HYDERABAD: On a summer afternoon in 2017, we were seated in the lounge at the RBI's sacred 18th-floor on Fort Road, Mumbai for an informal chit-chat with deputy governor Dr Viral Acharya. The proposed interaction was already 30 minutes behind schedule and as we sat in a library-like silence awaiting our turn, something unexpected happened.
Acharya himself walked in to greet us, apologized sincerely for the delay - which by any Indian standards was nothing - and after exchanging pleasantries, made two requests. Could we wait another 30 minutes and would we be kind enough for a group chat (with another journalist) instead of a one on one? Outrageous for sure, but Acharya's simplicity was as persuasive as his CV.
Around that time, the central bank, fresh out of demonetisation scars, was going through yet another credibility crisis with the government moving in to amend the RBI Act, 1969 in the aftermath of the Insolvency and Bankruptcy Code.
There were weightier questions on our minds, but Acharya went first: "So, what's the feedback? What are you hearing (from North Block)?" He was eager to know the reactions to the speech he gave a few weeks earlier.
Titled A bank should be something that one can 'Bank' upon, it dealt at length with everything that had gone wrong with our banking system and proposed a five-point action plan to set it right including re-privatization of banks, besides recommending consolidation, asset sales, mergers and infusion of private capital 'instead of propping up banks with state aid.'
Inevitably, the conversation veered towards the topic he had a good handle on -- the bad loans crisis -- and as it unfolded, Acharya's bluntness became evident. Not only did he champion the need for a time-bound resolution, but he was also instrumental in cherry-picking 41 large defaulters who accounted for over a quarter of bad loans and chased banks to get cracking.
In the subsequent months, the Dr Urjit Patel-Acharya duo made synchronized moves tightening regulations on toxic assets. They insisted on higher provisions, were ruthless on lenders that under-reported NPAs and forced full public disclosures. This upset several quarters and instead of a clean-up, it provoked criticism that they were 'too harsh.' But Acharya was convinced: "We have a debt timebomb. It needs to be defused NOW."
An expert on debt he might have been. But critics say Acharya lacked the same level of grasp on the nation's needs and along with Patel, instead of easing rates when the economy needed it the most, they pursued a tight monetary policy. Despite heartfelt pleas from the industry and requests from the North Block, the Monetary Policy Committee refused to take the foot off the policy pedal. With time, the differences with the Ministry of Finance grew deeper, not only on rates, but also on credit flow to MSMEs and liquidity management. Hell broke loose when the government sought higher dividends and transfer of surplus reserves resulting in a stormy board meeting, that triggered the dramatic exit of Patel last December.
Acharya's CV remains thick, 14 pages and counting, while his economic papers and articles have won praise. Perhaps wanting to convert economic ideas into real-world solutions, he voluntarily applied to the RBI when Dr Raghuram Rajan was at the helm. He was eventually roped in when the DG's position fell vacant after Patel was elevated as Governor.
But that was when the RBI was in the most turbulent phase and throughout his stint, Acharya walked on eggshells. Now after two years, it's a curious situation for an academician who got the job on his intellectual credentials to go down giving up the battle. This brings us to the question, if dissent always leads to exits, isn't it the end of constructive criticism? On the same note, should external appointees be allowed to leave mid-way, causing both avoidable embarrassment to the government and to the credibility of an institution like the RBI, which perceives itself as matchless?
Also Read: