Demonetisation: Urjit Patel to brief parliamentary panel today; will he unravel more details?

Reserve Bank of India Governor Urjit Patel will brief a parliamentary panel today about demonetisation and its impact on the economy and the steps taken by the central bank to deal with the cash crunch.

Besides, representatives of the Finance Ministry, including from the department of Economic Affairs, Financial Services and Revenue will brief the members of the Standing Committee on Finance headed by former Union Minister and senior Congress leader Veerappa Moily.

Representatives of Indian Banks Association (IBA), State Bank of India (SBI), Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) are scheduled to be present in the meeting.

 Demonetisation: Urjit Patel to brief parliamentary panel today; will he unravel more details?

Urjit Patel. Reuters

The meeting will discuss the "demonetisation of Indian currency notes of Rs 500 and Rs 1,000 and the impact thereof".

An earlier report in The Indian Express said that in a seven-page reply to the questions raised by the committee, the RBI had said it was the government that advised the central bank to consider demonetisation of Rs 500 and Rs 1,000 notes. This went against the assertion by power minister Piyush Goyal to the Rajya Sabha that the note ban and exchange was the RBI's idea.

According to the RBI's reply, the government wanted it to consider demonetisation of high value currencies "to mitigate the triple problems of counterfeiting, terrorist financing and black money" on 7 November. The central board took a decision on this and the government announced the demonetisation on 8 November.

Another report in the same newspaper also said the RBI had cleared the introduction of new Rs 2,000 notes in May 2016 and that the central board had not discussed the ban of Rs 500 and Rs 1,000 notes in its meetings in May, July or August. This essentially goes against the prime minister's statement that the process was in the works for the last 10 months but was kept a secret fearing the black money holders will find escape routes.

On the whole, the entire exercise of demonetisation is mired in secrecy as neither the central bank nor the government has given any details on when the decision was taken and who were involved in the process. The briefing by Patel and other bureaucrats before the Parliamentary panel assumes significance in this context.

Their answers to the committee is likely to throw more light on the yet unknown details of demonetisation.

The RBI Governor is also scheduled to appear before the Public Accounts Committee of Parliament on the same issue on January 20.

In a surprise move on 8 November, Prime Minister Narendra Modi had announced the demonetisation of old Rs 500 and Rs 1,000 notes.

Following the decision, the RBI had put restrictions on withdrawal of cash from ATMs as well as from banks to deal with shortage of new high denomination currency notes. This led to long queues at ATMs and bank branches.

The cash situation has improved gradually with supply of new Rs 500 and Rs 2,000 notes. On Monday, the RBI increased the daily withdrawal limit from ATMs to Rs 10,000, though it kept the weekly ceiling at Rs 24,000.

All over the country,  banks had to deal with huge rush of people who thronged their branches to deposit the junked notes. The deadline for depositing old notes with banks ended on December 30.

With inputs from PTI

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Updated Date: Jan 18, 2017 08:28:12 IST