Warning of a talent crisis at RBI, Dy Governor Viral Acharya quits six months early

Mumbai, June 24: RBI Deputy Governor Viral Acharya, the in-charge of the monetary policy department, has moved up resigning six months before the scheduled end of his term saying that the central bank's independence and autonomy is crucial for economic progress and financial stability and that any government undermining its monetary authorities would face the wrath of financial markets and economic fires.

 

 

This is the second high profile resignation in the past six months at the Reserve Bank of India. It has gone through a tumultuous time starting with a change in policymaking where rate-setting shifted to a six member panel that experts commended as a step in the right direction, to the surprise resignation of Governor Urjit Patel in December 2018.

 

Acharya had joined the central bank on January 23 last year after Patel was elevated to the post of governor in September 2016. He took over at a time when the central bank was facing criticism for repeated changes in the rules related to deposit and withdrawal of money, post-demonetisation. The RBI is now left with three deputy governors N S Vishwanathan, B P Kanungo and M K Jain.

 

“Governments that do not respect central banks independence will sooner or later incur the wrath of financial markets, ignite economic fires, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans”, he said.

 

“To secure greater financial and macroeconomic stability, these efforts need to be extended to effective independence for the Reserve Bank in its regulatory and supervisory powers over public sector banks, its balance- sheet strength, and its regulatory scope”, he added.

 

Acharya, who was called as the poor mans Rajan, over the many similarities with the former Governor Raghuram Rajan who also left RBI against his wishes to continue, had also warned of a talent crisis at a central bank if its independence is seen to be compromised.