Government Asks NS Vishwanathan To Continue As RBI Deputy Governor For Another Year

The government has extended the term of Reserve Bank of India Deputy Governor NS Vishwanathan by one year, according to an order by the Appointments Committee of the Cabinet.

Vishwanathan’s term was to end on July 3, but under the latest order his term would be extended till July 4, 2020. He was first appointed as RBI deputy governor in June 2016. At the time he was replacing HR Khan, who had then superannuated.

It is common for the appointments committee to extend the terms of key decision makers at the RBI who have been handling important portfolios.

The decision to give Vishwanathan another year as RBI deputy governor comes amid churn at the central bank’s top offices.

The banking regulator announced Deputy Governor Viral Acharya’s resignation on June 24, six months before his term was supposed to end. While Acharya has said that he was resigning due to unavoidable personal reasons, he has had a difficult relationship with the government over the past few months. Urjit Patel had resigned from his position as RBI governor in a similar fashion in December 2018.

In his position as RBI deputy governor, Vishwanathan is in charge of the department of banking regulation, co-operative banking regulation, non-banking regulation, among others. He was one of the key RBI officials to come up with the controversial Feb. 12, 2018 circular. After the circular was released, Vishwanathan had defended the tough timelines prescribed by RBI in a speech where he also advocated for higher credit discipline among large borrowers. He had said that banks must not wait till the day of default to act against stressed firms.

He was appointed as head of the department of banking supervision in July 2017, after SS Mundra retired as the RBI deputy governor. Since then, Vishwanathan has held a stringent hold over the bad loan management practices at banks.

Under Vishwanathan’s tough regulations, the banking system has seen its bad loan ratios soar, owing to better recognition of stressed accounts. However, the ratio of stressed loans have now started to come down, since banks have moved on to recovery efforts against these borrowers.

Vishwanathan was also at the forefront in discussions regarding the health of the non-bank lenders after a spate of defaults by IL&FS Group in September 2018, which sent the entire credit market into a tizzy. Recently, the central banker also announced a slew of regulations which made norms for non-banking finance companies closer to those of banks, including tightening of asset liability management guidelines.