Vishwanathan was to retire on July 3, but before that could happen, another Deputy Governor Viral Acharya quit. Acharya’s resignation was accepted by the ministry last week. The government and the RBI had started looking for a replacement of Vishwanathan and a few internal candidates were identified, according to sources.
According to RBI law, of the four deputy governors, two are outside specialists — usually an economist and a career banker, while two are career RBI central bankers. Generally, the Department of Banking Regulation (headed by Vishwanathan) and Department of Currency Management (headed by B P Kanungo) are reserved for RBI insiders. Monetary Policy Department (headed by Viral Acharya) and Department of Banking Supervision (headed by M K Jain) are reserved for outsiders.
The portfolios get reshuffled based on the availability and seniority of deputy governors, but one crucial department — that of internal administration — has been with an outsider deputy governor for the past 15 years. There was a proposal to shift this back to an RBI insider, and after Acharya, this may fall back on Vishwanathan for the time being, at least. Acharya’s resignation has complicated the matter because two deputy governors would be leaving the central bank in a month’s interval, which could be unsettling for the bank. Acharya was set to leave on July 23.
Hence, Vishwanathan was asked to stay back. Vishwanathan’s relationship with the government has not been easy otherwise. The central bank steadfastly refused to dilute its February 12 circular for power sector loans, and Vishwanthan was also adamant that one day default norm is sacrosanct.
However, the Supreme Court turned down the RBI’s objections recently, and the central bank had to put out revised guidelines that strongly disincentivises banks from delaying on resolutions.
Shwanathan is known to be one of the key architects behind the revised norms, which encourage banks to take companies to the Insolvency and Bankruptcy Code by freeing up locked provisions.