RBI Deputy Governor Viral Acharya resigns ahead of Union Budget 2019

Daniel Fowler
June 24, 2019

RBI deputy Governor Viral Acharya with former RBI Governor Urjit Patel.

Acharya had clashed with Prime Minister Narendra Modi's government over an erosion of the central bank's independence.

RBI said in a circular, "Reports have appeared in certain sections of the media that Viral V. Acharya, Deputy Governor of the Reserve Bank of India (RBI) has resigned from his post".

After Patel resigned in December and Shaktikanta Das took over as Governor, the RBI has cut its repo, or short-term lending rate for commercial banks, thrice already, bringing it down to 5.75 per cent. Acharya had voted against the cut two out of three times. "Frictions between him and the government on issues related to central bank independence had come to the fore", said Nomura in a note on Monday. Among the most prominent and controversial issues between RBI and government where he was involved included the demand that the central bank shell out more dividend, which was strongly opposed by Acharya.

Acharya, who once called himself the "poor man's Raghuram Rajan", had also said undermining RBI's independence can trigger a crisis of confidence in capital markets and that attrition of central bank powers results in attrition of its human capital and deterioration of its efficiency and expertise over time. One of the tension points he highlighted was the treatment of the RBI reserves.

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Meanwhile, Deputy Governor N Vishwanathan is likely to stay back for another term, even though his tenure is due to end in the first week of July, the news report said.

Acharya is in the mould of a classical economist for respecting central bank's independence.

"At the margin, the composition of the monetary policy committee will likely become incrementally more dovish, in our view".

"The RBI has its work cut out to convince markets and investors that it remains focused on stabilising inflation close to the 4% target", Capital Economics' Shah added.

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