RBI gets a Rajan follower as its youngest Deputy Governor

Mumbai, Dec 29 (KNN) Viral V. Acharya, a professor of Economics at the prestigious Stern School of Management of New York University has been appointed by the Government as the new Deputy Governor of Reserve Bank of India.

The 42 year old is appointed to the vacancy created by the elevation of Urjit Patel as the Governor of RBI.

Besides his age,  RBI Deputy Governors are generally white bearded, ‘aged’ financial bureaucrats, what  is raising the eyebrows of financial observers is the close proximity of the new Governor with Dr. Raghuram Rajan, who relinquished the post of Governor, RBI  not very ceremoniously.

Acharya, who has co-authored a paper with Raghuram Rajan, has often expressed his admiration for the former RBI governor.

Once he had mentioned that if he had Rajan as a role model and could get even 5 to 10 per cent of him, he could easily be the poor man’s Raghuram Rajan.

Like Rajan, Acharya is also a strong critic of India’s public sector Banks and the looming crisis before the Banking sector, of burgeoning NPAs.

A Computer Engineer from IIT Mumbai, Acharya shifted to finance later and obtained his Ph D in Finance from Stern School of Business in 2001.

Acharya is already involved in the financial regulators of India as Director of National Stock Exchange (NSE) of India and Member of the Advisory Council of the Reserve Bank of India (RBI) Academy.

He was also a keen observer of the India’s financial health as the Director of NY University -Stern schools Initiative on the Study of Indian Capital Markets.

Again like Raghuram Rajan, Acharya has been a strong supporter of the independence of the central Bank and asked them to be democratically accountable but operationally free from political interference.

In the background of the recent topsy –tervy in the role and responsibilities of the RBI in demonetisation, Acharya’s actions in the emerging post demonetised economy will be keenly observed.

According to some observers Acharya’s  appointment as the Deputy Governor may also be a strong signal by the Government  to the Standard and Poors’ of the global financial market, about its  intention to cleanse the Balance Sheets of the Banks.

Only recently in spite of its best efforts and persuasions, the Government failed to convince a leading rating agency to upgrade India’s rating to ‘Investment’ grade.

The major concern of the rating agency was the  health of the Public sector Banks and with a strong view on their recapitalisation and privatisation, Acharya may provide some comfort to the rating agencies about India’s intention to strengthen the Banking system..

However, for the MSME sector the point of concern may be whether the new Governor with his strong Rajan following will further stifle the MSMEs with rigid non - performance norms and closure of accounts at the slightest default.

Then it will be not the double but the triple whammy for the MSMEs, along with demonetisation and ‘cash less’ dictums. (KNN/ DB)