have anything to do with his stance on reaffirming the RBI's independence from the current govt. https://t.co/iTtLQGyGBQ— Congress (@INCIndia) June 24, 2019
In Dec 2018, RBI Director Urjit Patel resigned 9 months before his term, and now Deputy Director Viral Acharya has quit 6 months before his term. Also, Dhoni was spotted with Army insignia on his gloves and ICC objected to it. Which of the two issues will get more media coverage?— Pratik Sinha (@free_thinker) June 24, 2019
With RBI Deputy Guv Viral Acharya quitting we have several economists resigning before their term ended -- Urjit Patel, Arvind Subramanian, Arvind Panagaria.. Note the IAS now controls most of the institutions which had economic experts advising!— M K Venu (@mkvenu1) June 24, 2019
Govt changes, but issues of Economic Manhandling remain!— Randeep Singh Surjewala (@rssurjewala) June 24, 2019
RBI Dy Guv, Viral Acharya adds his name to the long list of experts who attempted to show the 'Mirror of Truth' to BJP regime.
4 Economic Advisors,2 RBI Guvs & a Niti Aayog VC has resigned earlier! https://t.co/RZbpk2QYyf
Dear Liberals/ Lutyens Please don't say now that talent is leaving Modi. Acharya is leaving RBI to join his teaching in Newyork because he was not able to carry the agenda, which he was sent for. Dy Gov. Viral Acharya quits six months before his term ends https://t.co/8eGFnomkoJ— ASHWANI MAHAJAN (@ashwani_mahajan) June 24, 2019
State of Economists & Intellectuals— Dhruv Rathee (@dhruv_rathee) June 24, 2019
June 2019: RBI Deputy Governor #ViralAcharya resigns
Dec 2018: RBI Governor Urjit Patel resigns as tensions between Govt & RBI rose
June 2018: Cheif Economic Advisor Arvind Subramaniam resigns. Later he showed how GDP % was faked
Big breaking news by @TamalBandyo: RBI deputy governor Viral Acharya quits six months before his term ends.— Somesh Jha (@someshjha7) June 24, 2019
Asked for comments, Acharya tells @bsindia “A schoolteacher once told me: ‘When your work speaks for itself, do not interrupt’”.https://t.co/eQG9Xlbeet
With inputs from agencies.