The deputy governor of Reserve Bank of India (RBI) Viral Acharya has put in his papers six months before his term ends on January 20, 2020. Acharya was a coose aide of former governor Urjit Patel and it was his fiery speech in October 2018 that brought out the differences between RBI and the government. He had joined RBI from New York University’s Stern School of Business.
Many had expected that the deputy governor would step down along with Patel given that he was more voluble in his criticism of the government both in public speeches and in the contentious board meetings that took place last year. However, after he stayed on for three monetary policy review meetings after Patel’s exit it did appear as though he had settled down.
Although Acharya has not announced his plans yet, it is expected within RBI that he will be returning to Academia. Sources in RBI believe that the timing of his resignation might have to do with coinciding with the academic year in the US where he has a family.
Acharya is understood to have communicated his intention to step down to RBI governor Shaktikanta Das who in turn informed the finance ministry. The governors and deputy governors are appointed directly by the government, with the governor having a say in the selection of his deputies. Of the four deputy governors, two are selected from within RBI, one from the commercial banking sector and the fourth an economist.
According to sources the government is likely to grant an extension to deputy governor NS Vishwanathan whose term ends next month. The search for a successor could not take place due to elections and formation of the new government. Besides Vishwanathan, the other internal deputy governor is BP Kanungo while Mahesh Kumar Jain is a former banker.
Acharya was an exceptional governor in more ways than one. At 42, he was among the youngest to take on such a senior position. A computer engineer from IIT Mumbai with a President’s medal in 1995, Acharya had secured a doctorate from NYU. Among policymakers, he was seen as an inflation hawk and had often been the dissenting voice when the monetary policy committee voted for easing. He had a lighter side and once explained the relationship between the Centre and the government by singing lines from various Bollywood songs. An avid musician, in New York he had brought out a CD of songs composed by him the proceeds of which went to charity.
The defining moment of his term at RBI was when in his AD Shroff memorial lecture on October 26, 2018, Acharya lashed out at the Centre stating that governments that do not respect the independence of central banks will sooner or later incur the wrath of financial markets. The speech was the beginning of a slide in the relationship between the RBI and the government.
Economic affairs secretary SC Garg in a taunting tweet, when markets rose after Acharya’s speech, questioned the wrath of markets.
While other central bankers found the speech incendiary, it later turned out that there was provocation from the government which had threatened to invoke Section 7 giving directions to RBI for the first time in its 83-year history.