Viral Acharya
Viral Acharya Image Credit: PTI

(Bloomberg) — The Reserve Bank of India will lose one of its most outspoken officials, raising further questions about the independence of the central bank six months after the governor resigned under a cloud.

Deputy Governor Viral Acharya has asked to leave the central bank not later than July 23, citing “unavoidable personal circumstances,” the RBI said in a statement Monday. His resignation request, which was submitted a few weeks ago, is under consideration, it said. His three-year term was due to end in January 2020.

Acharya, who was in charge of the monetary policy department, will return to New York University in August as an economics professor, the Business Standard newspaper reported earlier. He is on leave from NYU’s Stern School of Business.

A monetary policy hawk, Acharya defended the central bank’s independence in a hard-hitting speech last year, bringing to light the tension between the government and monetary policymakers which eventually led to Urjit Patel’s sudden departure as governor in December.

Central bankers globally are coming under attack from politicians, with the most high-profile being US President Donald Trump’s persistent criticism of Federal Reserve Chairman Jerome Powell for his performance.

“Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution,” Acharya said in his October speech.

Patel quit last year following a clash with the government on issues including lending rules and interest rates. The RBI under his successor, Shaktikanta Das, has cut interest rates three times and given up its tight policy stance.

Acharya, 45, was the only deputy governor on the six-member monetary policy committee, and his exit leaves the door open for more easing to support a slowing economy. Acharya’s vote for a rate cut at the June meeting was in his own words, done with “some hesitation.”

Shilan Shah, senior India economist at Capital Economics Ltd. in Singapore, said Acharya’s departure will probably seal the case for another cut as early as August.

“But it should once again raise questions over the RBI’s credibility and its inflation-fighting credentials,” Shah said.

‘Tough Love’

Acharya kicked off his tenure at the RBI in 2017 with a speech in which he advocated “tough love” for India’s struggling and under-capitalised state-run banks. India has one of the highest stressed-loan ratios in the world and authorities have been pumping in billions into state-owned banks to get their balance sheets in order.

News of his departure comes in the same week that a joint government-RBI panel was set to complete its study on how much excess reserves the central bank holds and can be transferred to the state to help finance the budget. Acharya opposed any move to undermine the central bank’s reserves.

The panel has delayed submission of its report until after the budget. Indian bonds, which gained earlier in the day on speculation Acharya’s departure will prompt more rate cuts, fell on news of delays in the panel’s report.

Acharya’s parting shot last week was targeted at the government. In the published minutes of the June monetary policy committee he raised red flags about the worsening fiscal picture, saying rising public debt is a threat to inflation.