Acharya's exit will not roil markets: SBI report

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SME Times News Bureau | 25 Jun, 2019
The news of RBI Deputy Governor Viral Acharya's premature exit from the central bank, although unfortunate, will not disturb the markets, state-run State Bank of India (SBI) said on Monday.

The bank's latest Ecowrap research report authored by SBI Chief Economist Soumya Kanti Ghosh said the exit of the Reserve Bank of India (RBI) Deputy Governor was not surprising.

"Though it was a rumor, but market had anticipated it after the resignation of former Governor Urjit Patel way back in December 2018," it said.

Acharya was appointed as the RBI Deputy Governor on January 23, 2017, for a 3-year term.

Citing unavoidable personal circumstances, however, he has decided to leave the RBI on July 23, 2019, six months before his term ends.

In support of his contention, Ghosh notes that capital flows nearly doubled in the first half of fiscal 2017-18 over the same period of the previous fiscal.

He points out that the country's foreign exchange (forex) reserves also grew, the rupee appreciated and the stock market also gained in one-year period following the exit of RBI Governor Raghuraman Rajan.

A New York University professor, who became the youngest Deputy Governor, has been quite conservative whether it be his approach to monetary policy or in dealing with financial markets.

He had raised concerns about the RBI's independence in relation to the government in a public speech in October 2018.

At the RBI, Acharya held a total of 9 portfolios, including the Corporate Strategy and Budget Department, Financial Stability Unit, Department of Economic Policy and Research, Monetary Policy Department and the Forecasting and Modeling Unit, among others.

Acharya has been part of the last 15 monetary policy committee (MPC) meetings. He
and the other external MPC members have been on the same page on the majority of occasions.

"So we believe that the next MPC meeting in August to be held after the exit of Viral, is likely to see more nuanced discussion veered towards more dovish stance going forward and consequently, space opening up for more cuts", the report said.