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RBI likely to adopt further rate cuts after aggressively joining the dove camp, says Commerzbank

The Reserve Bank of India (RBI) has joined the dove camp by cutting rates aggressively, and further cuts are widely expected, according to the latest research report from Commerzbank.

Viral Acharya, RBI’s youngest deputy governor post-economic liberalization, has resigned six months before the scheduled end of his term. Dr Acharya , who joined the RBI on January 23, 2017 for a three-year term, is reportedly returning to New York University Stern School of Business as a professor in July.

The departure of Dr Acharya recalled the case that former RBI governor Urjit Patel resigned last December, which was against the backdrop of increasing tensions between the Finance Ministry and the RBI.

Somewhat interestingly, the RBI spokesman said he was “unaware” of Dr Acharya’s resignation when asked by media yesterday morning, but later RBI confirmed that Dr Acharya submitted a resignation letter "a few weeks ago", the report added.

Dr Acharya is a strong and vocal supporter of central bank independence, as he said last October: "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 that they undermined an important regulatory institution.”

Meanwhile, such rhetoric indicates that he is unsatisfied with the intensifying political influence on monetary policy. As such, Dr Acharya's departure means that the RBI will lose another outspoken and respected scholar, Commerzbank further noted.

By Debarati Bir
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