The deputy governor of the Reserve Bank of India, Viral Acharya, has resigned six months before his term ends due to unavoidable personal circumstances. In a statement, the RBI confirmed media reports that Acharya was leaving his post, but did not specify why or if it had accepted the resignation. Many have speculated that Acharya grew frustrated with a power struggle between the government and RBI, like other RBI governors before him who also resigned.
A few weeks ago, Dr. 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 RBI. Consequential action arising from his letter is under consideration of the Competent Authority.
The RBI has not yet decided who will fill Acharyas shoes, if anyone.
Although Acharya has not publicly confirmed it, the Times of India reports that he will resume a teaching job at his alma mater, New York University. TOI also said that Acharyas resignation could be linked to the start of the fall semester in the US.
Who is Viral Acharya?
Dr. Viral Acharya was a professor of economics at the NYU-Stern department of finance and taught a class on credit risk. In 2017, he left his job in academia to pursue a three-year term at the RBI. He has a B.Tech in Computer Science and Engineering from IIT Mumbai and a Ph.D in finance from NYU-Stern.
He joined the RBI as deputy governor on January 23, 2017, and was assumed to be the next Governor after Urjit Patel resigned. Acharya was one of the youngest governors the RBI has seen.
Money Control reports that, at the RBI, Acharya leads the Financial Stability Unit, Monetary Policy Department, Department of Economic and Policy Research, Financial Markets Operation Department, Financial Market Regulation Department, among others.
He was also a strong advocate for the RBIs independency and will be remembered for a speech he delivered in 2018.
In this speech, Acharya said that the government was not respecting the RBIs independence and was trying to interfere in policy making. If the government continued on its current trajectory, Acharya said that it would face a crisis of confidence in capital markets.
Also read: RBI asks government not to undermine its role
He added that government policies were like a T20 match that are short-term, but the RBI is not impacted by election cycles and needs to be allowed to formulate policy for the long run.
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He said, I chose for today’s occasion the theme of the importance of independent regulatory institutions, and in particular, that of a central bank that is independent from an over-arching reach of the state.
Acharya is not the first to exit RBI before term ended
Acharya is not the first RBI official to have resigned before their term ends. In 2018, RBI Governor Urjit Patel also resigned with only nine months left on his term.
Also read: RBI governor Urjit Patel steps down citing personal reasons
Like Acharya, Patel officially said that he was resigning due to personal reasons. However, the media has reported that there was a power struggle between the RBI and the government.
The Economic Times said that the government was trying to dictate policy by pushing the RBI to relax regulations and allow public sector banks to increase credit lines. The RBI also had issues with the government cherry-picking officials to be on the RBI board of governors. There was also talk of the government imposing Section 7 (a provision in the RBI Act that allows the government to direct the RBI for national interest).
Business Today explains that the government also took issue with Patel wanting to adopt strict BASEL-III rules and International Financial Reporting standards that require banks to maintain more capital.
The RBI and government also butted heads of the February 12 circular where the RBI tried to make insolvency proceedings mandatory for firms that defaulted on their debt for more than 180 days.
Apparently, Patel could neither resist too strongly nor agree with the governments interference. Among others, Patel and Acharya were part of the RBI board that disagreed with the government. After Patel resigned, Acharya was expected to, as well.
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Patels predecessor Raghuram Rajan also suddenly quit as RBI governor when he felt unsupported by the Finance Ministry, reports Business Insider. Rajans decision to raise interest rates invited backlash from high-ranking government officials. Like Acharya, Rajan also returned to academia, although the latter waited until his three-year term ended.
When Patel resigned, Rajan told ET, I think we need to ask what were the circumstances that led to Dr. Patel resigning and I think the government must take extreme care in how it proceeds further in its relationship with the RBI.
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Rhea Araora is a Staff Writer at Qrius