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Banking & Finance

Hawkish Indian central bank deputy abruptly resigns

RBI's Acharya to take up teaching post at New York University

Viral Acharya, outgoing deputy governor at the Reserve Bank of India, speaks at a banking symposium in Germany in 2014.   © Getty Images

MUMBAI -- One of the Reserve Bank of India's deputy governors, Viral Acharya, has asked to resign six months before his term ends, marking the latest departure of an outspoken defender of the central bank's independence.

The central bank acknowledged his request in a statement Monday but declined to confirm acceptance of his resignation or any schedule for his departure. 

Acharya told the central bank he cannot continue to serve beyond July 23 "due to unavoidable personal circumstances," according to the RBI statement.

Acharya has been the monetary policy committee's most hawkish member on inflation, as well as a firm proponent of an independent central bank both in terms of monetary policy and financial sector regulation. The choice of his successor by Prime Minister Narendra Modi's government will affect the credibility of India's central bank.

International financial markets will hope for a similarly independent-minded replacement at the RBI, which has faced pressure from ruling-party politicians during the past year for easier monetary policy and looser bank regulations covering nonperforming assets.

Acharya follows Urjit Patel, the RBI governor who abruptly quit in December 2018, as well as Patel's predecessor Raghuram Rajan, who did not seek a new term in September 2016 while facing pressure from nationalist forces in the ruling Bharatiya Janata Party.

Acharya began the three-year term in January 2017 while his family stayed in their New York home. The deputy governor had said privately it would be difficult for him to remain apart from his family beyond the current term, a source familiar with the matter told the Nikkei Asian Review.

Acharya's push to resign early appears timed for him to assume an academic post at the New York University Stern School of Business.

The deputy governor also had said the political pressures threatening the RBI's independence subsided this year and that some of his efforts to counter those pressures are on hold, according to another source.

But except for the timing, few observers seem surprised by his exit, as Acharya had repeatedly confronted former Finance Minister Arun Jaitley and other ruling-party politicians over interference with central bank policies and regulations since last spring.

"Dr. Acharya’s departure is not a complete surprise, as frictions between him and the government on issues related to central bank independence had come to the fore," Nomura economists Sonal Varma and Aurodeep Nandi said in a note.

Acharya, Patel and Rajan are so-called nonresident Indians who were educated in foreign academic institutions and who pursued overseas academic careers, which nationalist political forces tend to dislike.

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