RBI Exodus continues; Viral Acharya, RBI Deputy governor has requested for resignation, six months before the scheduled end of his term in the office.
In an explosive speech in October last year, Acharya defended RBI’s autonomy, which was seen to be under threat from government interference.
- Acharya was in charge of several departments, including the monetary policy department that includes forecasting and modeling, corporate strategy and budget department.
- The central bank said Acharya had stated his inability to continue beyond 23 July and it is speculated that now RBI has to look for an external candidate for filling the post.
- Acharya was viewed as Patel’s supporter who resigned from the Governor position due to differences with the government over a number of issues.
- While discussing the monetary policy, it seemed obvious that Acharya had disagreed with views of the new governor Shaktikanta Das.
Is Central Bank truly independent?
Acharya was vocal about the central bank’s independence. He was the first to sound the bugle when things were going wrong between RBI and the government.
He stated 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; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans.
Governance of RBI
There is another major issue of ‘Governance of RBI’. The RBI is not board driven as directors are not technical person but representing different stakeholders like government, industry, etc.
It is obvious that there will be a conflict between the government and RBI due to many reasons. But with the constant interference of government in the independent system like RBI has forced governors like
Dr. Raghuram Rajan and Dr. Urjit R. Patel to resign before their complete term.
And with a pattern like this, it can be speculated easily that due to political interference, the central bank is losing its autonomy.