Mumbai: RBI Deputy Governor Viral Acharya’s resignation on Monday did not surprise many. Market sources said it was expected, given his views on the Reserve Bank of India's (RBI) position in the economy.
Acharya’s exit from the RBI top ranks was being speculated upon since last year, when he took on the government with a hard-hitting speech on the need to ensure the central bank’s independence.
In fact, the most recent round of tension between the government and the RBI culminating in the abrupt resignation of former RBI Governor Urjit Patel, was signalled in a speech by Acharya after the government sought consultations with the RBI under Section 7 (a provision rarely used) of the RBI Act, which allows the government to give directions to the central bank in public interest. On Monday, the RBI said Acharya had resigned for personal reasons.
He has voted for rate cuts only twice in 15 monetary policy reviews. He opposed rate cut even in the February and April monetary policies this year.
Acharya is in the mould of a classcial economist for respecting central bank’s independence. 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. In a speech in October 2018, Acharya cited the example of the Argentinian central bank governor, who resigned after the country's government raided the central bank’s balance sheet.
“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.
The final report of the committee set up by jointly by the RBI and the government to examine the RBI’s Economic Capital Framework (ECF) is expected this week, while official sources in New Delhi said there is lack of consensus in the ECF panel over the transfer of capital and reserves to the government. (IANS)