Viral Acharya named RBI deputy governor
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Mumbai: Viral Acharya, a 42 year-old professor at the Stern Business School of New York University, was named deputy governor of the Reserve Bank of India (RBI) on Wednesday.
Acharya, a graduate from the Indian Institute of Technology-Bombay who has a Ph.D from Stern School of Business, New York University, will oversee the important monetary policy department and research, the central bank said a statement.
The monetary policy department at the RBI was headed by Urjit Patel until he became RBI governor in September.
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The department is now under deputy governor R. Gandhi, who is also part of the monetary policy committee (MPC).
Acharya will replace Gandhi in the recently formed MPC.
The position of the head of monetary policy has traditionally been occupied by an economist.
“Dr Acharya has been a good researcher and has helped the RBI with analysing some banking sector data. A lot of his work has been around the Indian securities market and risk involving financial institutions. He has also written extensively about the financial sector crisis of 2008 and the issues around it. He should be a good fit for the RBI,” said a former RBI deputy governor, seeking anonymity.
The new deputy governor’s primary research interest is in theoretical and empirical analysis of systemic risk of the financial sector, its regulation and its genesis in government-induced distortions—an inquiry that cuts across several other strands of research such as credit risk and liquidity risk, their interactions and general equilibrium consequences.
When Raghuram Rajan won the Deutsche Bank award for financial economics in 2013, the year before he became RBI governor, Acharya spoke at the award ceremony. In his introduction, Acharya spoke about an instance on a plane when a co-passenger wrongly identified him as Rajan. Acharya joked that if he did even a little of what Rajan had achieved, he could pass off as a “poor man’s Raghuram Rajan” on flights.
Unlike the former RBI governor, Acharya believes that bad loan management and a clean-up of the system has to be led by the government.
Acharya is also a firm supporter of the idea of a bad bank to clean up the toxic loans on the books of Indian banks. In an interview with Bloomberg Quint earlier this month, Acharya had discussed the idea of separating bad loans from the books of banks.
The idea was first mooted in a research paper on Indian banks published in 2015. The paper had concluded that the burden of cleaning up the banking system of bad loans through radical reforms lay on the government.
Previously, in a talk with Bindu Ananth of IFMR Trust in 2011, Acharya said that while India needs a bigger variety of financial institutions that are larger, it needs to also focus on a regulatory apparatus to manage them.
This is not Acharya’s first appointment with a financial sector regulator.
He has been a member of advisory scientific committee of European Systemic Risk Board, advisory committee of the Financial Sector Legislative Reforms Commission of India, and International Advisory Board of the Securities and Exchange Board of India.