In his book Quest for Restoring Financial Stability in India, Viral Acharya said 'RBI lost its governor on the altar of financial stability'.
Former Reserve Bank of India Deputy Governor Viral Acharya has alleged that former Governor Urjit Patel quit his post because of attempts to undermine the central bank’s autonomy.
Viral Acharya’s book Quest for Restoring Financial Stability in India is a collection of his speeches, research and comments as a member of the RBI’s Monetary Policy Committee (MPC).
In the book he alludes the government wanted the institution to dilute Prompt Corrective Action (PCA) norms, transfer excess capital as dividend to the treasury, ease up on defaulters and formulate policy to help it borrow more, but never used Section 7 of the RBI Act to do so, The Economic Times reported.
He also noted that excessive monetary and credit stimulus caused the Indian financial sector to lose its stability, adding: “Nevertheless, attempts to alter the governance structure of the RBI to institutionalise such outcomes in future would have meant crossing the Rubicon and had to be foiled. As a result, the RBI lost its governor on the altar of financial stability.”
Notably, Acharya also quit before his term ended in 2019. He however notes the tussle was between “a regulator fighting for a sound and prudent banking system and a government that began on the right path but retreated due to fiscal profligacy and lobbying pressure.”He adds that the “tide turned in the space of 10 months” and “the government was trespassing on the autonomy of the regulator, rowing back on prudent measures and making unreasonable demands that led to the resignation of Patel in 2018,” the report said.