SAGE INDIA celebrates 'Quest for Restoring Financial Stability in India' by Viral V. Acharya

The book 'Quest for Restoring Financial Stability in India' by Viral V. Acharya was officially released at a virtual interactive session. Published by SAGE Publications India, the book is a front-row view of RBI deputy governor's mission to help banks survive Non-Performing Assets (NPA) jams and rebuild financial stability. It analyses among other issues how under-capitalized banks with weak asset quality and profitability remain vulnerable to further stress and are a cost to the real economy and what can be done about it.

Viral V. Acharya is the C. V. Starr Professor of Economics in the Department of Finance at New York University Stern School of Business (NYU Stern). He was the Deputy Governor of the Reserve Bank of India (RBI) from 23 January 2017 to 23 July 2019, in charge of monetary policy, financial markets, financial stability and research. Dr Acharya has been the Director of the National Stock Exchange of India and the NYU Stern Initiative on the Study of Indian Capital Markets, and a member of prestigious bodies like the Economic Advisory Committee of the Financial Industry Regulation Authority (FINRA), International Advisory Board of the Securities Exchange Board of India,

The book was virtually inaugurated by Dr Y V Reddy, former Chairman, 14th Finance Commission and Former Governor, Reserve Bank of India. Dr Duvvuri Subbarao, Former Governor, Reserve Bank of India, gave the keynote address. Applauding the book, he remarked, "The conviction and concern with which Viral narrates the frontline battles of a policymaker to influence economic policy debates is the second reason I commend this book. The earnestness with which he writes about them is both endearing and compelling."

"The issues relating to financial stability in India have become more complex and more challenging since the speeches were delivered. In addition, the spread of virus has imparted more complications and greater urgency to address the problem of financial stability in the face of unprecedented fiscal challenges. In this background, the book is of special and urgent contemporary interest," said Dr Y V Reddy in his inaugural address.

This was followed by a stimulating discussion between panellists Mr Tamal Bandyopadhyay, Consulting Editor, Business Standard & Senior Adviser Jana Small Finance Bank; Dr Sajjid Chinoy, J.P. Morgan's Chief India Economist; Dr Prachi Mishra, MD/Chief India Economist Goldman Sachs India Securities and Dr Duvvuri Subbarao, Former Governor, Reserve Bank of India, moderated by the author.

Kicking off the panel discussion on fiscal dominance and financial stability in India, Mr Tamal Bandyopadhyay noted, "Viral Acharya is a straight talker. Even when he was in office, he was never diplomatic while delivering his speeches. They were not uniformly liked but he didn't change his style. While fiscal dominance is the central theme, the book is also replete with micro details of how the system is gamed by different stake holders."

Dr Prachi Mishra added, "Viral is perhaps very humble about the contribution of his book to the macro and finance literature. A huge contribution of Viral's book is to broaden the definition of fiscal dominance - beyond its effect on monetary policies, and to include the effect on financial regulations more broadly. This is especially important for a full service central bank of a large emerging market like India."

Dr Sajjid Chinoy remarked, "Dr. Viral Acharya seamlessly combines theoretical first principles with market realities and policy prudence. He demonstrates how inextricably the financial, the fiscal, the regulatory and the external are connected and provides a unifying theme to understand their recent evolution. Fiscal policy and the financial sector will be at the fore during and after COVID-19, making this book particularly timely and relevant."

Dr Viral Acharya, spoke on the occasion where he noted: "Post 1991 reforms, India undertook an upward and onward march in economic progress for close to two decades. Since then, lack of financial stability has emerged as its Achilles' heel. The reasons for this are many but a first and foremost contributor has been the increasing dominance of banking and financial sector regulation by the unyielding deficit situation of the consolidated government balance-sheet. Reining in this fiscal dominance requires not just a strengthening of the institutional framework for fiscal management but also the right balance between the roles played by the government, the central bank, the markets, and the private sector in the economy. My objective in putting together the book has been that it stirs up this important debate, gives it the primacy it deserves, and provides some useful inputs so together we can implement the much-needed long-lasting solutions to restore financial stability in India.

Beyond the headline-grabbing issues, the Indian economy is struggling to solve a critical problem: How to restore and maintain financial stability on a durable basis. In this book titled Quest for Restoring Financial Stability in India, Former Deputy Governor of RBI, Dr Viral V. Acharya, talks about his quest for restoring financial stability in India and offers a concrete plan for sustained improvement. Dr Acharya shares a feasible plan to address the recapitalization needs of public sector banks, offering solutions on how to improve credit allocation by credit intermediaries and establish viable and efficient capital markets. Elucidating the need-of-the-hour reforms, this book also raises several stark and unanswered questions related to the re-emergence of fiscal dominance in India, not just of monetary policy tools but also of banking regulations. It makes a persuasive case for striking the right balance between the government, central bank, private sector and markets, in order to improve long-run growth prospects for the real economy.

Dr. Viral Acharya's share of proceeds from book sales are entirely ear-marked for Pratham: Every Child in School and Learning Well, an NGO providing education and skilling for under-privileged children and youth in India.