Viral Acharya, 45 years, became the youngest deputy governor to serve RBI when he joined the central bank in January 2017.
In his two-and-a-half-year stint at the Reserve Bank of India (RBI), deputy governor Viral Acharya voiced his opinion on critical matters and stood his ground when it came to central bank independence.
The 45-year-old Acharya, was the youngest deputy governor to serve RBI when he joined the central bank in January 2017. We take a look at such instances where Acharya’s bold remarks did not fail to leave an impression.
In his speech at the AD Shroff Memorial Lecture on October 26, 2018, Acharya said that “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’s speech was widely believed to have been delivered in the backdrop of a tiff between the government and the RBI on the issue of transfer of excess reserves.
His comments were seen in government circles as being out of line, with Subhash Chandra Garg, then economic affairs secretary, tweeting a week later: “Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?.”
In the same speech, Acharya also said that a government’s horizon of decision-making is rendered short, like the duration of a T20 match as there are always upcoming elections of some sort – national, state, mid-term, etc. while in contrast, a central bank plays a Test match, trying to win each session but importantly also survive it so as to have a chance to win the next session.
It should be noted that cleaning up of the banking system has been one of the main focus areas for Acharya since his early days as the deputy governor. He believed that the RBI’s Prompt Corrective Action (PCA) was an effective tool in this exercise.
On October 12, 2018, he defended the RBI’s PCA framework that bars weaker banks from fresh lending and expansion. He said that without the PCA imposition, some banks would have incurred even higher losses and required even more of taxpayer money for recapitalisation.
The June 6 MPC minutes revealed Acharya’s difference of opinion with the Governor Shaktikanta Das on the subject of fiscal discipline. While Das exuded confidence in government’s track record of by and large meeting its fiscal deficit targets, Acharya pointed out that it posed as the most important upside risk to inflation. While he was in favour of the change in policy stance from neutral to accommodative, he voted for a rate cut with hesitation.
In April policy review, he had voted for a pause when the majority went for a rate cut. Acharya had noted that 6.25 percent policy repo rate was just “right” for achieving headline inflation target of 4 percent on a durable basis in the medium term and opted to wait for more data.
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
