Viral Acharya, professor of economics at the New York University’s Stern School of Business, has been appointed as deputy governor at the Reserve Bank of India (RBI). This position has been vacant since September, after Urjit Patel became the Governor of the RBI.
The decision was announced by the government following a cabinet meeting on Wednesday morning.
Acharya has significant experience in global finance, specifically in theoretical risk assessment of the financial sector. In 2015, Acharya co-authored a research paper that analysed “the precarious condition of public sector banks” in India. The paper found that “the onus of remedying this situation through radical reform lies primarily with the government.”
The paper recommended a few fixes, mentioned here in brief:
- Recapitalisation, maybe via deep-discount rights issues
- Professionalise the process of board appointments
- Wean them off their funding advantage from government guarantees
- Privatise public sector banks or reallocate their assets
In an interview with BloombergQuint in October, Acharya advocated a “bad bank model” for the Indian banking sector.
I am absolutely proposing, either explicitly or implicitly, that we separate the unhealthy parts of the troubled banks from the healthy parts.Viral Acharya, CV Starr Professor Of Economics, NYU Stern School Of Business
The central bank has four deputy governors who are appointed for three-year terms. Traditionally, at least three of them are RBI insiders while the fourth is picked externally.
The division of the portfolios is done internally by the central bank. The key portfolio of monetary policy, which was being handled by Patel, is currently under the watch of R Gandhi. SS Mundra handles the banking supervision department, among others, while NS Vishwanathan, the third deputy governor, handles banking regulation.
Acharya’s entry in the central bank will not be his first brush with the Indian financial sector. He has previously been a member of the Committee of Financial Sector Legislative Reforms Commission and also served on the International Advisory Board of Securities and Exchange Board of India.
(This article was first published in BloombergQuint.)
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