New Delhi, January 21: Seventy Two days have passed since demonetisation was announced and the central bank of India failed to roll out figures pertaining to junked old currency and assure deadline for cash normalcy.
Governor Urjit Patel, Deputy Governor R Gandhi and five directors– Nachiket Mor, Bharat N Doshi, Sudhir Mankad, Shaktikanta Das and Anjuly Chib Duggal met Public Accounts Committee (PAC) of Parliament for evidence on “Review of Monetary Policy” on Friday.
Despite submitting over 200-page document addressing questions related to the monetary policy and demonetisation, the panel seems unhappy with the answers.
As a result, the panel has asked Reserve Bank of India Governor Urjit Patel to provide written replies on demonetisation queries and summoned the RBI team after 15 days.
For better clarity on the issues, PAC has also called upon Finance Secretary Ashok Lavasa, Economic Affairs Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia and Financial Services Secretary Anjuly Chib Duggal on February 20.
As the meeting began, chairman of PAC and a Congress MP K V Thomas made a statement on demonetisation, which prompted protests from BJP members, including Bhupender Yadav, Kirit Somaiya and Nishikant Dubey. Citing the amendment in the RBI Act in 2016, they said any question put to Patel must be in
Citing the amendment in the RBI Act in 2016, they said that any question put to Patel must be in context of the central bank’s monetary policy and not outside it.
After a long debate, the panel agreed that questions on demonetisation could be asked, however they should be in the context of monetary policy.
In the beginning of the meeting there was a long discussion on what matters could be included in the review of monetary policy meeting and the RBI team replied to many questions as “the government may frame a suitable reply.”
As per the sources, the RBI governor largely failed to satisfy the panel with his answer on note ban, but he still divulged the timeline of demonetisation events. The governor said that it was on the evening of November 8 at around 5:30 PM that the RBI board met and approved the government’s advisory note.
The central bank could not answer who initiated the note ban, how much cash is deposited into the banks and when the cash supply situation would normalize.
The meeting ran for over four hours and raised burning issues such as health of economy, job losses and life toll over 100 post demonetisation.
Governor Patel said there may be problems but we will overcome them and in the long run this will help economy. While, he could not establish how this will help.
They also agreed that the system is not ready for digital economy after a PAC member questioned about the preparedness for digitisation process and push for cash-less economy.
They admitted that there is much to improve and the main issue that holds back digitalisation is the lack of infrastructure, especially availability of the spectrum. They said there were also issues of non-availability of swipe machines.
The RBI governor also assured that the central bank was in touch with the service providers of some online payment platforms and working to reduce transaction cost.
It was surprising for the panel when the RBI governor failed to give “number” of junked currency notes that were in circulation and said that they are still calculating the number of notes back in the system. The PAC then asked for numbers in written in the next meeting.
The central bank said: “The exact number of specified bank notes withdrawn from circulation is being worked out.”
However, Patel had told the Parliamentary Standing Committee on Finance on Wednesday that new currency notes to the tune of Rs 9.2 lakh crore had been introduced into the system after the removal of the old notes. But the report was out that the figures shared by Patel is not in tune with RBI figures released on January 13 and it also includes smaller denomentation currency that was not banned.
Minister of State for Finance Arjun Ram Meghwal on December 2 told Parliament in a written response that currency notes worth Rs 15.44 lakh crore (17165 million pieces of 500 notes and 6858 million pieces of 1000 notes) were in circulation on November 8, when the demonetisation was announced.
Another member asked what would happen with currencies with NRIs at embassies, citing Nepal and Srilanka. Patel said he would look into the matter.
The RBI team also told that the matter related to demonetisation was under discussion between the government and RBI for “some months”, following which the proposal was placed before the central board of RBI on November 8 for consideration.
Defending restrictions on cash withdrawal post demonetisation, the RBI governor said, “The ceiling on withdrawal was determined on the basis of availability, past utilisation pattern and considering the needs of the common people so that hardships are minimum.”